All Forum Posts by: John Leavelle

@Devante Boll Yes. That is a good assumption. You definitely should consider the HOA will cover and adjust your numbers appropriately. However, there can be other issues that I chose not to deal with. It will have to be an exceptional deal for me to pursue a property in a HOA.

@Collin Savunen your numbers are confusing.

Purchase price is $195K. How are you paying for this? Conventional or Hard/Private Money loan? It looks like you are saying the loan ($255K) will also cover the Rehab ($60K). Conventional loans don't typically cover both. This sounds like a BRRRR deal. If it is you have a number of other expenses to consider. Hard Money points, Holding costs, and closing costs/fees.

This is considered a multi family investment property. You may not e able to get a loan amount that is 80% LTV. Typically it will be 75%. Double check what you can get.

Please clarify what your plan is.

Howdy @Jennifer DavisToliver

It is possible, but, very difficult for the reason @Chris Mason indicated. You must be able to make enough equity gain through the added value from the Rehab to be able to qualify for the Refinance. For multi family properties the typical refinance loan amount will be based on a LTV of 70% to 75% of a new appraisal. That means your equity must grow from 3.5% (your FHA Down payment) to 25% - 30%.

@Roberto Torres is working with a Single Family Residence ( a very large SFR) which he may be able to get 80% LTV. His numbers indicate he has achieved the needed equity gain.

Be sure to find a property that needs a sufficient amount of repair and purchase at a good discount to allow for the needed increase in Value.  If you can do that you may be successful.  Otherwise, you may have to stay in the property longer than the minimum one year to gain enough equity.

Howdy @Collin Savunen

You did not include anything for Vacancy.  Recommend at least 8% (8.34% is equal to one month rent).  

Also, why is your Mortgage Amount $279K If Purchase price is $219K?  You did not indicate any down payment, why?  Why are you including the Repairs in with the Mortgage?

Howdy @Devante Boll

HOA - the Cash Flow killer. I do not invest in properties with HOAs. Additionally, since you will be living in one unit for a while you will experience negative Cash Flow every month (only 3 units paying rent - not 4). Can you afford that?

Howdy @Jason Malabute

To know if you are doing it right depends on your investing goals.  What criteria have you established to use as your guide when you evaluate deals?

Are you trying to build equity?  Are you looking for Cash Flow for passive income?

What are your minimum acceptable requirements?  Cash Flowing a minimum of $50 per month per unit? $100? $200?  Do you want a minimum Cash on Cash Return of 5%? 10%? Higher?

In your report you included all the normal information to make a good evaluation.  Your numbers are very conservative (which I like).  But I agree some are excessive (Accounting and Legal).  Lawn care may be a little high depending on the area and size of the property.

My question to you is are you satisfied with putting such a large amount of cash into a property only to get under $100 a month in Cash Flow and a measly 1.58% COCROI?  I have CDs that earn better returns.

@Joshua D.

I use three methods to finance the Purchase and Rehab for my BRRRR deals. A Private Lender, HELOC with a small local bank, and a Line of Credit with a Credit Union. I then refinance the properties as each project is completed with a local bank or Credit Union (Portfolio Lenders).

So if you are going to continue this way I would suggest you get the best rate/terms you can for a HELOC and LOC. But, also look into finding a Lender that will Refinance your properties to payoff those loans. Then, you can just keep reusing them over and over again and not have to get new ones every time.

@Joshua D.

If you are using a HELOC for the Purchase and Rehab Cost and the ARV is $250K (if accurate), then, why don't you apply the BRRRR strategy to this deal. You could easily recover your entire cost (plus extra if you want) by doing a Cash-out Refinance on the property. The HELOC would be paid off and readily available for your next deal.

Also, if you are not getting the terms you like with your current bank, then, shop around and find a different lender.

Howdy @Kenneth Garrett

Every BRRRR property that I have purchased was distressed and below market rents. Each met the 1% rule at Purchase. However, once the Rehab was finished the rents were raised and still meet the 1% rule with the new Value.

I would not purchase one of these type properties if I could not raise rents.

Howdy @Jean Felix

Combining the House Hack (using FHA loans) and BRRRR strategies together is very difficult. The primary reason is you start off with low equity and it takes a long time to reach 20% of the Value. When you refinance you typically must have a minimum of 20% in equity and up to 30%. It depends on the lenders terms and LTV requirement.

A HELOC (assuming that is what you are talking about) will require the similar equity requirements.

Have you increased the value of the property through a significant Rehab?

You may be stuck saving for your next deal. If you are interested in the BRRRR strategy I wouldn't try combining it with FHA (House Hack) unless you can significantly increase the value of the property.