All Forum Posts by: Jerod Smith

Thanks @Kevin Trumbull

What Capex percentage should I be figuring into deals?

@Aaron Montague wow that was a great explaination and lots of that I haven't thought about.  So, how much net do you look for in a deal to make it worth the time?  (Obviously $21.42 isn't going to cut it).

@Kevin Trumbull yes after refi. 

Thanks everyone for the input. I'm learning a ton on BP. Now to learn how to find an actual deal! :)

@Fernando Angelucci I'll gather more details today and post them. My concern about a conventional loan is quickly running out of cash on hand by placing the 20% down into each deal. Won't this end my RE career quickly? My existing deals were all conventional, the $48k is what's left.  Also, banks here are telling me they will only go 20 year max on investment property. 

Am I missing a key component here?

@Jarred Sleeth I'm also concerned with the net. What if this was a flip instead?  I'm not sure if I can get the property for less than $50k. That would still leave me making at least $10k for my first flip. Thoughts? 

**In all of this my concern is running out of cash on hand to keep the ball rolling. I'm protecting the $48k like a pit bull!

Still haven't pulled the trigger on a BRRRR deal yet. Trying to be patient and seems like all the properties I look at have a major thing that scares me off.

BUT...through the help of my Realtor, I've found a 3/1.5, 1075sf, brick, 2 car garage in an area that brings an ARV of $90k.

Asking price:  $69k.

Rehab would include (not limited to):  

• Refinishing wood floors in Living room and hallways.
• Carpet in bedrooms.
• Tile, Counter tops, paint cabinets in Kitchen.
• Paint interior
• Tile, sink, vanity bathroom (maybe more).
• *All other systems and structures seem to be in good order.

Estimated rehab:  $20k

Lending:

• Hard money for initial purchase at 12.75%.  (Fee is 1% of loan and 1% payoff penalty inside one year).  
• Refi at 80% of after rehab appraisal.  15 years at current rates.

Rent potential:  $900 (neighborhood brings $850 for non remodeled properties).  Mortgage plus tax and insurance should put me around $750.  Net= $150 (not counting vacancy, capex etc.)

Further details:

• $72k= loan amount of 80% of ARV.
• $20k= rehab cost.
• $2500= est closing costs (incl. refi).
• $400= bank appraisal

QUESTIONS:

• My offer should be $49,100 in order to cash out, correct?
• I have a 790 credit score with cash assets of $48k. The rehab money comes from this cash. With my credit score and cash, should I be expecting a way better hard money deal than 12.75%? I've never used this type of loan so I'm not sure if this is normal or highway robbery. If yes, where do I look for a better HML?
• Is my rental net too low?
• What other advice would you seasoned professionals give me about this deal?

Thanks in advance!

Jerod 

ps. Other two deals were traditional 20% down hold. I have equity in both however. Owned 1 since March and the other since August. 

Other two deals were turn key Tennant occupied properties. They are successful. This is my first rehab though.  My bank (from the other two deals) said they would make me hold it 12 months on a refi.  This is considering I get my initial financing somewhere else because they don't like to refi a loan they just completed.  

Seems like they really just want me to do the traditional, 20% down and hold  but I really want to find a way to get that cash back out like I'm seeing others do on BR. 

I've read so many BRRRR threads that I hope I have a handle on this and ready to do my first deal. Would love input.

• $46k cash on hand. 
• 2/1 ( could be 3) SFH offering $30k in recovering, popular neighborhood.
• Rehab cost $20k
• ARV is $70k

The plan:

• Use HML (12.75% 15yr, 20% down, 1% per $1k upfront fee, 1%/balance early payoff fee inside 1 year,) Initial purchase = "approx" -$24,000 (incl $6k down).
• My cash for the rehab. = -$20,000
• Appraisal = -$400

1. total in- $44,000 ($26,000 mine)

• Rent ASAP $800/mo (approx $2400 net for 6 months)
• In 6 months, Refi 70% of ARV = $49k

Questions:

• Am I crazy for taking the 12.75%?  Is there a better way? My thought for keeping more cash on hand was a safety net because it being my first deal.  In addition, the traditional bank I've used on to 2 other deals seemed a little timid of my strategy. So, I went to somebody who was willing to do it. 
• doesn't this scenario put me back where I started with my cash in hand?
• Is it possible to do a home equity immediately after rehab to cash out early?  What are the details of that route? (Cost, rules etc). 
• Other thoughts?  Things I'm missing?

*please excuse any errors in the math. It's late. ;)

@Fred Heller thanks again!  

@Fred Heller thanks for the input. How much should I worry about the piering?