All Forum Posts by: Josue Guerrero

I was doing a little bit of reading up on the BRRR strategy blog post by Brandon Turner here on BiggerPockets. I'm slightly confused on the refinancing aspect of the strategy. I'll use his example to demonstrate:

Let's assume we got a hard money loan from a financial company for a home with an ARV of $150,000. Using the 70% rule, we purchased it for $75,000 and incurred $30,000 in repair costs getting our total investment to $105,000.

Now my question is this: a hard money lender is going to charge you interest and loan points. Let's assume its an 10% interest rate, with 3 loan points on it and the lender wants the money back in 90 days. How exactly do you go about the refinancing of this property through a conventional lender in a step by step process, assuming you refinance at a 70% LTV ratio?

I was doing a little bit of reading up on the BRRR strategy blog post by Brandon Turner here on BiggerPockets. I'm slightly confused on the refinancing aspect of the strategy. I'll use his example to demonstrate:

Let's assume we got a hard money loan from a financial company for a home with an ARV of $150,000. Using the 70% rule, we purchased it for $75,000 and incurred $30,000 in repair costs getting our total investment to $105,000.

Now my question is this: a hard money lender is going to charge you interest and loan points. Let's assume its an 10% interest rate, with 3 loan points on it and the lender wants the money back in 90 days. How exactly do you go about the refinancing of this property through a conventional lender in a step by step process, assuming you refinance at a 70% LTV ratio?

@Ben Leybovich

You are absolutely right, Ben. I'm realizing more and more everyday that REI is not as difficult as most would have you believe. I suppose it's still just a little hard for me to wrap my head around the idea that your best investment strategy sometimes, is simply common sense!

@Ryan Billingsley  Yes, 4 eyes are definitely better than just 2! I will definitely bring my contractor on board when I go check out some of the properties. You also make a valid point about overestimating expenses if I can't bring him in. I might have to do a little bit of research on the costs of things so I don't underestimate, while I think I'm overestimating! 

I appreciate the response, Ryan!

@Ben Leybovich Ha ha, you are right, that is indeed quite simple. I asked a contractor about checking out the properties with me and he said he would but he wasn't sure if realtors approved of that. I realize the question sounds silly, but he put the doubt in my mind and I just wanted to be sure about it! 

Thanks for the insight though, Ben!

So I've been doing a little bit of analyzing deals and have found a couple of houses that would make sense to take a closer look at. The homes are in need of some repair work and I've set a budget for it accordingly. My question would be, how strange would it be to ask my general contractor to come take a look at a home alongside me, and give me an estimate for the repair costs on the spot, in order for me to decide if it's worth making an offer on it or not? 

In other words, if my budget for repairs is $10,000, and after looking at the house with me he says that it needs $20,000 in repairs, I would decide it's not worth my time or would lower my offer accordingly.

My question is, is that something that is normal to do in real estate investing, or is bringing your contractor along something that is frowned upon?

Forgive the newbie question, but I'm curious as to how exactly a cash-out refinance works. Could someone please explain to me the process of cash-out refinancing a house purchased and renovated through a private money lender?

Follow up question: What is your own personal experience with a home that you purchased and rehabbed with private or hard money, and then refinanced?

You know Annette, I've come to realize that people always want to see you doing great, but nobody ever wants to see you do better than them. The reason the naysayers exist to begin with is because they don't feel that they themselves can do what you're doing, or maybe they tried to do it and it didn't work out for them. Those naysayers will say whatever it is to justify their own failures such as, "Yeah, Real Estate is a tough gig, are you sure you want to do it? I mean, I tried to get into it last year and let me tell ya, I couldn't find any good deals! The market just isn't quite like how it was in 2008!" (Can you tell I've heard this once or twice before? :] ) 

Sadly, we live in a society where we've been molded to believe that the path to a successful life is to go college, and then work at some 9 - 5 job for most of your life, and then retire at 65. Doing anything else is seen as extreme, or crazy and will guarantee you criticism from people who don't understand why it is that you're doing what you're doing. 

You sound like you know what it is you want from life, Annette. Keep doing what you're doing and I have no doubt that you'll go far! 

As a new real estate investor who's ready to take the plunge in fix and flipping, I've found that private/hard money lending would be the way to go to get started. 

To everyone who has had to negotiate terms with a private or hard money lender, what was your experience like and what did you have to show for them to agree to lend to you? How reasonable were they with interest rates, points, and the length of the loan? Did they require you to have a steady income or could you qualify while being self-employed. Also, was it your corporation/LLC that borrowed the money, or did they make you personally guarantee the loan amount?

Thats great that you're wife has earned her real estate license! I'm pretty clueless when it comes to brokers but I have heard that as a real estate agent, there's a lot more liability involved. Not only that but I think your wife would be legally required to mention to every seller that she is a licensed real estate agent.

Best of luck to you on your real estate adventure Cody!