All Forum Posts by: Omar Ramirez

Hi Ertha, 

Congratulations on your decision to invest in real estate! The other users in this discussion have provided some valuable insights into the "hot markets" in Ohio. However, I tend to agree with the user named @Shawn Parsh. You can also find good investment opportunities in your local area, and as many others have mentioned, your success may depend on the people you know. I would encourage you to start advertising yourself as a local investor on every social media platform you have access to. You will be surprised by the people who will reach out to help you, such as wholesalers, contractors, investors, real estate agents, lenders, and more. The goal is for you to generate leads for good investment properties. Who knows, a friend of a friend might have a house they want to sell but don't want to deal with the hassle of fixing, negotiating, and selling the property. Best of luck! 

Hello @Randy Thibodeaux! Those are some great questions you have. I suggest that you begin by calculating the cost of rehabilitation if you intend to keep the building's structures intact. You will need to get in touch with contractors and ask them to provide you with bids for the complete repair work. It is advisable to obtain quotes from multiple contractors to compare and assess the best available options. Additionally, you will need to evaluate the current value of the property in its "as-is" condition as well as its after-repair-value. Once you have determined these three aspects, you can then approach a lender to discuss a refi-rehab or refi-heavy-rehab loan proposal. We fund these types of loans all the time.

Lending Scenario
Let's assume for this loan scenario that you did all of this and the results were as follows: 

"As-Is" Value: $100k
Rehab: $100,000
ARV: $280,000
Loan Payoff: Free and Clear

Ignoring other underwriting criteria such as FICO scores and experience, most lenders will fund up to 85% of the Loan to Cost (LTC) for a real estate purchase and rehab. In your case, the property is already owned free and clear, so you have technically already funded 50% of the total cost. As a result, the lender will be willing to finance the remaining 50% LTC or $100,000 worth of rehab. It's important to note that this is a short-term, interest-only loan with a typical term of 12-24 months. While you may receive a small portion of the rehab budget on Day 1, the remaining funds will be kept in a holdback account for you to withdraw from. The purpose of this loan is to provide you with the necessary funds to make the repairs needed to stabilize the property. Once the property is stabilized, you can refinance with a long-term loan or sell it.

To summarize. I suggest you begin by assessing the current value of the property in its current state. Then, calculate the total cost of rehabilitating the property and compare it with the cost of demolishing the property and constructing a new one. Finally, evaluate the potential value of the property after it is repaired or after the construction of a new property. Once you've done that feel free to connect with different lenders and discussed the lending options available to you. I hope this information is helpful!

There is a group of lending institutions that can provide financing for loans starting at $50,000 or an appraised value of $66,700 on 1-4 residential units with DSCR loans.

Furthermore, there are hard money lenders who offer purchase rehab loans without a minimum loan amount requirement. 

However, it's important to note that these loans may appear to have higher costs due to fixed fees that cannot be reduced in proportion to the loan amount.

I'm sorry to hear about this. However, this issue is quite happens from time to time among my clients. The good news is that there's a way to improve those numbers. Most appraisal companies allow for disputes. You should inform your lender that you want to dispute the "as-is" value listed on the appraisal. Keep in mind that you only have one chance to dispute that report, so it's important to research the report thoroughly and identify the areas that need to be disputed. When I review the reports with my borrowers, we usually find one or two things that need correcting.

Condition- If you've recently completed a full rehab on your property, you'll want to aim for a C2 condition rating on the report. This rating means that your property is "like-new" and has been fully rehabbed, and it's the best rating you can get for properties that have been rehabbed.If the report lists a C3 or below, don't worry! You can dispute these conditions and support your claim by providing comparables with C2 conditions. Don't hesitate to reach out if you have any questions or need further assistance.

Property Comparables- It's really important to keep in mind that if your property has 4 bedrooms and 2 bathrooms, but the comparable properties listed on the reports show 3 bedrooms and 1 bathroom, those comparables might not be accurate and could potentially impact the value of your property. Just something to keep in mind!

When you're looking at the reports and you feel like there's something that needs to be disputed, it's important to send over comparable properties that have similar conditions and size configurations. Just a heads up, though - if you're trying to compare a rehab property, don't use newly built properties as comps because they won't be approved.

When you're trying to compare properties, you want to find ones that are similar in size, have the same number of bedrooms and bathrooms, and were sold within the last six months. The best way to do this is to look for comparable properties within a one-mile radius of your subject property. Remember, the closer they are, the better your comps will be!

@Lee Korak Hey there! If you're considering refinancing with DSCR, it's important to keep two key things in mind: loan payoff and ARV. Here's an example to help explain things better. Let's say your property's ARV is $100,000 and the loan payoff is $54,000. If your LTV is around 70%, your new loan amount will be $70,000. Out of this amount, $54,000 will go towards the loan payoff, leaving you with $16,000. This remaining amount will cover the loan costs and third-party fees like title, escrow, and insurance. So, you could potentially get a cash-out of about $9-11k.

While John is correct about the time period of 3-6 months for 70% LTV and 6+ months for 75% LTV, it is worth noting that this can vary depending on the lender. There are some lending programs available that can offer up to 80% LTV on cash out with no seasoning requirement if the property has been rehabbed. Hope this helps!

Don't hesitate to connect, I would love to share more info with you! 

@Joel Berry II , Hey there! Sorry for being late. Our company works with many beginner investors and we love helping them out. Charlotte is a great area to invest in and I'm sure you'll love it too. Let me simplify the BRRRR method for you. We break it down into two parts - Hard Money with Purchase Rehab Loans for purchasing and rehabbing the property, and DSCR loan for refinancing once the property is stabilized. The amount of cash you can get when refinancing or selling depends on the property's ARV. If you're already working on your rehab and almost ready to refinance, then you'll be happy to know that interest rates seem to be dropping! Best of luck with your investment and don't hesitate to connect if you need any help.