All Forum Posts by: Jim Kittridge

Is your partner who has a design/build co on the loan with you? If he is, most of the larger hard money lenders should do the project assuming the numbers make sense and you both have adequate financials/credit.

I don't want to brag, but I do want to break down how I made $700k BRRRR'ing 7 houses so you can copy it.

Just over a year ago, I purchased 7 properties from a landlord who was focusing his efforts on growing his new construction business. 

After a lot of negotiation, we agreed to a purchase price of $420,000 for the 7 houses with a rent roll of $3,700/mo. The cash flow was okay at best but the rents were +50% under market value so their was room to add significant value. The houses needed ~$100,000 in improvements to bring the rents up.

A local commercial bank was willing to lend 85% loan-to-cost (LTC) of the purchase and rehab which equated to $442,000 at 4.25% interest. A private lender loaned an additional $110,000 at 11% interest with a guarantee from the holding entity and a personal guarantee. 

After a year of turns and renovations, we were able to more than double rents and still keep them 20% below market.

We took it to our long term lender and ordered appraisals which came in at just over $1.2M which meant I created $700k in equity (current value - current debt).

The cash out refinance was $930,000 at 3.75% interest, fixed for 30 years. Our bank and private lender were paid back in full and I walked away with $400,000 in cash to invest in more deals and an additional $300,000+ in equity

And one of the most important things for those of you who made it this far: How did I find the deal?
I personally called and texted every landlord who owned 5+ properties in a few target counties. I reach out to each of them every 3-4 months to see if I can help with anything whether it's a plumber, a new flooring I'm using, or a deal that I saw from a wholesaler that might work for them. I had spoken with this owner 2 years beforehand and kept in contact with him until he said that he'd consider selling if he could get a fair price and not bother his tenants so he could focus on building his new construction business. 

Getting deals like this isn't that complicated or difficult, it just takes sustained time and effort.

It depends on your risk threshold, what kind of deals you can get, and your opinion on the future of interest rates.

Personally, I prefer home equity loans (fixed interest, fixed term) in this environment as I have ample deal flow. I pay a small premium to fix the rate and term, but I reduce my risk of interest rates rising. 

If you don't have a lot of deal flow, HELOCs can be a great way to BRRRR or flip properties. Just continue to analyze deals properly.

Welcome to BP @Sarah Barrett. I'm pretty active in my market and use a variety of lenders (private, community banks, and the large asset based lenders).

It depends which audience you're serving, but most normally care about: LTV/LTC, rates, speed, and ease of borrowing.

I would recommend joining your local REIA and getting more active in it. Go to subgroups and see if you can give presentations on how to get funding for deals, what lenders look for, etc.. Provide value and connect with people.

You can also connect with local agents, flippers, and wholesalers.

Hi @Serge Velet, making money on flips is pretty straightforward. 

Profit = Sale price - Costs(Purchase, Renovations, Holding,  Selling, Financing). Take into account your general overhead (insurance, marketing, accounting, etc.). What's left over is your profit. If you're new, J Scott's book on Flipping Houses is a fantastic starter.

Income from flips is treated as active income and taxed accordingly. It's highly dependent on your tax & income situation. One person might be taxed at 30% while another might be 47% in a higher bracket and higher tax state.

The most common way to reduce tax liability from flipping houses is to refinance them and keep the flips as rentals. If it's rented out and you sell a year later, it will be taxed as capital gains instead of active income. Consult with your CPA, but it's roughly a 15-20% tax instead of 30-50% if you bought and sold as a flip.

Lexi, I'd recommend reaching out to landlords directly or ones that have units available for lease.

I spoke with the ones mentioned, but found a better one locally. I opted for a 2nd position HEL, 2.99% fixed for 20 years with a $400k max HEL. They had slightly better HELOCs, but I prefer to fix the rate.

Call/drive the competition. 

Most SS investors start with the assumption of 10% vacancy + 5% delinquency when underwriting deals in “normal” markets. 

I think the easiest path is bring on an experienced partner on the GP side. 

If it’s a 40% return as you stated, it should be pretty easy to get someone with the balance sheet, track record, and banking relationships to do the deal with you. They may even have a better capital stack than a 75/25 split with LPs. 

John Sanders with Farm Bureau is exactly what you're looking for. His rates are competitive and he only works with investors.