All Forum Posts by: Pope Lake

Would also recommend Groundfloor for hard money needs. Had a great experience with Paul Cosentino - dm me for contact details. 

@Rob Drum

Investment Info:

Single-family residence buy & hold investment in Birmingham.

Purchase price: $70,000
Cash invested: $35,000

First investment. 3 bed - 2 bath, 1860 sqft SFR. Currently executing a BRRRR in the greater Birmingham, AL area. Investment requires basic interior and some exterior cosmetic renovation. Once renovated will rent out then refinance.

What made you interested in investing in this type of deal?

I was first looking at doing a buy and hold in Birmingham, but then as I learned more about different strategies for SFR investing, I came to realize that the BRRRR method is the most effective for forcing appreciation while achieving the highest cash on cash return.

How did you find this deal and how did you negotiate it?

I found this deal on the Alabama MLS and through the help of my Agent @Rob Drum.

Shout out to Rob for great communication, providing invaluable knowledge, and having a well-credentialed list of vendors and connections that enabled me to gather the other members of my team. Overall great experience working with Rob.

How did you finance this deal?

Short-term, hard money financing. Covers purchase price and renovation costs. I had to put down a "skin" amount roughly equal to 20% of the all in deal price.

How did you add value to the deal?

I will add value through having basic cosmetic interior and exterior cosmetic work completed on the house.

What was the outcome?

Still in process - TBD. But hopeful to achieve an ARV of 135k-140k and refinance at 75% LTV.

Lessons learned? Challenges?

Gather ALL members of your team before trying to execute a iterative strategy like the BRRRR. Also do prep-work such as getting a pre-approval from both your short term and long term lender.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I would highly recommend @Rob Drum in who's a high-performing agent in the greater Birmingham, Alabama area. As aforementioned, Rob has the knowledge, communication ability, and care to guide you throughout your investment process. Not to mention, Rob is well connected to a highly qualified network of vendors that can add immense value.

@Jason Johnson I would highly recommend reading Multi-Family Millions by David Lindhal. Great overall perspective of the MF investing process, including how to raise private money. Best of luck to you! 

@Kevin Paglia I agree with @Greg Dickerson and @Evan Polaski that multifamily is the best way to go - especially if your goal is replacing your income. To illustrate the money making potential of MF, an example I like to think about is, if you own 10 units and you increase rents by just $20, you get $200 extra income / month, which equals $2400 / year. If you divide this by a 8% cap rate, you've increased your property value by $30k! (Value = net operating income / cap rate). This type of forced appreciation is much harder to achieve with single family. 

That being said, multifamily investing is a lot more complicated than single family investing and may be more difficult just starting out. If you do go through with buying a single family home, I would go the BRRRR route as you mentioned. In my view, the BRRRR is the best way to get forced appreciation on a single family home, while leaving much less capital in the deal, as compared to a traditional buy and hold.

@Evan Polaski - Understand how these expectations need to be set upfront and how managing the refi fits within the role of the GP. Also thanks for clarifying your point on investor return expectations, I get what you mean. 

@Brian Burke, @Ryan Daigle, @Evan Polaski - thanks for your feedback. 

Brian, to your point - I agree with you in that there are many other factors to consider when looking to re-fi, including moving from bridge financing to long term debt and securing more favorable terms. I appreciate your mentioning of the transactional costs as well.

Ryan, I like what you said about laying different scenarios out before pulling the trigger. 

Evan, I appreciate your perspective on the returns for the project. After a re-fi, distributions may be lower to investors - especially if they're receiving a preferred rate of return. I did not consider the tax element either with this so thanks. 

Overall what I'm gathering is multiple scenarios have to be considered and evaluated before making a move - rather than sticking to hard metrics. 

This begs my next question, do you get weigh in from your investors on something like this, since it's a capital event? Or, being that they are silent partners and you're responsible for managing the overall asset as GP, do you do what you think is best? 
 

Hi BP! 

I've become more interested in the multi-family space recently after reading Multi-Family Millions by Dave Lindhal and various multi-family related market reports. 

One question that has come up is around refinancing. When refinancing a multi-family project what are some of the "hurdles" that are commonly used, in terms of returning capital to your investors? 

For instance, I've heard that a refinance should be done only if 60% of capital can be returned to investors... I've also seen that this number can be 50%. What rate do you use? 

Hi BP! 

I'm looking to use the BRRRR strategy, and I'm trying to figure out: what is the difference between a Bridge Loan and Hard Money?

Ideally, I want to have cash to purchase a property upfront and do the rehab, wait for the seasoning period, then refinance into a traditional loan. Would a Bridge Loan or Hard Money make the most sense for this? What other financing strategies have you used for BRRRR?

@James Wise thank you sir! Have started to take a look at this and it's already helpful. Much appreciated.