All Forum Posts by: Nicholas Lohr

Usually on here we are talking about an investment rental property and the question is, can this rental property still cash flow even after taking the 80% out?

Since in this case it's your personal house what mortgage payment can you realistically and safely afford?  If the 80% is not problem then go with the 80%.

Buy a property for 200,000 with 25% down.  

25% down is 50,000.  And you have a loan of 150,000.

Put 70,000 into making it nice. 

You are now into the property for 50,000 + 70,000 = 120,000 cash into the property

Have it appraised 6 months later at 350,000. 

Banks will lend 70% of the new appraised value of 350,000 which is 245,000. 

You take the 245,000 and pay off the old loan of 150,000. so 245,000 - 150,000 = 95,000.

You take that excess 95,000 and put it towards your next down payment on a new property.

And even with that new loan of 245,000 you still cash flow from the rents. 

I left some closing costs and other fees out of this for simplicity but this is almost verbatim my first BRRRR deal.  Now I have 14 units. 

Of course I'm going to help someone from the Wick! 

See the bookstore tab at the top of the site here?  Select that, scroll down to The Book on Estimating Rehab Costs by J Scott, buy that, and read that. 

@Mary Griffin

Here is an article from today's paper. 

https://www.sfchronicle.com/business/article/San-Francisco-Silicon-Valley-rents-saw-sharp-15307118.php

You may have to be a subscriber to read the whole thing.  I'm just sharing this as a word of caution.

I live in SF and have been investing solely in multifamily in Sacramento for the last 5 years and it's been amazing. Better than I could ever have imagined. 

However I personally am finished with CA investing. The taxes, the prices, the businesses leaving in droves, the outflow of population, the anti landlord sentiment, the rent control, and now the tech workers working from home permanently thing is what has led to my decision.  

Again this is all just my personal decision / opinion but that article is something I think is important for someone to be aware of if they are starting out in the bay area in the coming months. 

2 things stick out to me

1. "maybe carpet and paint total about $4,000"   I would be very careful assuming this is all it's going to take. 

2. You left out ARV. (After repair value) Do you know or can you project what that will be? You need to find out a realistic number for that. Besides the purchase price and the repair costs that ARV is super important.  You need to figure that a lender will lend 70% of that ARV and work backwards from there to see if you are paying too much or if your projected repair costs are too low. 

Not quite. The real money in the BRRRR strategy happens in that third "R" the refinance. A successful BRRRR means that you got ALL the money you put in (the down payment, rehab costs, holding costs, etc) out of the deal when that refinance happens and then you own that property for free. When that happens you're playing the house's money as they say and your returns are infinite.

BRRRR is more of a wealth builder rather than a cash cow at first because you can just keep doing it over and over and the next thing you know you own a bunch of properties for free with the tenants paying off your mortgages while you keep the buy more properties party going with that refi money each time.

@Jenny Sung  No I haven't had a bad experience with a section 8 tenant specifically but I've had experiences with inherited tenants. The worst one was a unit that needed extensive repairs.  It was in very bad shape and it needed to be vacated so we could get in there to make the needed repairs.  

Even though I offered the tenant cash to move out, 2 months of rent free living, and a full security deposit refund no questions asked he still refused to move out.  The eviction process took a lawyer, took 5 months, and cost $1000s.  (plus no rent collection for that unit for half a year)

He ended up abandoning literally everything he owned in the unit and the CA law states that I have to store that stuff for him for a period and then hold a public auction for all of it. A public auction that nobody showed up to by the way. 

Anyway I got through it but it was rough. 

Just sharing that that's the kind of things you have to be prepared for with an inherited tenant, especially in tenant friendly states like ours. 

I think everything you just asked for can be found on this page. And you're a Pro so you should have access.  

https://www.biggerpockets.com/tools/landlord-resources

I personally use Cozy.co for rent collection and screening and I like them. 

I asked myself that same question a month ago because my usual lenders weren't working out at all.  I kept at it, made lots of calls, and networked with people in my contact list and finally found someone to refi.  We're closing next week. My was a multifamily and perhaps they are looking at offices differently these days but I'd still say to keep at it, you'll find someone. 

It doesn't sound like the repairs are really that much an issue from your list there.

What you should be more concerned about in my opinion is this part, "Comes with Section 8 Tenant (Mom & 3 kids)"  Now she absolutely could be the best tenant in the world but she also may not be. Are you prepared for the latter?

The most frustrating / worst part of investing for me over time has definitely been inherited tenants, with repair and construction headaches coming in a distant 2nd. It's definitely part of life for us real estate investors, I'm just saying to be prepared for it.  Especially in tenant friendly New York.