All Forum Posts by: Scott Hollister

@Steve Sapowsky, so there are two houses on one lot? 

Why are you paying the mortgage? 

Are you buying this for an investment and then moving up to your dream home? 

Will the rent cover the mortgage, cap-ex, taxes, maintenance, etc? 

Hello @Steve Sapowsky,

The discussions from our group in CT is that lenders like to see "skin in the game." My advice is go straight to a lender and get prequalified, tell them this scenario and see what they say because they are the ultimate yes or no. 

• What does it appraise at and what equity do they have in the property? 
• Are your parents willing to sit on the down payment money until you pay in full? 
• Does the property need any work? (Force appreciation) 
• You can't offer them higher than asking price, I mean you can if you had cash but a bank will not loan higher then the appraised value.

I think in order to make this a "best case scenario" deal you would approach it as a BRRRR strategy to force as much equity as possible. Speak with your parents and offer them less than market value, remember you're saving them money on agent fees and time by trying to market and sell a home.

My best suggestion? Will you consider a house hack multifamily? Remember, you're trying to create wealth and positive income streams. If a single family home is costing money out of pocket then it is not an investment, despite what everyone else will tell you. (You can try a live in flip if you have forced appreciation in mind, if the property needs some repairs and you can add value within those first two years) 

Best of luck with the choice Steve!

@Sean Forner what are your choices? 

• Paint the outside for $4k
• Replace wood siding with aluminum or vinyl? 
• Sell the house

I would run the numbers on vinyl siding, it might be more to replace it but the upfront costs will pay dividends in the future. (If you keep it long enough to reap the benefits)

• Now you have less maintenance and longer life
• Also, you don't have to worry about getting lead paint certified. 

Welcome @Kevin M., 

It makes me nervous that you have to make money "now". Why is that? 

Also be cautious using credit cards due to the high interest rates. 

You have a good credit score, I would focus on finding a partner to invest with. Maybe someone who has the money while you bring the experience? 

@Gary Dezoysa I would focus on the price of properties where your local partner is located. It all depends on what type of lender you are, here is the financing on my last two deals in the past 3 months so you can get an idea of how deals are financed. 

• Deal 1: Hard Money Lender. They loaned me 90% of the purchase price and funded the rehab at 100% (Around 7k) I did the rehab myself. 
  • 12% interest only payment each month with principle paid in full at end of year (Annualized) 
  • Points 
  • Had to get inspection and appraisals (As-is and ARV)
  • I paid closing costs. 
  • Used HELOC to cover gaps ($0 out of pocket)
• Deal 2: Private Money. They loaned at 100% and rehab costs covered. Rehab will be completed by partners and myself. 
  • 10% fixed on total amount (120k) regardless of time. (I said 12 month term because this will be a flip, in and out in 6-7 months)
  • No points or costly inspections or appraisals. (You might want to require this on lending your own money, it depends on how comfortable you are in your investor) I know my numbers and have deals under my belt so I have built that trust over time. 
  • Investor paid closing costs ($0 out of pocket)

The reason I shared this is so that you can have a realistic idea of HOW deals are actually getting funded. So now you can decide for yourself on what type of lender you want to be. Maybe you start with the guidelines of a hard money lender until this person has verified their worth (in terms of protecting your money). 

Long response short: Depends on market of homes. You can purchase 35k homes or 150k homes. My advice is to stick with your bread and butter homes. Your buying pool is larger and financing is easier (That means your money gets rinsed and repeated more often) 

This is how I protect my private financing when they finance 100%

Purchase Price: 110k

As-Is Value: 145k (35k buffer for lender)

ARV: 185k (Low value)

Rehab: 21k

Closing Costs: 6k 

Total Investment: 136k (Remember this lender still isn't in over the as-is value, but is a little over the 70% rule. But remember, that is with closing costs and carrying costs for 6 months! Every penny needed is included)

End of 6-7 months lender with receive a check at closing for $13,600. (For not lifting a finger! The bank is the best place to be!) IMO

Best of luck Gary! 

Hello @Glenna Bryant,

Be very careful when projecting rent costs. The best way is looking on leading rental sites for apartments in your area. 

• Craigslist is a very good source.
• Zillow has a great rental program that farms out to other sites (I've had great luck off of this)
• Structure your purchase based off a cash flowing property with as little money out of pocket as you can. (Philosophy of using other peoples money) 

Useful Tips:

Use the BP calculator for a property analysis. When you enter in the rent from the 4 units add in under market rent value for the area. Be cautious on your first few properties until you really understand the process. 

Plan out for every repair and closing costs, carrying costs until its rented, etc. Some people follow the 70% rule. That is, you must get the property at 70% of ARV. You would minus repairs from that 70% value.

So lets say it needs 5k at 100k house value. 100x.7= $70,000

Repairs: $70,000-$5,000= $65,000 is you MAO (Maximum allowable offer)

Hello @Taylor K.,

I would run it through the BP Calculator and add in Cap ex, maintenance, and property management (Even if you are the property manager now, you might not be able to do it one day. Whether thats too many properties or you get sick/hurt)

If the numbers still look good (and you have accurate repair budgets with extra just in case) then I would bid on it below the asking price. 

Problems to be solved: 

• Roof: It most likely wasn't repaired correctly (Could be an easy fix, get a contractor or roofer in there to give you quotes) Does he have documentation for the repair of roof? Trust but verify.
• Windows: Just add this in the budget, subtract it from the 70% (of ARV) value you get. Can you replace windows yourself? If not, get a contractor to give you a quote. In New England we can get averaged sized windows installed for around $400 each. (Good quality) This will change based on your location.
• Sewage smell: If is just a cap then why won't he do it? For me that is a no brainer to fix RIGHT AWAY. I don't know how it keeps tenants... Get someone knowledgable in there. 
• Porch: Get a contractors quote or do it yourself. 

Positives: 

• You have frustrated tenants, which means the landlord might be sick and tired of the business (Good for you!)

As for the money pit, ALL houses are money pits but if you can make a decent return on it then its a wise investment. My advice would be to really hammer out those numbers and make sure they are correct. And if this is your first property, be careful and increase your budget by 25%-50% 

I call this the emotional mistake percentage. When you do your walk through you get caught up in the property and forget certain things or don't account for safety protocols (Fire alarms and extinguishers) cost of materials, taxes going up, etc.

Best of luck Taylor! 

I have two contacts in CT. 

RCN Capital, ask for Paula in closing and she will point you in the right way.

Sachem Captial, speak with @Donna Genovese or Jeff! (Both are knowledgable and willing to help BP members) 

@Charlie Nghiem, 

If you can make it work with hard money, do it. 

Find a new lender if they charging you a penalty. (They should be happy to collect the points you are paying. Remember YOU ARE offering them a deal) Talk to the owner and take him out to lunch, maybe you can work a line of credit at a fixed rate? I've seen this done before. Remember you are selling yourself as a business and someone to believe in! Believe in yourself! 

I'm just going off my gut on this one but I don't think a HML would take a 2nd position on the house. They might want a 1st position and you as a 2nd unless you have enough equity to protect all parties involved. (This is a good question to ask a HML)

It all depends. I just had a normal mortgage in my name before my first HML. But I sat down with the VP of financing for lunch and I presented myself as someone to invest in. I had a plan and I told him I can find deals! I just needed the financing piece, he took a chance and it has worked out for everyone.

Is HML expensive? YES

Do i cash flow with a HML? NO (It carries the property until i can refi out)

BUT do i wait the 6 months to eventually have a cash flowing property? ABSOLUTELY

So now you must decide, do you take the deal and make some money...

P.S. contact RCN Captial to see if you can work a deal out. Contact Chris Dorin who helped me out with my last deal. (They are nation wide) I don't make any money off this recommendation and my mother is in the closing department. (It helps to have someone on the inside!) What's 5 minutes of your time to see if it will work? 

CHRIS DORIN

Loan Officer

RCN Capital is proud to announce that we are lending in the state of California! To learn more, .

75 Gerber Rd East, South Windsor, CT 06074

Welcome @Account Closed! 

Congrats on your new path for financial freedom! You always have options so don't feel stuck. 

The question depends on many things:

• If you have "Gods Money" then cash is king. Answer this, is it better to have debt or no debt? (A real estate individual in my area sits on a few hundred million dollars, he can afford to pay cash for all properties, and he gets great deals because of it) 
• If you're like us normal people (net worth not in the multi millions, yet;) you want to leverage your money. So your second option would be "better" if you want the most return for you capital. You will want to have a higher tolerance for debt because you made a promise to pay someone back so if someone doesn't pay rent you are still responsible. 

But before we get into all that, let me ask: 

• Do you have a primary residence? (If not, a good way to get started is house hacking)
• Do you know what you want yet? Is it a certain number of properties that cash flow 1-200 a month? (Identify this and it will help guide you)
• Have you been listening to the podcasts and reading books? (Knowledge is power, and there is plenty of POWER here!)

Best of luck Brian!