All Forum Posts by: Jake Hartnett

In Minnesota (and I think everywhere) you can talk to the County Assessor. You have to be specific that you want properties that are currently delinquent on their taxes, not properties that are up for auction at the next sheriff's sale. They might be confused and they might not want to give it to you but it is public record and they have to give it to you somehow, but they might charge for it. Also, it will probably be in a really confusing excel file (if you are lucky). I got a few with about 100-200 properties per county for about $50 each.

I have heard that some people get lists from title companies, but I have never done this. It might even be free from them if you have a relationship with them and you do a lot of business there.

God luck.

There are no deals available in the areas you are looking at, and I think that is pretty normal. I think investors got lazy in 2009-2013 when there were deals all over the place. Now, if you want a deal you have to find a property with something wrong with it. That is what my uncle has been saying for the last 40 years. "Buy a property with something wrong with it that you can fix." Unfortunately, FHA doesn't really let you buy a property with anything wrong with it.

On the flip side, to make a deal work you either need a great price or great financing. Lucky for you you can get great FHA financing. If you are cash flow positive at all you are likely to see 100% ROI because you basically have nothing into the property, especially if you get decent seller concessions.

Here is what you might do: Buy a property where you want to live, in a desirable neighborhood, and with amenities you want. Make sure you are living cheaper than renting, preferable living for free. (This will be easier with a 4-plex or a duplex if you are renting out additional rooms in your unit.) Get your systems in order, bookkeeping, tenant screening, build your team of handyman, plumber, etc. Think of this as a practice house that doesn't cost you money.

Remember, you are house shopping and investing, one of them has to suffer. Even if you plan to move out after 12 months you might find that you aren't able to if the market shifts, so buy something you wouldn't mind living in for a few years.

I'm not saying buy a bad deal, but it sounds like you are looking for a turnkey property in a hot neighborhood that cash flows. Something has to give.

@Samuel Waters

No. I am just getting started with this strategy, meeting with lenders and contractors. I need to keep my job so I can qualify for the refi. I will probably get a GC but maybe do some of the work myself on evenings and weekends, Demo, framing, trim carpentry etc.

It sounds like you need to do some more research before you jump into a deal. You are having trouble with the 30,000 ft view, which means there is a ton of detail work that you need to book up on. Study before you jump into anything.

With BRRRR you generally need to be prequalified with an institutional lender before they will give you any money. They want to know that they are going to get paid off, unless they are the kind of hard money lender that wants you to default, so they can take your property. Some hard money lenders are just acquisition pipelines. Be careful.

Theoretically the equity that you build when you rehab the property will be your "down payment."

Example:

$200k ARV

70% LTV (of ARV)

$140k hard money loan

$90k purchase price

$50k rehab

Refinance at $200k value into 30 year fixed, They will only loan 70% LTV so the $60k difference between what you owe your hard money lender and the current value is your "down payment." Lenders don't require a down payment, they just wont lend over 70% LTV (or 75% or 80%).

If you didn't qualify for a loan before the BRRRR, you wont qualify afterwards. Work on your credit score and start making more money, save some money and keep researching.

Even if you do a BRRRR you need reserves in case you go over budget, or cant refi as fast as you thought, or the property doesn't appraise as high as you thought. You probably want $30k just sitting there just in case.

Good Luck.

I wouldn't walk yet. It seems like it comes with headaches but you might be able to get a better deal because other people might not want the headaches. Just make sure you are getting paid for your headaches.

I would immediately budget an eviction into your numbers, and consider lowering my offer to compensate my time I might have invested in this deal if the court process drags on. It might be very worthwhile for the sellers to accept a lower offer because the signed purchase agreement might help speed up their executor's job and get everyone their money faster.

You might talk to a lawyer who has some knowledge of probate about the purchase agreement's effect on the sellers in court.

Also, have you or and inspector been in that tenant's unit?

Good Luck

Multifamily tends to have better cash flow, because some of the expenses are split between two units, but they tends to get more transient people, so your turnover is higher. Probably get more families in SFR, than in multis. "I want them to move in, put their kids in the local school, fill the garage with crap and never leave." -an old podcast guest

I wouldn't worry about multifamily (like a duplex or triplex) being more difficult to manage than an SFR. You will have so much "overhead" time setting up all of your systems for managing that you might as well get two rent checks. Its not that much more work. SFR might be easier to sell though, because it could go to a retail buyer. Might be harder to buy though, because you are competing against retail buyers.

I don't think they are that different, more a matter of style.

I'm not following, so you rent a place and then sell it? How do you take possession or get interest in this property?

The ceiling falling down is crucial. Everything else looks fine for a C property, but I would probably  paint everything and consider a new kitchen floor, and a new toilet. It might help attract a better tenant. A little landscaping would be nice too. Can't see the kitchen cabinets or the bathroom floor or tub.

Caveat: I have not done this, I have only done one deal, but this is basically my plan over the next few years.

First off, this is a pretty aggressive timeline.

Second, I assuming you want passive income and are not interested in a wholesaling or flipping business.

Third, I assume you are willing to put in a ton of work in the next four years to get to a passive position, because I don't know another way to do it.

I would BRRRR.

I don't see a better way to gain enough equity to own that many properties.

In my area a good duplex can cash flow $600/month with 75% LTV financing. There is a local hard money lender that offers 70% Loan to ARV financing.

So if you buy a rundown duplex for $100,000, put $40,000 in rehab and refinance it with a $200,000 ARV and a $10,000 down payment you have $600/month. (72% cash on cash)

$600x12months=$7,200/year

$100,000/$7,200=14 duplexes

14/4years=3.5 BRRRRs/year

Maybe you could do 2 4-plexes/year, or just one huge apartment building that takes 4 years. I don't know.

14 $200,000 duplexes at 75% LTV is $700,000 in equity that you got for $140,000. I don't know a better way to get $700,000 for down payments.

Looking forward to hearing other strategies.

Find a credit partner, like you mentioned, someone to cosign on the loan for a share of the profits. The ideal person would be someone with some development experience who can lend their experience as well.

good luck.