All Forum Posts by: Michael Woodward

I have a question for the highly experienced lenders and investors that have multiple active lenders.  I've got a really good lender (bank) that gives me market rates (4% range) for my flipping operations. I'm extremely happy with the service they provide but as my business grows, I'm bumping against the lending ceiling they've provided.  They are willing to increase my funding but that's pretty much limited to once a year and is usually a relatively small increment.  I want to be in a financial position where I can act on any good investment (or business) that I find but that means having more that one lender.  I've always felt that I need to be 100% transparent with my current lender but I'm wondering if that's really the expectation in the lending circles.

I've heard of people that have many businesses running at the same time that I'm sure required many different investors/lenders to fund but I don't see how it's possible to bring in a new lender without losing the primary lender because they don't like their perceived risk. I want to do this right, I just don't know what's "right" (acceptable) in this situation.

So, the question is.... If I have multiple lenders, is it necessary/required/recommended that I let each of them know exactly what I'm doing with the other lender(s)?  Does everything need to show up on the balance sheet?

@Simon Stahl,  To really nail it down, you'll likely need to get some estimates from local contractors that can do the whole job.  If you don't want to (or can't) get the contractor in the house you might be able to give them a full description of the scope of work and get a ballpark price from that.

@Miki S.,  I've used a specific process that's really helped me to move forward.  Start by writing down your specific goal(s).  Goals are critical!! Once you have that, expand it by making a list of actions needed to accomplish each goal.  Each action item might have several subordinate actions required to make them happen.  Keep going until you've created a master actions list (to-do list) in order of when they need to be done.  That will lead you all the way back to a very specific first task.  You'll find that as you break the ice and start doing a few things, momentum will build and the whole thing will look less daunting.  Good luck!

@P.J. Bremner,  If you're convinced that they are legit then this could be a good way to get your investing education with little risk to yourself.  Just be careful that they really are on the up and up.  If they're charging any kind of fees up front I would really question their intentions.  Targeting newbies is the preferred method of shysters that want to collect their fee and then put ridiculous criteria on their projects so you never find anything.  That doesn't sound like the case here but....just a word of warning.  Assuming they're all good and you complete a couple projects with them, you'll learn a ton with little risk....and hopefully make some money.  After that, you'll be more confident on your own.

I don't mean to poke anyone in the eye but I have to strongly disagree with Sebastian and Steven that the rehab is a "piece of cake" and it's all down hill after you find a good deal.  I've seen great deals completely annihilated by someone that didn't understand the how/what/where/etc with the renovations and how to get it done right.  That's a HUGE thing that can't be underestimated.  I hope that company is a good one because they will keep you on the right path if they are.  Good luck! 

@Rene Perez, The Register of Deeds or tax office at your local courthouse will have all of the owner's information.  It's all public record so you should have no trouble getting the info.  Getting a response from the owner is another matter altogether.  It's worth a try though!  Good luck!

@Adam Wells, I agree with Jacob that most REO's end up in the MLS but there are quite a few that don't for various reasons. I have my real estate license so the MLS is a big part of my search radar but running a close second is Zillow. The advantage that Zillow has over the local MLS is that they pull REO data from every source they can get their hands on. The MLS doesn't operate that way. Auction.com is my third most used source. I used to use Hubzu some but they seem to be going through some kind of transition so they're not servicing my area at all anymore... weird. Realtytrac.com is a subscription based source that has a TON of listings but I've found that I can pretty much get all their listings for free somewhere else so I don't subscribe anymore.

For government sites, I search hudhomestore.com, homepath.com, and homesteps.com in that order. There are usually some decent properties listed on hudhomestore. I haven't had much luck with the others but I know they have some. I've never bought a list because it's all out there for free right how. One other thing you could do is contact all of your locally owned banks and credit unions to see if they will tell you when they get REO's. I've never bought a house that way but I occasionally have bankers that I know call me to see if I want to buy anything off their list.

Good luck. Hope this helps!

@Greg P.   Since you're new to the business, my recommendation would be to meet with at least a couple local real estate agents that handle rental properties or some local property management companies to ask them what renovations need to be done to rent it for the amount you expect.  They should have a good feel for that.  Be careful to talk to people that will have your best interest in mind and not people that will just tell you what they think you want to hear.  These kind of professionals should be able to steer you away from under-renovating or over-renovating.

Once you know what needs to be done, ask these same professionals for contractor recommendations so you can get some estimates.  I would be very cautious about asking for pricing advice on a forum.  It's always best to have boots on the ground at your project.

I can't over-state how important referrals are for contractors.  In the words of Forrest Gump.... Contractors are like a box of chocolates.... you never know what you're gonna get!  (coming from a former contractor...)

@Sharika L.   The problem with trying to pre-sell a house that needs renovating is that most people can't envision the final look and feel of the house.  People that renovate their own house can do that because they've lived there long enough to know what it needs and how will look in the end but doing that with an unfamiliar house is impossible for most people.  When they walk in the house for the first time they immediately start creating their opinion (consciously and subconsciously).  The homes problems and deficiencies can turn people off and they won't consider buying it.  

I think you will be more successful in the investment if you get lots of advice from local home decorating professionals, real estate agents, and others that deal with home buyer's needs and desires.  Real estate agents are probably your best source because they're constantly hearing what people like and don't like.

Another serious consideration is dealing with the sales contract and how it encompasses not only the sale but the renovations.  The water can get really muddy when you have a very complex situation like that and opportunities for the deal to fall apart grow exponentially.  In the end you could end up having to try to sell a house renovated to someone's personal taste that everyone else hates.

I would personally never pre-sell a house this way.  I want the cleanest (and shortest) interaction with the buyers I can possibly have.

Good luck!

Leverage is the key to building a big portfolio so you'll want to take advantage of the BRRR strategy as much as possible. There's tons of info on BP about BRRR so I would research that to make my decision.

@Patrick Hensley...  I think it's always a great idea to live in your investment/flip if you can.  It's the classic house-hack that @Joshua Dorkin and @Brandon Turner talk about all the time.  I've done them myself a few times.  I promised my wife after the last one that I wouldn't do that to her again because she was getting frustrated that she couldn't "nest".

In my experience, this scenario has many advantages with bank loans, taxes, etc.  I'm not a tax professional or mortgage lender so you should consult some but I've seen that primary residences have better terms and conditions than investment loans.  

As far as whether or not you can live in it, you will obviously have some interruptions to "normal" life.  You might be taking a shower in the kitchen sink or using the port-a-potty outside for a while but if you can roll with it, you can save (or make) a lot of money with this strategy.

Good luck!