All Forum Posts by: Jonathan McGee

Hey @Joe Livsey glad to hear you made it to the appraisal process on a BRRRR investment! Although landing 15-20k is not entirely too bad, I definitely can understand needing to get that number boosted a bit. I've had success with one client who was able to talk to the lender and request an appraisal dispute. Our projected appraisal amount was at least $85k hopefully $90k (Memphis) but the appraiser gave us a whopping $50k, stating the property had not been updated. The client spent $25k on the remodel which included turning a carport into a 4th bedroom so basically we turned in the remodel invoice(s), before and after photos and some very similar recent comps we found more in the $90-100k range.

The appraiser gave us the $25k for the remodel and the client settled at $75k instead of continuing to fight it. We could've went with another lender but that would've extended the process.

We actually had to dispute this same appraiser on another property as well. Needless to say, we are now refusing to accept appraisals from this particular company so stay diligent! Especially if the comps are there. Good luck!

Wholesaling is a necessarily evil, in my opinion. Many may not agree with it, but it feeds the entire industry. I think it is safe to say that 70% of the turnkey market in Memphis is delivered by 'educated' wholesalers. I'm sure there are unethical ones, just as there are agents, contractors, etc. I will agree that the practice is diluted more so than other aspects of the industry by uneducated people who don't know a lick of real estate, but that's due to the draw of "make money with no money in real estate" seminars sending masses out to the field. 

I market to potential sellers every day, and I've yet to run into a situation where someone was willing to accept a drastically undervalued offer for their home because they didn't know any better. I've heard about it happening, but that's like a unicorn deal. You're telling me that an investor finds a seller willing to take $30k for their $140k property, and you're not going to close on it because it's "unethical"?

Most of your educated, successful wholesalers work in private. DIrectly texting, emailing or calling their pool of buyers that they've built relationships with overtime. They aren't on Craigslist or Facebook marketing to the masses. Find a deal that makes all the sense to any investor and you've got the option to assign it for a quick flip, or there will be a private lender who will happily loan you on it.

In my honest opinion, there is no way to stop what's done in private and only shown on the buyer's HUD. Start working with a successful wholesaler, and your opinion will be changed.

Wow..Midsouth’s wait list is til November or December? I guess I need to get to work LOL 

Having turned a many properties over to several of the turnkey outfits in Memphis and watching the progression of these properties, I can say there are some slight differences in their approach. I am not in the business of upselling either of these companies, but I can vouch that some spend a significantly higher amount on their renovations. The goal of this to reduce capex, maintenance and overall costs for at least for the first 10 years. Secondly, these higher cost renovations are to achieve a premium rent rate. I would also consider the differences in their property management, length of leases and quality of tenants. 

Some have a brand to uphold, and their products speak for themselves. Others have spawned as a more cost effective alternative to this. Others offer renovation warranties on their properties. I simply look at these as either buying a Ferrari, or a Corvette, or a with a 10 year warranty. 

Best of luck either way! 

If you are specifically looking for an app, DealCheck is pretty nifty. I’ve used it to generate reports as well.

I work with quite a few BRRRR investors in Memphis and have managed their remodels with my contracting team as well as connected them to certain lenders. First, switching lenders is definitely an option. Some lenders find this investment strategy risky and are not willing to loan as much as you'd like, and I believe they are either using a particular appraiser or coming up with their own numbers. You can also look into delayed financing which will net you your purchase price plus remodel costs or 70% of the appraised value, whichever is less.

Secondly, I always explain to new BRRRR investors that going for the full turnkey style remodel is not always necessary to hit that magic appraisal number. As you stated, appraisers are looking at square footage, age of roof, HVAC and water heater, electrical, foundation, windows, doors, year built, location. While fancy counter tops, cabinets, floors etc. are nice, they don't exactly pad an appraisal. These items are added to turnkey homes to get a premium rent rate. I'm not saying you don't need to do updates, but going on a spending spree is not going to help your situation.

Your third question is something you'll have to strategize. Put the ones you went all out with on the remodels up for sale on the market, try to get some cash out of it and start over.

@Eric Piccione If you’re talking about buying the property, refinancing into a mortgage and then leasing it out with an option to purchase, there’s nothing wrong with that. You’re essentially just renting out the property with an option fee to purchase after the first year or two. I feel like this defeats the purpose of buying to hold as a cash flowing rental since you’re taking the risk of the lease option purchaser actually deciding to close it, but 9 times of out of 10 they never do. 

The Memphis market is popular predominately for it's SFH investments, not so much on the MF side. The 2-4 unit homes are scattered throughout the city but some investors have had great success with these. Unless you plan on spending a few mil, the "deals" on 8+ door units are going to be in rough areas as previously stated. You're looking at $500-$650 rents per door with high turnovers, damages to property, theft and from my experience, major challenges in trying to get these places remodeled. I was managing the remodel for an investor on an 8 door complex and we literally had to look into hiring overnight security during the remodel.

Get a copy of the last lease agreement even though it is on a month to month term. I would also suggest getting an addendum signed between the landlord and tenant stating they are month to month term. Worst case scenario, you close and give her a 30 day notice and she whips out a signed year lease with 6 months left.

Self-managed rental deals have been risky in my experience. I recently found a deal for one of my out of state partners that had a month to month tenant. Our intention was to get her out so I could get the remodel rolling. Seller told us she’d be out in 2 weeks after closing. That turned into 2 months after I finally found her a place to go from another landlord. 

Even if he provides you with rent ledgers, you are still taking on an unknown risk of a tenant you know nothing about. I’d turn that over to a property manager as soon as you close with either a new year lease or 30 days to vacate, whichever the tenant decides.

Best of luck!

@Jay Hinrichs I understand. From what I gathered when trying to assist in an advising a private lending deal, DIL's can be risky to the lender. There is supposed to be a sequence of events such as a request from the borrower so a pre-signed deed in lieu may not hold up. Pre-signed QC in TN was the method used in that scenario, and although it didn't default, the QC would have been an easy transfer but I also understand other states may be different.