All Forum Posts by: Jared McCullough

James,

Although I am fairly new to this it is my understanding that your Cash Out Refinance Value will be based on a certain LTV based upon the assessed/appraised value of the house.

If this is correct that what your suggesting is false. Buying a house that needs "significant" rehab is not the only method for buying a house well under market value which is basically what the model is suggesting is that your "all in" is low enough that you can pull money back out through financing at a comparable market value.

Example:

I buy a house at foreclosure for $50,000 cash that needs ZERO WORK. The house would appraise for $100,000 based on comps/market. I find a lender willing to do 75% LTV. They send for an appraisal it comes back at $100,000. They approve a loan at $75,000. I pay myself back my $50,000 cash. I have just netted $25,000 operational cash without doing any Rehab. I am a little confused at why your implying that Rehab is required unless I am naive to something (i.e. which is quite possibly true as I stated originally I am new to this).

Sounds like an awesome opportunity. I am in the middle of doing something similar on a Tax Sale house we bought. Turned into a full gut with new roof/siding. Please post pictures when you are done and good luck don't get to frustrated there will be curve balls along the way.

It's awesome to see you cut the list price in more than half and they accepted. It gives me inspiration that I should probably be throwing low offers out there.

This does not necessarily conflict with the BRRRR method depending on the situation. The "Rehab" part is usually implied due to the price point at which it is bought at compared to the value of the property after repair. This does not mean that if you can't get a good deal on a house that needs minimal to no repair that you still can't use the model. Realistically it is basically just trying to be "all in" to a house cheap enough that the appraisal and refinance (i.e. the new mortgage) will get your money back.

For example the house that I just purchased:

Purchase Price: $24,000

Repair: $1,000 (Carpets/1 window) I don't even call this repair in my world this is just standard prep for new renter

All In: $25,000

Estimated Appraised Value: $50,000 (This is uber conservative on the low end expecting more like $65,000)

Cash Out LTV: .75%

Cash Out Refinance Payment: $37500 

Loan Processing Fees: $1,000

Walk Away Cash: $36,500

Obviously people are doing this on a much larger scale but this was just an example of how the model can be on a property that does not need much rehab. The key here is you need to get it at a price point that works which requires doing some research and math. 

I was a little confused about your thought of doing it without "Refinancing" at that point you have lost the BRRRR method in that your "monies" are stuck in equity in the house which is a 180 from what the whole BRRRR Method is intended for.

Jared

 Alexander,

My questions were focused on what there interest rates and terms were as based on what I am understanding is this is some special program offered through Fannie Mae. The house is a cash purchase which I am looking to CORF on as soon as I close and get a renter in. I have a current lender at a 15 year 5.6% Commercial Loan but if I can get better rates doing as you are suggesting I am very interested. 

Alexander,

I am looking on there website to find a little more information about rates/terms for their Cash Out Refi program. I am actually purchasing a house right now that will most likely qualify for this but there website is not the most intuitive so as one who has done it before I was hoping you could maybe guide me to more information.

Jared

I am looking for referrals of decent contractors (Plumbing/Roofing/Siding/Finish) that people have used and have experience with that will work outside of inner city Pittsburgh. I am looking for some people that do decent quality work but more importantly are reasonable in terms of pricing. I have been looking at a roofing/siding job and some of the quotes I have got are just insane. 

I assume there are some on here who have plenty of experience either flipping or rehabbing properties so there might be some people with good references on here. Most of the properties are Indiana or Armstrong Counties so I am hoping to find a contractor who may be willing to travel.

I actually have a partner so we were really trying to avoid putting anything in personal names so LLC was a big sticking point for us. Your are going to struggle to find anyone to give you conventional loan rates on a LLC. The loan we are looking at is a commercial at 5.6% with similar to as you mentioned a 5 year reset.

Both organizations I looked into never once even suggested using purchase price it was always based on appraised value. This is a win/win for me because although yes I have to get an appraisal it also offers me some validation in the asset value of my portfolio  (i.e. albeit I am not a huge fan of the process and think its worthless but it is something that is professionally done).

I spoke to quite a few credit unions none of which were interested in loaning to LLC. This being said they had some great rates for personal HELOC's which would have been the route I went had I been doing this alone.

Jared

Are they basing your Loan Value of what you paid for the house? I think that is the important aspect is appraised versus purchase value. It sounds like they are using your purchase value. A lot of people on here call it "After Repair" value this implying that there are substantial repairs. 

I just purchased a foreclosure that needs maybe $1k for some new carpet and a window. The house should appraise for $60-80k and I should be able to pull about $50k from .75 LTV. I bought the house for $22k if the bank was only using the $22k no way I would even bother investing in this model. I would just find someone willing to lend at appraised value and not purchase value.

 Steve I would be interested in learning more about the financing options you are using. Are you making cash purchases and refinancing or are you financing a standard mortgage without anything down? If you would be open to it could you PM me with the details of your lending institution as I am in the Pittsburgh area as well and I am looking to essentially do something very similar to what you are suggesting.

This might be an obscure question that I am sure has been answered many times but if not the MLS then what is the best option for finding real estate fairly readily? I ask because I would love to avoid the MLS due to inventory and as you stated exposure but would not even begin to know how to find houses other than spending the time to find what look to be vacant properties and then making cold calls.