All Forum Posts by: Mark Burns

Hey @Rachel Pratt, I'm just about to complete my first hard money deal. Because it's my first, I'm not an expert but I think I might be able to help you. Are you doing a flip or a brrrr? You say the lender will loan 80% of the ARV if you put 20% down. The way this worked in my deal, I put 20% of the loan down. This means 20% of the 80% loan. Let's use some numbers in an example.

Purchase Price of house: 60k

Rehab: 20k

ARV: 100k

The lender will loan 80% so 80k. However, you need to put 20% of the 80k down which is 16k. That means your loan will be 64k. You use your 16k and 46k of the loan to purchase the house in full. You now own the house and have 20k of the loan left for the rehab. After you complete the rehab, you now have 0k left but the house should be worth 100k. You need to pay back your hard money lender now so you either cash-out refinance it (brrrr) or sell it (flip). You find a bank that will refinance 80% of the ARV. This means you get a check for 80k. You now pay back your hard money lender and recoup your 16k. However, since you refinanced 80% of the ARV (aka: 80% LTV), you now have 20% of equity in the property.

I hope this example made sense or helped. Please understand that I left out certain things to make the example easier to follow (closing costs, loan interest, holding costs).

So, to answer your questions:

The down payment goes towards the project, not the hard money lender. It is to make sure that you are taking risk as well. The lender does not want to be the only one putting money into the project.

You will get some, all, or none of your money back depending on how the numbers in the deal work out. In the example, it was a great deal so you got all of your money back.

It's definitely a culmination of your last few points. They have something going on with themselves that makes them feel the need to respond negatively without really thinking it through. Sadly, it's just human nature and lots of people are unwilling to control the urge... oh well...

@Account Closed I think you've hit the nail on the head here. I can speak from my own personal experience that what you've said is at least resonating with a decent portion of the population. I lived in Salt Lake City to enjoy the vibrant life and saw all of the benefits diminish the first week of stay-at-home orders. This made me reevaluate why I lived there and I could no longer justify the higher cost-of-living. Then, on the work-from-home side of things, my company was already pretty lenient on it and considering downgrading office space. Since March, I've been full-time remote and it has accelerated my company's need to create a solid WFH environment for the rest of the employees. In my opinion, I like the new normal and can definitely see it driving renters into more suburban settings.

Hey @Leanna West, welcome! That sounds like a pretty solid plan. I just bought a SFR with a mother-in-law apartment in Ogden since it was a bit cheaper than the normal small multifamily prices. It seems like the deals are there as long as you keep checking.

Thanks Scott! It really should as I already can't wait for the next one!

 Thank you, Marlen! I'm very excited that I'm beginning this journey.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $223,000
Cash invested: $17,000

This is my current primary residence that serves as a house hack. It is a SFR with a mother-in-law apartment: 2br/1b up top and 1br/1b down low. The only thing the two units share is the laundry. I live in the mother-in-law and rent the top. It leaves me only paying a couple hundred a month. When I move into my next property, it will start cash flowing.

What made you interested in investing in this type of deal?

I wanted to get my feet wet in real estate investing so I began looking for properties I could house hack.

How did you find this deal and how did you negotiate it?

I was looking for duplexes on the MLS and this SFR popped up. I saw it had a mother-in-law apartment so I jumped right on it. I negotiated down the price after a few items came back in the inspection that weren't up to code. I was able to knock off more than I knew the contracting jobs would cost. This also resulted in a more optimal cash flow opportunity which I was keen on.

How did you finance this deal?

I financed this deal with a convential loan for 5% down and 30 years.

How did you add value to the deal?

I was able to get initial value by buying for $10k+ below the appraisal. I am slowly adding value by doing small improvements such as upgrading from a swamp cooler to central air and improving the interior cosmetically.

What was the outcome?

I am currently living in one unit and renting out the other.

Lessons learned? Challenges?

I learned the process of buying a house, getting contracting work completed, and landlording. The only challenge that stands out to me is learning that my bank wouldn't do wire transfers over the phone or online. Since my bank is regional and I don't live in that area anymore, this caused a major problem. My lender and title company did a lot to workaround this.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Any Hour Services knocked out adding GFCI to my outlets quickly. Tom from Community Lending Group helped to really explain the ins and outs of getting a convetional loan and making sure I could overcome the previously mentioned challenge.