All Forum Posts by: Jonathan Edmund

I am looking at buying a property in my market. It's just an efficiency condo and it's currently rented for $700 a month. Tenant in place through May 2021. I ran my calculations on it and if I purchase it and put 20% down, I'm looking at a $167 a month cashflow after factoring in taxes, mortgage, HOA fee and costs that vary. But my cash on cash return will be 19%.

If I pay cash for the unit, I can cashflor $329 a month but my cash on cash return is only 8.5%. Since rates are so low right now, would it make more sense to finance it and keep my cash so I can try to get another unit sooner, or is there a good reason why going cash makes more sense in this case?

Hey Clark!

I'm an agent in the Myrtle Beach area. I am originally from the area and can definitely assist you with your search for properties. I have dealt with quite a bit of multi family so feel free to reach out to me anytime! 

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!!!