All Forum Posts by: Kristin Feerst

Quote from @AJ Exner:

Quote from @Courtney Murphy:

Hello BP Community,

I am curious how people estimate rehab costs on an auctioned house that you aren't able to see ahead of time.

Is there a formula? 

Exit strategy is rent or flip depending on what the market is doing when all is done.

Thanks!

Courtney

Hey Courtney,

So something else to consider. 

With my clients who seek financing for auctions, check with the group doing the auction if they want the money as soon as you win or if you have a period of "due diligence". I have found that it varies by region.

If it is an area where you need to buy cash at the moment you win, you can also look into delayed financing. It is a bit more prone to having to navigate liens and title issues, but, it is an option that allows for you to have a lot of your money reimbursed as kind of an 'unseasoned refinance' and to add a rehab escrow to it. 

A lot of factors to consider, but certainly some great opportunities as well.

AJ, Does your company provide funding for bidding at auctions?  I am interested in how these loan products work for a state such as Colorado where it is a public trustee auction that needs to fully fund same day.  Do you offer something for these types of purchases?  Thanks!

Yes, I know I can make an offer, but have been debating if it’s worth it.  I am not sure how many of these foreclosures actually go to auction vs. make a last minute deal with the bank.  With this much equity in the property it is surprising to me that they would go to auction.  I am new to foreclosures so it makes me wonder what I am missing here?  Why would someone with over $500k in equity let their property go to auction?

Do liens need to be settled ahead of closing?  I am pretty sure I can fund in 10 days it would just depend on other paperwork.  

Again I am debating going direct to seller or waiting for the auction and bidding there.  TIA!

I recently found an ideal property set to go to county auction in two weeks. My research shows the bank balance for the foreclosure action is less than $200k. Property is also listed on MLS for $725k, but it was only listed 13 days ago. I don't think its enough time for a conventional buyer to come in and prevent auction, but if they have an agreement of sale, even with conventional financing, would that prevent the property from going to auction? From the listing pictures online the property is in excellent condition, but there is a tax lien on it and there have been a number of municipal liens over the years, it is hard to tell if they are all cleared.

Is it worth trying to approach the owner or realtor and offer a much lower than market deal but with cash close and fast i.e in like 10 days?  Or should I just wait for the property to go to auction and get possibly a much better deal if I win at auction?  

With the ARV so high and the property in good condition I don't know if it would really go to auction, but there is not much time.

Thanks in advance for any thoughts/advice!

I am not sure how they would enforce this on properties not in the PHA program?  Do some landlords choose not to participate in the PHA program due to the burdens?  Yes, absolutely.  

Maybe instead of more regulation on landlords, PHA should examine their program and find out why landlords are not interested in participating in section 8 in the city.  In addition to the inspections and other burdens already mentioned there are payment and communication issues with the fair housing agency.  I know several landlords that haven’t received payment from PHA for months in a row and no one at the PHA administration answers emails or phone calls.  After speaking with several landlords currently in the PHA program and hearing the horror stories I have no interest.  

Just another reason I am selling my portfolio in Philadelphia.  I once had hopes for the city but its been steadily going down hill.  The likely prospect of a new ultra liberal mayor is terrifying for investors.  When will city hall realize the burden they put on landlords is the reason there are no nice, affordable places to rent?  Good landlords can’t win in Philadelphia.
  

Hi everyone,

Just went into eclipse to renew a rental license and it came up with a new statement saying either the property must be managed by a PM in the city or we must have an address of an office in the city.  

What is this?  I live 20min from my property just over the bridge in NJ.  If I lived in west or far NE Philly I’d actually be further away.  What is the point of this new requirement?

I think I am done with Philly, let me know if you are realtor and want to help me exit this ridiculous landlord hostile place!

TIA!

I often see people post about using HELOC funds for additional capital towards REI, but have major concerns regarding credit impact.

Does a high balance on a HELOC negatively affect your credit score? The Transunion blog states that HELOCs are counted as revolving credit so a high balance could drop your score 100 pts. The Experian blog says exactly the opposite, that HELOC balances are not included as revolving debt in the FICO score calculation.

Several other sources all say it does count, including bank rate.  

Curious on real world experience. I have an open HELOC but am afraid to touch it and negatively impact my score.

If I say for example have a $100k HELOC, is $25k about the max you can actually use to not see a score drop?

TIA!

@Alyssa Wells just saw you live in Loveland.  I went to CSU and loved life in Fort Collins.  My parents are in Parker, CO.  I miss Colorado like crazy, just spent last weekend skiing here in New Jersey and it is not the same!!! lol

Hi Alyssa and welcome!  

I did my first BRRR, which was a gut rehab in Philly, this year and am happy to lend my insights. You don't need to use all your money to buy cash. Using leverage wisely is key. I did a HML and as a first time buyer they required 20% down on the purchase+rehab.

I'd say you need to have at least $25-30k in the bank to get started, minimum.  

Keep in mind for a HML you usually have to front the money for construction costs and get the money back after each draw, so you need to manage cash well and time draws wisely. Also, a lot of contractors require cash so I wouldn't rely on credit cards to float the money for construction. There is such a thing as a bridge loan to cover construction, but I think that is too risky. That said everyone has there own risk tolerance.

Definitely plan for contingencies to the tune of 10-15% over your initial rehab estimate.   

Cheers to 2021 and good luck.

I did LVP in my 110 yr old BRRRR. Floors looked similar to yours with holes in some areas. We ended up having to do plywood sub floor on the whole downstairs to even it out. We used self leveling compound in the upstairs hallway where it was really uneven i.e. sagging. LVP is thin, even the higher grade stuff, so you need a level sub floor or it will be bubbly and not durable.

Next time around we are going to compare cost of LVP vs. site finished hardwood.  Everyone is gaga over LVP but for older homes with rough sub floor site finished HW may win because you don't need as much prep and it will be more durable.  

Jury is still out on how long our LVP will last.  It looks nice but I question the robustness.  We used a hickory color which has good hide.  Went with Duralux brand from Floor & Decor at $1.39/sq. ft. I've heard good things about lifeproof but at the $3-4/sq. ft price point I don't see the value over HW.

Thank you for posting such a detailed account! It was a refreshing read. I feel like this forum needs more "real life" stories. Your post definitely makes me want to tell my 1st BRRR story as well now.

Tenacity is crucial to get through these projects.  Some people get lucky the first time around, but like you we struggled with a GC and went over time and over budget.  Thank god we had reserves and the resources to pull through!  Your statement about going days and weeks with nothing happening on the job reminded me of my project!  That and the odd order of operations was our experience as well.  Luckily there is no teacher like the school of hard knocks and we both survived and will do 1000% better on the next deal.

Cheers to 2021 and new success in the new year.