All Forum Posts by: Nicholas Lohr

Make sure you talk to has many experienced contractors as possible to get an accurate repair cost AND at the same time talk to as many realtors/ appraisal companies/ property management companies/ online listings as possible to get an accurate ARV.   Those 2 numbers are the most important in a BRRRR deal.  I'd recommend you have at least 3 contractors look at the property and then figure the highest bid you get in your calculations just to be safe.  And then use a very conservative ARV and figure that in your numbers.

Also don't forget to include your holding costs while you are fixing it up in your calculations.. 

Since this is your first deal it's best to be as conservative as possible. 

Also the neighborhood you choose is VERY important. You need to make sure it is desirable enough to both get the amount of rent you want to collect and the quality of renters you want/ can deal with. 

And please carefully read these 2 articles too..

https://www.biggerpockets.com/renewsblog/2015/08/2...

https://www.biggerpockets.com/renewsblog/2015/03/0...

After you hold the property for a certain amount of time, AFTER it has both been rehabbed and rented out, you can use the cash flow from the property to increase your income. 

The amount of time will vary from bank to bank but for me it was 8 months. It's called "seasoning."

Yeah the $800 thing here stinks. However the only good part is it really makes me think twice about forming one in the first place rather than having unnecessary LLC's.

To answer your question I'd recommend talking to an attorney about it.  Since you have so many I think it be worth it. Perhaps you could create a holding company?  

Yes to ALL those things.   There's really no reason not to.  At least I'll say the being safe rather than sorry upside far out weighs any downsides, if there are any, in doing that.

@Wes Blackwell thanks, yeah I'm really pounding the pavement trying to find someone to put something in writing. For some reason when it comes time to put pen to paper people get nervous. And it's simply, "What do you pay in rent?."  It's weird because if a potential neighbor/ desperate person came to me and asked me to write down what I pay in rent I would have no problem with it.

@Jonathan Wenthe  We submitted the rebuttal already.  But they are now telling us to bring proof. We got verbals from convenience store owners but I'm having trouble getting them to put anything in writing.  The appraisal came in at $2500 for the store but I know for a fact that the exact same 2 convenience stores within 200 yards pay $3500 and $3800.  If I can get the appraised rent of that store up to $3500, which is what it should be, it would save me about $100,000!

Do you have any ideas??

Yes I have. I specifically need a letter from a landlord in order to negate the existing appraisal. Or a tenant would work too actually! You know someone who runs a convenience store in Sac by chance??

Does anyone out there know a landlord of a convenience store in the Midtown area of Sacramento? Or better yet IS anyone a landlord of one? I have a mixed use building under contract in midtown Sac and the appraisal for the rent of the convenience store part of the building came in unreasonably low. I think the appraiser was more used to doing residential appraisals and didn't do a thorough job with the commercial aspect. The reason why I need the rents to be higher/ accurate is because this is an FHA loan and the higher the rent is, the less I have to put as a down payment. The appraiser/ lender has told me that if I find a landlord in midtown who will vouch that they are charging higher rents then I'll be in business!

@Account Closed thanks for the response. I'm not too worried about cash flow on this deal because the it cash flows straight out of the gate even without me adding the new units. My biggest question is, do banks still lend 70% of the ARV when it's a commercial multi-family as they do when it's residential? I suppose I should just call some banks and ask, I'll do that.

I'm a bit confused by what you wrote here, "You can "get" the balloon by refinancing but if the market takes a little dip and which changes your DTE ratio, what's your plan? I'm guessing you'll get a 20 year amortization"

Is there any way you can explain when you mean here? My confusion is the "get" in quotes.? Also are you saying that I'll start with a 5-7 year with a balloon and then refi into a longer term when it's time?

@April Crossley thanks for the input. Yeah this will be a purchase price of 875k and an ARV of 1.2 million. At least that's what I'm seeing as far as comps out there for downtown Sacramento 6-plexes.

I think my biggest question is will the bank lend 840,000 against the new 6-plex. (1,200,000 * 70%) so I can pay off the old loan and get the majority of my value add capital back.

@Aaron Mazzrillo i had a hamster named Zippy once, how dare you! i loved that lil sum bit!   ;)