All Forum Posts by: Kevin O'Brien

Only you can make that decision. As someone who actually did drop out at 19 with a similar amount saved up I can tell you its certainly not the EASY route. Had I not come from a construction background  and been able to continue living with family I don't think I would have succeeded. 3 years ago when I flipped my first house the purchase price was 70K and needed another 20K in work. I sold it for 125K net. Nothing spectacular. I took the savings and profit and bought the next one cash since nobodies gonna lend your or I money at that point. After fixing the house up and renting it out I was able to work with a hard money lender after trying MANY. Don't even try doing a loan with a bank without 2 years of solid W2 income. So, Could you succeed? yes. But it wasn't easy for me and that's with all the advantages I had that I'm not sure you have access to. 

Ask yourself if you are okay doing a lot of the work yourself on the first dozen? properties? You can figure most basic things out like painting, trim, basic carpentry, vinyl flooring, landscaping, demo, tiling on youtube. But there are things you shouldn't do yourself like plumbing and electrical. And for those things it really pays to have connections considering the tight budget. MY plumber is now making on average $700 per day from a lot of his customers. He is a family friend and I pay a good big less thankfully. It's easy to get screwed over in this business when you're inexperienced. 

If your degree isn't interesting to you anymore maybe try out a trade. I know plenty of electricians and plumbers that would be happy to take on an extra set of HARD WORKING hands. You'd probably start around $17-$20 an hour and after a year or two have decent proficiency in the trade and make $250-$300 a day. You can use that skill to fix your future properties up and save some money. 

My advice to you if you are determined to drop out would be to apprentice with a license trade for your day job. You'll learn a bunch and create contacts with other types of trades along with hopefully learning what others are doing in your area that works. You also need to decide exactly what type of real estate you want (single family, duplex, condos, etc.) your price point and if you are flipping or renting. You need to be the expert in your market and know exactly what you want. That way when a deal comes on the market you are able to analyze it quickly and pull the trigger. A good deal usually doesn't last long enough for people to overanalyze it.

Don't do this if you think you'll be financially independent from realestate a year later. I am 3 years in and currently fixing unit 8 up. If you're netting a few hundred a door it'll take a while before realestate is making you rich.

Run!

Drive the area you need the work in enough and eventually you'll see these guys doing the work on houses. Get out of your car and get their phone number and introduce yourself. I look for the guys driving the beat up vehicles most the time. The nicer the truck usually the more it costs. Try to not act like a homeowner. 

$100,000 sounds reasonable but impossible to say without seeing the property. Gut rehabs tend to be contractor specials. When you are gutting a property all you save is the original wood framing and even then you are still framing stuff so its really not much easier or cheaper than new construction. Id argue new construction is easier. I wouldn't be surprised if you get to $100 per SQFT once the dust settles. There doesn't tend to be enough margin unless you are very attentive to the project and more or less GC it yourself. Id pass $20K + $100K +$10K in closing costs to sell brings you to $130K. $45k in profits isn't enough for me to gut a property considering its a 4 to 6 month ordeal plus closing time assuming you have your ducks in a row. 

Find properties that cost less than $75,000?

I think it greatly depends on yourself. Are you going to continue on when you have exhausted plan A, B, C, and D and the going gets tough? I dropped out at the beginning of sophomore year which was one year ago. Since then I have bought two SFH rentals and am closing on the third next week. I do a lot of the work myself (paint, trim, flooring, demo) and that reduces my costs considerably. If you are handy with your hands you should consider doing some of the work in the beginning. Also look at getting your realtors license its easy and only takes a couple weeks. Figure out what you can buy through talking with a mortgage broker. Once you know your budget figure out what type of property you want to be targeting ( single family house, two unit or something else). Once you know what you are looking for and your budget for said property look religiously twice a day minimum to check for new deals that meet your criteria. When a deal that you can realistically buy that meets your profit margins comes on the market ACT AND BUY IT!!! Don't sit around and run could or should have would have scenarios around in your head while someone else buys it.

The property was purchased on March 27th. I can do 3 months of seasoning but if I had to wait 6 months I’d probably just sell it. If 70% is the max I’m going to get I’ll still take it because that covers all the money I invested. The extra 10% is just gravy. Hopefully we see things return to before. I missed the early 2000’s NINJA loans and this is the closest I’ve seen to it. 🙄

 70/75% is what I’m seeing also. 70% gets all my money out of the deals so it’s good enough. But hopefully thinks shift back to norma in June when Im refinancing. 

I am in the final stages of a rehab in Indiana that I was planning on refinancing through a hard money lender once it is rented. Before the virus I saw some hard money lenders up to 80% LTV @ 6% for 30 year fixed loans.

Are there any lenders offering similar terms now? Property was 70k and with the rehab I’m in it for just under 90k. It should appraise for 130k. I expect to be able to rent it for $1375. 

Expenses are $200 a month for taxes and insurance. So with a mortgage at 6% it's somewhere around a 1.9 DCR.

It's a bit rough unless its a cheaper deal under $75k. You should aim for 12% interest and 2 points or $4,000 in fees. Whichever is higher will be about what you should be paying in origination costs. Hard money lenders used to want a minimum $3,000 profit per loan its probably higher now.