All Forum Posts by: Kevin Brenner

BP Fam,

I have a 4 unit under contract and I'm looking for a bit of advice on the best way to purchase this property. The property is under contract for $318 and needs $55k in rehab. The ARV is $485k. I will be BRRRRing this deal and am looking for a bridge loan with a maximum term of 36 months.

I have a Private Money Lender ready and willing to front the 25% DP ($80k). We have agreed to terms on a private loan structure and will sign a promissory note and personal guarantee. After all debt service (mortgage and personal loan) on a 75/25 LTV refi I will be left with approx $20k.

The plan was to use traditional bank leverage to finance the rest of the property. Because I own other properties, my DTI is not favorable to qualify for the mortgage on my own. So we have a few options on the table to consider:

1). Cosign with my PML on a Freddie/Fannie Investment Loan Product (Fixed rate, 30 yr Am, Lower Rate, etc.). While this offers the most favorable terms, my PML is in LA, I live in DC, and our property is in GA - so we'd have to do a double remote close which definitely will add to closing costs.  Also, my PML will be on the loan/title with me until we refi and quit claim. 

2). Form an LLC and purchase the property using the entity to purchase the property with a commercial loan (5-7 yr ARM, 20 yr Am, Higher Rate, etc.). While more expensive, this would allow us to protect ourselves. Is home insurance on a residential loan more or less expensive than business insurance on an LLC? Regardless, this option seems more expensive than the residential loan, but would save us the hassel (and costs) of the double remote close. At the refi, my PML can simply quit claim the property to me and I will be the sole owner of the LLC.

3). Pursue non-institutional lending to provide a bridge loan that covers the building and the estimated rehab costs.  I'm working with a broker now who has a 1% origination fee (which could be approx $3.5k).  Not sure what the other lenders will charge...I'm sure they have fees though.  So higher closing costs for sure, but having the 55k rehab costs wrapped into the loan allows me to begin work almost immediately, which means I can stabilize the building faster and refi out faster.  Still waiting on the terms of this product, but it does sound appealling.

I'm supposed to close on 17 May - although I may be able to work with the seller to push a week or so if need be. 

Appreciate any feedback I can get!  Thanks.   

Jay,

Personally, I look for buildings in which tenants pay all of their own utilities.  That being said, it should not take a management company a few weeks to generate a cash flow report.  I'm guessing you don't have this under contract?  You mentioned that the rent is not showing $1700/mo from rent alone - what is it showing? Perhaps they charge people for storage or laundry and are counting that income in the rent roll, which shouldn't be the case.  

Off the bat, this deal seems a little strange.  I wouldn't give up on it just yet.  A lot of small 4 plexes are grossly mismanaged and this could just be a barrier to entry.  I don't know anything about the Fort Smith market, but if you think this place has potential its worth your time to investigate further.  

Good Luck! 

Have you considered a Seller Second to assist you with the DP.  Its an owner financing technique where you get a commercial 1st mortgage and then negotitate a 2nd mortgage with the seller for 15-20% of the DP at a certain interest rate.  Its a win win because you get lower exposure on the DP and the seller cash flows for a few years after the sale! This only works if you have a good deal with favorable margins though - you dont want the 2nd mortgage to put you underwater on the property!

@May Emery thanks for the tip.  I made some calls yesterday and already got a solid lead on a duplex! My team is pulling that thread and we'll see if anything shakes out.  Right now I'm saving the people with DNC numbers for the end.

And yes, these days I get tons of RVM messages from people.  It's kind of annoying cause I constantly have to clear out my voicemail. Maybe I should look into it haha! 

@Yolanda Eiland okay good idea.

First I got my list from ListSource (which was kind of annoying and not user friendly). Then I used mapcustomizer.com to enter all the addresses in at once to map them. From there I color coded them by neighborhood and eliminated the properties that I knew I didnt want. After mapping and sorting, I looked up each address on the county assessor to further tailor my primary list. I look for 2-4 unit properties only.

It was a lot of work, but hopefully it pays off. Just need one deal to make it worth my time.

So I just purchased a list of tailored motivated sellers of small MFH property owners in my market.  I organized, mapped, and researched each property to ensure it met my criteria (or close to it).  I then went ahead and built a script and skip traced each potential lead.  

The skip trace came back with cell phone, landline, and emails, but some of the phone lines were on DNC lists.  If I call a DNC number, am I setting myself up for failure? Will I face massive consequences? I guess I'm asking who regulates those lists?  I don't want to bother these folks, but I also don't want to miss a potential lead.  

Any wholesalers find success with RVM? I suppose I can also send an email blast out and see if anything comes back.  For some context, my leads are MFH/owner occupied/65+ year old residents.  

Appreciate any wisdom/marketing tips from the BP faithful :) 

@Evgeni Romberg appreciate your input.  I found a service called skip genie.  It's pretty much $50 per month for 10 skips with $1.50 per skip after that.  I might try it out and see if I can get some results.  I'll keep you posted! 

I recently spent $75 to purchase a list from List Source of Owner Occupied / Age 65+ / MFH properties in my market and surrounding markets.  From there I used mapcustomizer.com (great site) to map each address to get a better feel of where I think I will have my best chances of finding a legitimate lead.  It took a lot of time, but it was kind of fun to see the trends of where my target audience resides in my market.  

Regardless, I'm at the point now where I'm ready to begin marketing.  I was originally planning on using the "dollar" technique to send letters with handwritten addresses to all the people on my list (about 150 leads).  But then I found an app called whitepages that (for about $50/mo) allows you to skip trace all the addresses to get phone numbers to cold call.  What do you think is more effective given my audience?  Are their cheaper skip tracing service out there? Any ideas for a cold calling script - maybe what highlights should I hit?  I was thinking of going with the tired landlord route - any advice is much appreciated!

I've installed smart locks on my doors and my tenants love them.  The convenience of not having to carry yet another key really peaks tenants' interest in my market.  My tenants pay their own utilities so I don't plan on springing for the smart thermostat, but I do believe that upgrading tech in a rental garners more rental income (especially if you are in a C+/B- and up area).  Plus, smart tech will help me transition my long term rentals to short term rentals in the future so it's a win-win for me.  

@Andrew Neal this is an interesting idea. I recently took out a line of credit on my stock portfolio to pay for an MFH rehab. The money is floating at prime (cheaper than any hard money lender even if rates are hiked) and on a 5 yr balloon - more than enough time to refi out and repay the debt in full. Plus the money is 100% recycleable. Once I transfer this property to an LLC I plan on using my entity to secure the line of credit for future projects. Point is I can use this strategy to avoid paying HML fees. Although it only works if you have money to collateralize in an investment portfolio. Maybe this could work for you?