All Forum Posts by: Jonathan Edmund

It would rent for $1,800 a month. I believe you're right at this point.

So I was under the impression that I need to get all of my money back. So as long as I get the loaned amount and my repairs back I don't need to account for my closing costs or holding costs with the hard money?

So I have lined up a home that I was originally going to flip but I think may be better for the BRRRR Method. Or at least I thought so.

The homes ARV is roughly $250,000 but I can get it for $170,000. It needs $37,000 worth of work according to my contractor. That comes out to $207,000 total cost for home and reno. I would use hard money to get the property which would be 3 points up front, 450 appraisal, 695 lending fee and they 12% interest only loan for one year. I would re-fi after 6. That would be $7,951 in interest only payments before re-fi.

So I would be out of pocket $50,496 and have a $165,600 balance to pay off when I re-fi. So that would be $216,096 that I'm out. When I re-fi, I can only finance $175,000 (70%) of appraised value. But really since I paid almost 51k up front, I'm getting 10k back so I'm still out 40k. This isn't correct as this method is supposed to pull all of my cash out correct?

So is my problem that I'm looking at a home that needs too much work and am over paying? I figured for a home that I'd have that much equity in, I'd be doing ok until I really look at the numbers. I used the calculator for BRRRR method but I think it assumes I'm paying all of the repair costs out of pocket and messes up my numbers and thinks I'm coming out of pocket like 80,000.

I just want to figure out where I'm going wrong so I can correctly implement this plan in the future when the right deal arises.

So I have found a property in my area (Myrtle Beach SC) that I think would be a great flip.

I know the ARV on the home is easily about $250,000 but probably higher. I am using hard money for the loan through lending one. I'm coming to find out that with their fees on top of the other fees I have, it's going to be hard to find any property that will accept a low enough offer to make the numbers work

This is my numbers on the home. The repair cost are spot on I had a contractor look. The lending fee is 2.5% plus $450 appraisal and $695 processing fee. They will do a  year interest only loan which will cost me around $1,075 a month in holding costs. Assuming I hold it for 4 months, and have the other fees involved, I would have to pay $165,000 for a home that needs 37k in work and will sell for 250k. The seller won't go below 180k for it.

Is there any ways to cut costs maybe on another type of lending or something I'm missing? (on the chart the monthly mortgage fee is multiplied by 4 assuming I hold the property 120 days)

Or is it realistic to be able to find a 250k home that needs almost 40k worth of work for 160k? This is the first motivated seller I've been able to find where I feel confident in the ability for it to be a good deal but not if he wants 188k for it and with all of my current fees.

Sorry for the long post but any advice would be greatly appreciated!! 

@Jeffrey Long Thanks for the info man you're absolutely correct on that. Everything you said makes sense it's just harder to actually apply sometimes. Thank you! 

@Teri Feeney Styers Thanks for the response I used that rule on the flip in question and it changed the numbers by 10,000. I will be using that from now on!

So I have been a Realtor in the Myrtle Beach SC area for about 5 years now. I have been wanting to start doing some flips as well as acquiring rental properties and I have been doing a lot of research first. I don't really have any questions about rentals but for flips, I'm coming across some problems.

I use the 70% rule to evaluate max offer price. When I go to the foreclosure auctions or bid on any properties, I'm usually outbid and it's usually by over 10k or more making me feel like the 70% rule doesn't apply to my market. I don't know if I'm just over estimating repair costs or if I'm just missing something.

As a realtor, I know my ARV is spot on that's the easy part for me. But I feel like I'm missing something. I did hear of another rule that said take the ARV x 90% to take out holding costs, then subtract repair costs and the profit you want and use that as max offer price. Has anyone used this rule?

I just don't want to lose money on my first flip. I have found a condo in my area that is a perfect flip but my math says I need to get it for $65,000 max and the property is listed at $115,000 and the ARV is $128,880. I just know if I could get this for $65,000, it would be gone already so I know I can't get it for that price. I'm assuming 25k in repairs.

I doubt I'd get this under 90k so I'm struggling to make the numbers work to actually obtain the property. Any ideas would be greatly appreciated!!!  

 Thanks for this! This is the main thing I wanted to find out. I knew if I didn't do it correctly that would happen just needed to hear it from someone.

Thanks! 

@John D. Thanks for the input this is also all good and true information! Great photos and descriptions are a huge benefit for marketing purposes. As for offsite and onsite rentals, I think if you have the time and have knowledge about marketing and what sites to use as well as good photos, yes always rent yourself. If you don't have the time and you're comfortable with the numbers after using an outside company, that may be the best route to go. 

So I think it's up to the person but yes for me, I'd rent myself any day. That goes for short and long term rental properties. You make very good points though I appreciate all of the input! You shed good light on the ability to rent a property yourself and avoid management fees which is a huge expense. Good stuff! 

@Steve Vaughan Awesome I appreciate the input Steve!!