All Forum Posts by: Lance Castillo

Usually, when I'm down in the dumps about some real estate related topic, I like to take a step back for a second and really concentrate on the numbers. For instance, currently, I am trying to close on a 4-bed house. After getting it under contract, my realtor sent me some more photos of the place and it was a real fixer-upper. This sent me for an emotional loop since it looks like there may be some work that was unaccounted for in my initial analysis. I am currently in the process of having the house inspected by both an inspector and my contractor. I've decided that there is not much I can really do about it until I hear from them how the numbers from my initial analysis will change. At that point, I have a couple of options:

1. If the inspection report comes back with something really atrocious, I can ask for a credit off of the purchase price.

2. If my contractor comes back with a higher estimate of work that I planned, then I can plug that in to see if my ROI is still good if I had to cover that out of pocket.

If any of the above two options still don't work for my criteria for a good deal, then I can simply walk away from the deal. If it was due to something big in the inspection report, then I should be able to get my earnest money back. If it wasn't, then I lost my earnest money deposit. It's not the end of the world. The numbers should always help you to keep your emotions out of it.

I was just wondering... What kind of monthly rates are you guys seeing for your buy and hold rentals?

Hi BP,

I have a potential BRRRR deal with a 4/2 SFH with an extra finished room up in the attic. This will be my first deal. The numbers look good and after rehab, I'll have about $2.5k left in the deal with $175 cashflow and 84.5% cash on cash ROI. What I am having an issue determining is if buying a house this big will attract renters. I'm planning on marketing the place as a 5-bed to get better rent. My gut tells me that I should be looking for no more than a 3/2 for my first deal. What do you guys think?

Thanks Scott. I had an inkling that that was the case but I wasn't sure. I needed to get confirmation before moving forward with my first BRRRR.

I am going to give some hypothetical numbers to illustrate my question. Say I was able to buy a $100,000 property that needed about $20,000 in rehab to get to a good state for renting. Say I used a commercial loan to buy the property and finance the rehab. After getting renters in the property, it now appraises for $200,000 and I am able to refinance into a $150,000 conventional loan. Here are the numbers:

Say I paid $30,000 in closing costs for the initial commercial loan for the property which includes rehab costs.

Buy: $100,000 (for the purchase price of the property)

Rehab: $20,000

Rent: Say I am able to get about $1200 in rent per month.

Refinance: $150,000 (75% of the newly appraised value $200,000)

Repeat...

Ok so based on this example I was able to use the $150,000 I refinanced to pay off my initial commercial loan of $100,000 and the $30,000 I paid in closing costs. That leaves me with $20,000 in cash that I can use for future projects. Now for that refi of $150,000 would I have to give a down payment to open that? I know I will have the normal closing costs associated with processing this loan, but what about the standard 25% down payment associated with investment-based loans? Would I have to pay an additional $37,500 down to cover 25% of the new $150,000 loan I have? Thanks in advance!

How much did renovations cost you and what is your ROI? Congrats!

That's really awesome Nick. One last question. Did you find your contractor through your real estate agent or did you do some searching in the area yourself?

Did you have to find a property manager, did the property already come with one, or are you planning on managing from afar with software?