All Forum Posts by: John Mayer

Hi Chris! My wife and I flip homes here in the Denver metro and are starting on our 3rd project this month. We were in your shoes not too long ago, so I totally understand the information overload that often happens early on. I’d be happy to connect and share what we’ve learned, and potentially connect you with some good people in the biz. Feel free to pm me anytime!

Investment Info:

Condo fix & flip investment.

Purchase price: $300,000
Cash invested: $54,000
Sale price: $480,000

Condo Fix n Flip in the Makiki neighborhood of Oahu. Deal sourced through networking, partnership flip approach, rehab was financed through a HELOC.

How did you find this deal and how did you negotiate it?

Word of mouth networking. Negotiated a "partnership flip" approach, where we provided expertise and rehab capital but never took title. After sale, seller received agreed upon portion of profits + "purchase price" -- we took the rest.

How did you finance this deal?

Used HELOC to finance the rehab.

How did you add value to the deal?

$54,000 full gut rehab.

What was the outcome?

Low inventory and high level of rehab compared to similar nearby actives led to multiple offers over asking price. Our accepted offer was $35K over asking. The outcome was a $96,000 net profit.

Lessons learned? Challenges?

We would have added an accent to the island face or a backsplash using mosiac tile to add some color & flair.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

HC Construction (Oahu-based contractor), Christina Nishiyama (Engel & Volkers Real Estate Agent).

@Fahadbin Alam

Debt to income ratio. It's the ratio of your monthly debt payments to your monthly income. Ex: if I make 5000 a month, and I have a 2000 mortgage + 250 student debt payment + 250 car payment, my Debt to Income Ratio (DTI) is 50%.

Inclusive of your new mortgage payment, the FHA program will allow to have up to a 55% DTI. Conventional loans are much less than that, I think around 40-45%.

@Fahadbin Alam

You don't NEED to use an FHA loan for every house hack, BUT that would certainly be an ideal scenario because of how little you put down for every house. Your returns could be well above 100% per house if you're doing your due diligence.

The ideal scenario would be to acquire 4 househacks in 4 years using only FHA financing. However, sellers don't really like FHA buyers because they put less money down. Denver is also an extreme sellers market, so FHA buyers have even tougher time.

Also, you can only have one FHA loan in your name at a time.

Again though, still possible.. like so:

1) Buy the first home with an FHA loan

2) Live in it for a year

3) Refinance that home into a conventional mortgage  (if you're buying in the right areas you should have the equity by now). This is to eliminate the current FHA loan in your name, thereby freeing it up for the next house.

Fyi** Lenders don't consider room rental income as investment income. Therefore, even if you refinance, your DTI is likely going to be too high on paper to finance the next property, regardless of if your cashflowing. There are ways around it, so you should work on finding a creative lender who can find ways to make it count, legally.

4) Now that you're refinanced out of the old FHA loan and your DTI is reset, you can use it again to finance the next property.

Rinse and repeat.

I see. Who were some people you approached early on and had success with?

Newbie flipper, just finished construction and getting ready to list my first flip.

Would love to learn from other flippers on the different ways you’ve attracted/found great private money partners.

@James G.

All from FB marketplace, we set up a pre-screening phone call, then in person tours, then the we do application with credit/background & references, then we chose the ones we liked that passed!

@James Carlson

Love that you used average rent to gauge how much of a success this is. I see people get caught up on negative cash flow so often, but a comparison like that can help put things into perspective. Awesome story!

@Ola Dantis

It’s his primary residence, not a rental

*breaking even, not cash flowing $400