All Forum Posts by: Jesse Byrer

@Kris Mann sounds like you are buying and rehabbing cash. If you get 100% financing you can to r&t refi up to 80% LTV and reduce the amount of cash left in each deal. Some might want to leave more in to increase cashflow, but most of my clients want to leave little to no money in the deal.

@Yosef Ajami No the 20%-25% equity has to do with the the future value or After Repair Value"ARV". When I invest I also do the BRRR Strategy, but the goal is to leave little to know money in the deal. So one of my fundamentals is to make sure the the ARV is 25% higher than my total cost (purchase + rehab). This way when I go to refinance I get optimal terms and leave no money in the deal. This is how you have instant equity in the property.

@Yosef Ajami The only time in recent history where I have hear of home values declining significantly was during the financial collapse in 2008/2009. Up until that point many people boasted that home values never went down. That was quite a eye opening time in history for many of us. What I would say about the BRRR Strategy as it relates to a decline in home value is there are a few things you can do to protect yourself.

1 - Make sure the data you are using to buy the property are accurate (ex. realtor CMA) and avoid over paying. Don't buy on emotion... buy on fact. Know your fundamentals going in and that will you avoid some problems

2 - Make sure you are building in 20%-25% of instant equity that way if you need to get out you have some room to unload and not take a bath.  

3 - In the beginning take on smaller rehabs... that way you are getting in and out within a few months or less and can avoid major downturns.  

Lastly, if you have rentals with long term loans in place... minor corrections in the market place really don't matter as you are collecting rents and not looking to sell.

Jesse

@David Davis great question...  often times the initial investment is the critical one as it sets the trajectory for future investments.  You mentioned that you were building or closing on a SF in the next month so I don't know if you are willing or able to move into another property?!?!  The strategy that @Lumi Ispas is a great method but, would require you to live in the property.  There are strategies if you are looking to buy and finance as an investment property, but it can takes more money that if you were living in the property.  There a strategies that allows you to recirculate your $40K - $50K to buy multiple properties, it varies based on your risk tolerance and how qualified you are as a borrower.  The key is the first loan, I call the "acquisition loan" which needs to provide 100% financing and allow you to buy dated or distressed properties as this is the quickest way to create instant equity (critical component in this strategy).  There are different versions of the 100% loan, but it depends on several things, your credit worthiness, area of interest, property type, etc.  

@Shaun Marks I use the strategy that Andrew often when my investors are buying properties with private loans... same concept. I have local title resources to help with properly recording.  I'm here in your local market as well, so if you need help with the refinance I'd be happy to help.  If you already have a lender that knows what they're doing then you're all set.  

@Glenn Haave there's always next time :-)

@Andrew J. what were the terms of the HM Lender?  Did they at least give you 100% financing?  

@Glenn Haave Congrats on your deal... I know this NEW COVID-19 world we live in is changing the landscape.. hopefully you get the project completed and tenant paying rent sooner than later. Just wondering why you didn't use the FHA 203K loan instead of tying up your own money?

@Joshua Vanderzanden You should reach out to @Lumi Ispas... she specializes in House Hacking in the Chicago Market and can probably give you more information that you need in regards to what areas are up and coming and ones that are not. In regards to the FHA 203K loan program, I have been helping homeowners buy and rehab homes using this program since 2009. I'd be happy to explain the program and process if you are looking for more clarification.

@Gabby McNabb There are a few ways to find a reliable contractor and I'm sure others could provide suggestions, but I often times tell my clients to asked a HUD Consultant in your area. These are the guys that are managing the projects so not only to they see the quality of work, but they see who is responsive, professional, and so on. What area are you in again?