All Forum Posts by: Luka Jozic

...that all the work it needs and all the time it will take is worth going through with it, just to leave 25K+ in it.

@Luka Jozic

you had a separate thread about this one going and i was skeptical... and still am =)

25K left in the deal for how much yearly return after real expenses? Compare your ROI to other options for the money. 1 year treasury is 5%

Your comps look decent to me. I like that they're all recent trades. 

I think if you're still unsure about it, try running a downside scenario. Find the worst 3 homes in the area that could still be considered comparable and see what those values are. If they're averaging $120k or more, I'd say probably you're in good shape. If it's more like $100k, maybe it's time to reconsider. 

FWIW I am NOT an appraiser, but I have noticed that appraisers will sometimes find VERY recent trades that are VERY close by and go by Price/SF. So maybe try that analysis as well? Even if it means using SFHs as your comps. 

I agree 25K seems a lot to leave in the deal. It's possible you won't do a whole lot better though. This is just such a tough market for BRRRRs

@Luka Jozic

well... include all the numbers though.

say you get 130K out.  you'll get 70-75% of that on the refi.  and you'll lose 5-8K in fees and costs on the refi closing.

and your purchase price is 66K + 35K rehab + your closing costs + your holding costs + any overruns + your staging and leasing costs.

so... it's probably closer to 20-30K left in the deal.

so you have to ask yourself if the risk is worth it.

only you can answer that.

@Luka Jozic

so we're mixing up a bunch of questions here - whether this is a good deal, the lead abatement, the financing, etc.

to talk solely about the purchase and refinance - here goes

if you buy in cash, fix up, and it appraises significantly higher, you can do a cash out refi and get all your cash back.

why do it this way?  because if you buy conventionally (which seems like it would be difficult at that low of a price point anyway?) you'll pay a bunch of fees to close and it will be a much bigger pain.

i have no idea if the ARV can be increased - but do the math and see. say for example - you buy for 66K cash and it appraises for 100K with a DSCR lender, you could cash out about 70K.

BUT

many DSCR lenders are now giving more favorable terms after 6 months.

so this is all something you'd want to work out first

HTH

We have several properties in the Cleveland Market.  If you have closed already I recommend moving one tenant out at a time getting the lead done, then replacing with Section 8 tenants (in Cleveland this is CMHA or EDEN) who require lead to be done before hand.  This will guarantee cashflow (no worries about them moving out) as well as give you annual rent increases if necessary.  

BUT.. if you have not closed WALK AWAY from any property where there are tenants already in there and it has been cited for lead.   Tenants are very savvy and you can get in serious trouble if one of them decides to make the lead an issue.

 I would highly advise having an inspector or gc walk the property one more time before you close. This can be a huge can of worms that you don’t want to deal with as a first investment.