All Forum Posts by: Ian Livaich

@Tarik Turner it's listed slightly below $200k, and I believe that the appraisal will come in at $270k easily (my conservative estimate), and can reach as high as $280k-$300k.

Yes, I could use that cash for a second down payment but I wanted to avoid the high fees associated with getting a rehab loan. Instead, I planned on BRRR'ing to capture most of my initial cash outlay.

Do you think going with a short-term interest only loan is better than starting with a conventional 30 year loan as the initial loan?

Hey Robbie, congrats on the first deal!  That is awesome.  I am currently on the hunt for my first small multifamily property in South Jersey (Camden and Burlington counties) as well.

While I have not used a property manager yet, a few local investors suggested Mike Williams of Sureway Property Management.  When conducting my due diligence on possible PMs in my target markets, Mike really stood out.  I told him that I was a new investor and he took the time to answer all of my questions and educate me about my target markets.  I believe he had a sub 10% fee at the time as well.  If and when I ever need property management, Mike will be my first call.

Shoot me a message if you want his number or just check out his website here.  

Best,

Ian

Thanks for the input @Jim Goebel and @Jim D.. At this point, I am leaning towards just billing the tenants for usage depending on the costs of the other options. I also wonder how much 2-3 brand new furnaces and ductwork would affect the appraisal as this is would be a BRRR. I am submitting an offer tomorrow and will keep you updated if get a more in-depth look at the HVAC.

@Jim Goebel

Appreciate your insight.  Sounds like ultimately it will come to what the HVAC specialists recommend and the cost differences among the options.  Depending on cost, the third option might be my best bet.  I have been reading how tenants appreciate one bill more and more, but I do not know if I could charge a higher rent in this particular market, which includes heat, so billing it back might be the best way.   

Do your tenants take issue with the cost spreading of heat?  Do you include any language in your lease that they must pay a certain share each month?

Never considered electric baseboard heat.  That's a good possibility, especially considering each unit is metered individually for electric.  Is that something an HVAC professional can help with as well?

@Jim D.

Thanks, James.  I'll ask some of the same questions above.  Do your tenants push back on this at all?  Do you include this in your lease?  Where is the thermostat in your units -- is it in a room that you have access to but tenants don't?  I guess that would just require going to the units every so often to adjust the temperature.

@Patrick Liska

Really appreciate the thoughts.  I wish I could have provided more information but that is all I know at this stage.  This is a really creative solution that I didn't think of.  Depending on the amount of ductwork needed, would this be cheaper than the mini split system?

Hey everyone,

I am analyzing my numbers on a triplex in New Jersey as a BRRR and may submit an offer this week. I would be obtaining a loan for the purchase price and paying cash for the repairs. After 6-12 months, I would like to do a cash out refi if the appraisal is where I need it to be (I am currently researching comps).

Without getting into the nitty gritty details of this particular deal, I generally would like to do know what type of loan is best for the initial short-term loan in a BRRR deal. Some have recommended a short-term rehab loan, but I would like to avoid this as I have the cash for repairs and want to avoid paying the higher interest rate and fees associated with that type of loan. The lender I am working with suggested a 5-year ARM with interest only payments. Does that option make sense?

What are some other possibilities for the initial short-term loan if I am looking to do a cash out refi after 6-12 months?  I am looking to keep my loan costs as low as possible.  

Thanks for your time and input,

Ian

I am heavily considering submitting an offer on a triplex (2500 sq. ft.) in New Jersey as my first investment property. This would be a BRRR deal. I am looking for insight and expertise with the HVAC system, because I am newer to real estate investing.

There is currently one natural gas furnace in the basement that pushes air to all three units and floors.  I would like to separate the heat for each unit so each tenant would be responsible for paying for their usage.  However, I want to choose the most cost effective option.  After talking with some local investors, here are the potential options:

(1) Purchase two more furnaces and install separate ducts from the basement to the second and third floor units to separate the heat for each floor.  Can someone give me a general range of the cost for this type of job?  I have been told that this can very difficult and costly to do due to opening walls/ceilings.

(2) Install a mini split system (outside condenser and wall units) for the second and third floor.  I have been told this option could be easier and cheaper (approximately $4k-$6k for materials and labor). Does that estimate sound about right?

(3) Forgo installing new furnaces/ducts.  Instead, save the cost of doing this work, rely on the 1 furnace in place, pay for the tenants' heat and try to recoup the costs through higher rents (heat included) or try to bill it back to tenants somehow (e.g. RUBS).  At a later date, I could install the furnaces if I choose to do so. 

Each option has advantages and disadvantages -- what does everyone think?  Are there any other possibilities?

Thanks for your time and input,

Ian

This sounds like a great event.  I wish that I could make it but the PA Bar exam is less than two weeks away, so I'll be burning the midnight oil until then.  Looking forward to the next one.

@John Leavelle Really appreciate you breaking that down for me. I haven't come across a way to calculate an offer in order to pull out all of your equity before so this will be a helpful guide. I think you are spot on. My proposed offer is too high for this deal. If I were to offer $150-155 and pull out 90-95% of my cash, what do you think about getting a HELOC to pull out the remaining amount of cash in the deal (and secure an even lower interest rate on that amount being leveraged). Does this creative way of financing a BRRRR make sense or does it defeat the purpose of the BRRRR because the refi should provide you with enough equity to pull all or more than your original cash out?

@Nicole A. After considering the numbers further and your comments, perhaps this just isn't the right deal for me unless I can acquire it at an ever lower price as John Leavelle pointed out above. Say if I was able to pull out all buy $10-20k and then opened a HELOC to pull out the remainder of my cash? That way, I would have $0 of my own money into the deal and have an infinite ROI. Does this combination of financing ruin the purpose of the BRRRR strategy? In other words, should the refi alone cash out all (or more) of your money rather than having to use multiple ways to pull your cash out?

@Jason D. The property is vacant.  There are not a lot of rental comps for 3 bedroom units in duplexes in my target area so my rental income is conservative.  It could end up being closer to $3200.  

Brian Garrett Bryan Cork I have seen some rehabbed duplexes sitting on the market in my target area (it seems that investors are targeting more value add properties than turn key), so I would rather rent it than take the chance of flipping it and having it sit on the market for an undetermined period of time.

@Nicole A. Thanks for your input. I completely agree with you. I think I would have to leave too much money in this deal at the end of the day. I am considering lowering my offer even further. I will say that my rents and ARV are extremely conservative -- rents might be $100/month higher and ARV could go up to $325 or higher. If one of those scenarios happen and with a lower offer, $20k would be left in the deal and the CoCROI would approach 7-8%, which is much more attractive. How do you feel about that scenario -- Pulling all but $20,000 out of $120,000 originally put into the deal?