All Forum Posts by: Peter Mckernan

How is it coming along? Did you get started after this post and how is the success?

I believe Noah set you up right on that post! I would add to this one pound into you the good relationships you have with the contractors and agents in your area will be your best and most helpful relationships. The contractor will give you better pricing the more you use them, some GCs increase their price, but those are the ones you would like to not use (side note, of course with inflation you need to pay your people right, but it needs to be reasonable). The other tip I would say is really get a good relationship going with a realtor in the area if you do not have one to give you the exact data you are looking for to be successful. That data would be sales price after remodel (the true numbers some agents really don't have the experience to be comping the property), the days on market you will experience (this is great info because you want to recycle the money quickly), and resources to sell the place fast not slowly which you do not want this because this could put your holding costs extremely high and push the property to little profit or no profit. 

I would connect with local people at meetups, that might give you some contacts for private money. This could be less costly and smaller hurdles than you would have with hard money lenders. For example, I have a private lender that gives me 8-9% on the rate for rehab costs when I am usually getting about 10.25-11.25% on the rehab costs from hard money lenders, and the HML is not sending the full money upfront, but in draws (this is normal for most HML) which is a lot more cumbersome.

Also, there are a lot of hard money lenders out there that you can connect with via google etc. I think you should be paying about 10.5%-12% on average right now, 1-2 points as well, and some lenders will not even need an appraisal.

Sounds like you need the money for rehab?  That is me reading between the lines, and I would suggest partnering with someone who has the money. I am actually doing a flip right now and hard money lender isn't the easiest to give us a loan for the rehab (draws verse pulling all at once, which is normal). One of my connections will fund the rehab for less and give it all to us on the upfront to finish the project at a lower cost. This is how I would go with your projects. 

The other hurdle is to find a contractor, that is something that you can do as well. I would vet contractors by finding local real estate agents that also work with investors, and/or a rehab investor in your area that does a lot of deals. They might have a contractor they can get in do all the work and get ready to sell! They might even be willing to front the money to rehab it and do a partnership with you to sell it too! 

The comps that come from local real estate agents will be the best for this one. The real estate agents who are knowledgeable and doing a lot of deals each month will be the ones who can get you these accurate numbers. I would check on this website on the find an agent feature or search Zillow for teams/agents in your area doing 25 or more deals a year. 

Check out the site meetup.com and also the events page on BP for meetings up in your area to meet people like this and build relationships. I know a guy that runs a great one in Tampa if you want me to connect you two (I know that is farther away). 

Tapping into the equity is always great when it comes to recycling money quickly as you would a flip. You are still going to have holding costs and a heloc will just have less holding costs that you would if you were doing a personal line or hard money. 

There is still a risk: You do not have the right outprice and lose money, your deal goes south due to unfound things when you bought it, then the rehab phase brings them up, and you spend more, and the market changes, which is something that can happen on a moment's notice. Other risks, the contractor walking off the job, a storm hitting and delaying the project for weeks, someone breaking into the home and stealing stuff (which happened just the other day to a client of mine), a squatter, or drunk driver driving into the house (happened a lot at my old job as a firefighter lol). That being said, anything can happen, but if you run your numbers accordingly, make sure that your contractor is trusted and do all the other stuff you'll be a little more protected than the next person flipping that does not do this type of calculation. 

I would go HELOC for sure that would be best as others were saying the lower cost for the money changes between paying a higher rate for a personal line and typically personal lines they want a higher monthly charge as well independent from the interest rate.

I get quotes as much as I can before we close (sometimes this does not work). After the demo, there really is not much you can do to save outside of thinking outside the box on fixing whatever that might be that has come up. 

To save those costs, you might want to stick to some year build and older, for example, if you cannot do inspections on the properties that you are buying due to off-market deals or something else that is hindering you (all sellers I buy from do not want anyone in the home till we close). I would try to buy properties starting at a specific date so not large ticket items come up. For example, if you are buying in an area that is in are 1980s and above, you might run into a roof that is tile and the paper under the tile needs to be replaced the day you close. If that is the case, can you start to buy places that are built in the mid-90s to stay away from those big issues? The other thing could be tracking what you have had come up on the last 5-10 projects after closing, i.e. the water heater was at the end of life when we bought the last 6 out of the last 10 properties. Okay, let's allocate $1500-$2,000 for this repair that will need to be done. 

Yes, I would agree with Chris and Bill, but if you have an option to get around this by putting it inside the house? If not you might be stuck with the work and the commitment to doing it since the city would be the ruling party.

Let's talk about this directly as a business decision. As a new owner, you should confirm if you can raise the pricing on the rent, and do that accordingly to the laws. This does not matter if the tenant is off a bit on rent and income. I would raise the rent. 

The first thing prior to this would be to verify this is a good tenant, check the lease, and confirm with the owner with a payment ledger that they have been paying on time since they have been there. Even if you know the owner like a brother, you need to do your checks and balances. Tenant estopple is a great place to start while you are in escrow, if you have closed escrow and did not do this stuff, you cannot backtrack. I would verify as much as possible which is looks like you know income on the tenant and maybe some other stuff too.