All Forum Posts by: Nathan P.

 Just had a property meth test positive today Caleb. Can you text me your connection?

I have flipped 5 properties this year and through my marketing efforts have come across some off market deals that I would like to start building my rental portfolio with. I personally dont have the credit score or down payment to finance either of these right now.

Both properties I have are under contract and are single families with accessory dwellings. The net positive cashflow after accounting for all expenses (property management, capex, vacancy, etc) is $700-$1000 which is very good for the Utah market I am in.

I was wondering what type of options are out there for private lending or asset based lenders that would underwrite the deal based upon the rental potential of the property.

The other path I am considering is partnering with someone that can do all the financing and be a silent partner and receive equity as well as cashflow.

Does anyone have any good ideas?

I locked up a property over the weekend here in Utah that I plan on flipping. The sellers agreed to our cash offer and we signed the REPC.

After signing Mr & Mrs Seller opened up about their plans more that her father is going to carry the mortgage for them on a property he had previously been renting. I asked them if that would be an option for us as well and they have been texting me about entertaining the idea. I want to see how the deal can be sweetened by seller-financing and would appreciate any help on formulating an offer. So here are the details on the deal.

174,000-Purchase Price

265,000-ARV

30,000-Rehab

90,000-Balance of Seller mortgage (approx. $84,000 in equity)

I have my Hard Money setup for the cash offer at 1 point and 11%.

My current thoughts were to present them with two offers

1. 1-$15,000 down and increase the purchase price by $3,000 while we pay their PITI payment monthly
2. 2-$84,000 (all equity) at the same purchase price as the cash offer and pay them monthly PITI with an extra $500

We dont close till July 31st so I have a minute to come up with an alternate offer just trying to crunch numbers and see if it actually benefits me this time to seller finance the deal.

I have been considering the FHA 203k loan as well but after listening to the BP Podcast with Meet Kevin from youtube I changed my mind. He brings up a good point that after paying HUD consultants and extra fees that add up to thousands of dollars the 203K just isnt as good of a deal. But the thing that really changed my mind is how long of a drawn out process it can be because of long escrow holding times and inspections between each contractor in order to receive the next draw. Time is money in the game and in the market I am in and there just isnt enough time to mess around with the 203k loan.

Now Hard Money may be an option for you but I dont believe you can owner occupy a home that has hard money at least witht the HML lenders I have used this has been a strict concern they have because the lender will be in hot water if you move in. So you wont be able to occupy until after you have repaired the property and refinanced. If you can find a good enough deal that you have 20% equity in after repairs then you can refinance and not have any money left in it.

With the numbers you have listed above that wont be the case.

Definitely works! Theres lots of examples on here of other investors doing the same thing and it became an excellent start.

The great thing about the FHA 203K is that you can actually buy up to a 4 unit property with it. So when you get started shopping make sure your parameters include that option. The rental income from other units will count toward your income for the refinance and may offset your mortgage payment for the year that you are living there.

Best Wishes

This sounds like an awesome deal! I hope it turns out awesome for you and your partner.

You said you are doing a full gut rehab. I want to know more about the rehab costs as it relates to a 203k loan. I am guessing the bank wants to have super solid numbers before they are going to approve the loan. What is your rehab budget? How did you calculate the budget? How far off was your estimate from the banks?

Give your parents the 3.5% down that you would be putting toward the FHA. Have a title company transfer the home over to you either by contract for deed or all-inclusive trust deed and note (this kind of depends on the state you are in and the lender you will use in a second.) Take out a personal loan or use 0% interest credit cards to do your repairs. Go out and find a lender that will cash out refinance you at least 80% LTV and use the cash out to payoff your repair costs. If you have money left over then come to an agreement with your parents how much they should get. When its all said and done you should be into it for no money down.

Make sure you do your math, get multiple bids, be conservative, plan ahead, and communicate with your lender what you plan to do. Your on your way!

@Richard Moore I feel like you may be getting a little too tight for comfort. Every investor you talk to will tell you that rehabs go over budget all the time for misc. purposes and there are unknown factors that sneak up. If anything goes wrong you may not have the funds to finish.

What is your exit strategy on the home? With it being an FHA I suppose you are planning on owner occupying for at least the next 12 months. If this is the case maybe there are a few things you could cashflow at a later date.

The real key here is the 203K loan. The good thing is that they make you adhere to very strict guidelines for bids, contractors and timelines. The way it is setup protects you in some ways. If the 203K portion is not going to get your home to the FHA standards then you will not be approve it. It sounds like it has been approved though so what are you going to be short on? The down-payment? Renovations? Moving costs and appliances?

With that said. If its a deal and the numbers crunch then "dont ask yourself if you can afford it, ask yourself how can I afford it"

Depends on what type of landlord you want to be.

Based on the subject it sounds like your shooting to be the "cool" landlord. I would recommend always being professional in your approach and systematic with how you do things. If it seems random to them they will think your trying to drive them out or discriminating.

Let them know well in advance that you will be adjusting your rental rates. Tying this increase to a general milestone makes it seem more common (e.g. New 2020 rental rate).

Let us know what other ideas you have for your approach.

@Zack Karp Your response did answer my question about refinancing using an FHA loan after renovating a property.

The only thing I know about FHA loans is that it has one of the smallest down payment requirements of any mortgage product. Other than the small down payment is there any other benefits to the FHA? I cant see why anyone would do a cash out refinance with an FHA if its now only 80% because thats what a traditional mortgage would be as well.