All Forum Posts by: Michael Radney

@Natalie Oliver the good news is you have some cash. It sounds like you can repay the $3,000 down payment credit and have the reserves needed to try qualifying for a non-owner occupied refinance. You'll need 25% equity for a conventional, 1-4 unit, NOO, limited cash out refinance.

Involving a lawyer and starting immediate communication is the right choice.  I'm not an attorney but if I were in that situation I'd shoot for a refinance grace period in order to protect my credit.

How a lender proceeds just depends on the individual lender's policy but I'd try my best to preserve my future financing ability.

@Miguel Hernandez did you front load payments to him?  Unfortunately, money controls a rehab schedule much better than the contract.  The best way to keep a project on schedule is to only pay for completed work.

Yes, that's tougher to do in this environment when GCs have their choice of jobs, especially one you haven't worked with before.  If you're in a position where you have to push, confront, cajole it's usually a losing battle.

If you paid a decent amount up front then your best bet is to be calm, diplomatic and try working with him, which usually means spending more money and time than anticipated.

Those two are the call center kind of lenders Mitch was saying to avoid. Finding an experienced loan officer at a local/regional lender or broker with an office in your market will usually lead to less headaches. They're usually (not always) easier to reach after hours, more knowledgeable and value your repeat business as an investor. Local lenders/brokers may have a few portfolio options too, for strong credit/conservative LTV scenarios.

I really get the frustration but even in your example scenario, you're not upside down if your tenant is paying the water bill.  You'd have $175/mo cash flow, $60,000 equity and pocket $15,000.  You'd cash flow better (and learn more) if you bought locally at first and managed it yourself but I understand your local market makes that really difficult to do. 

I wouldn't buy out of state initially but that's not what you're asking about.

In answering a question from your initial post, yes, you can occasionally find some MLS deals but yes, buying off market at better prices would help your numbers. Honestly, your example of buying at 38% ARV would usually be an off market deal that you marketed to and found yourself.

I'd walk and find a better deal.  If I was just starting out and this was a more stable environment, I'd take $25,000 after selling closing costs just to learn more about flips.  I think there's just too much downside risk right now though.

Plus I'm assuming you'd be going into it with a new contractor, who, no matter how highly recommended, is still an unknown performer for you.

As others said, have the tenant pay for water if local laws permit.

Leaving the extra $15,000 in the deal would help improve your cash flow.

Is your property tax assumption based on the current value or the improved value?  If it's the improved value, see if there's a renovation abatement program.

Are you shopping for insurance yourself?  A good insurance broker is well worth having.  Not familiar with OH rates but a DP03 landlord policy in Richmond for a renovated duplex with new materials and systems runs me $51/mo.

@Michael Mackney five months is a small sample set and sometimes random circumstance just opens your wallet.  Or sometimes it's the C tenants (things always seem to magically break).

If you've been paying out for capex and it's an older unit with a lot of original systems/materials then it's not going to get any better in the short term.  This is one of the reasons that I prefer gutting a place before renting if possible.  Using conservative maintenance, capex and vacancy estimates helps too.

Sometimes you just chalk it up to lesson learned and move on but that's hard to say without more info.  What items have you been paying maintenance on?  I know the island well.  Where's the property?

Great list, 10 and 19 are low hanging fruit that I use whenever possible. Paperwork process adds a few weeks to a renovation schedule but it's well worth it.

@Daniel Young if it's ultimately a flip and you're confident that it'll sell once listed, I'd just pull a credit card cash advance.  My go-to card's standard terms are 3 points and 2% minimum payment on the balance.  So for $20,000 that'd cost me $600 to borrow it and the first payment due would be $412.  The payments are all applied to principal.  No other fees and the ACH deposit hits my account in about 3 days.  

Personal loan would be my next choice but it'd be more expensive and take (slightly) longer to access.