All Forum Posts by: Preston Roper

I am looking into buying a Foreclosure to do as a potential BRRRR deal. I have a few reservations that i wanted to see if anyone on BP could shed some light on. I am looking into these mainly because the inventory in my market is extremely low i have been struggling to find deals. I figure that the requirement of having to have cash available will create a barrier to entry that will lower the competition for these foreclosed properties. I have listed out my concerns below and would love to hear some insight and opinions of others.

1 - One of the largest concerns that i have is buying a property that has multiple liens on the title. Is there a way to prevent this? Are all secondary leans required to be disclosed at auctions or is this something that needs to be researched at the court house prior?

2 - A lot of foreclosed properties are occupied. The risk here is fairly high because you are not able to review the property to understand the extent of work that it will need. On top of not being able to review the conditions of the inside there is also the chance that the occupant will refuse to leave leaving me responsible for evicting them it would think. Is there a way to minimize these risks?

3 - My final concern is finding / narrowing down the type of foreclosure that i should look into. I have looked at multiple different websites that list foreclosure but most require you to pay a subscription. Is there a website like HUD or Homepath that is more reputable that others? Do i have to go through a real estate agent to deal with the REO agents? I have a agent but he does not have much experience in foreclosures.

If your goal is to leverage the most out of the current mortgage rates it does not matter if you are looking for a triplex or a quad the goal of trying to leverage the most is to borrow the most money. So the more valuable property would provide you with the most leverage.

That being said its easier than you think to over leverage so like @Kevin Zolea said make sure it cash-flows as a rental. No matter what loan you are looking to utilize you will have to meet the required debt to income ratio. Some banks will take 70% of the income produced by the other units in the property but that is rare and you will have to have a signed lease for that income to count toward your debt to income ratio. 

I think it would depend on how you set up the management of the property. I have done a house hack with my brother but never where one of us didn't live there. I would think that if he is getting the benefit of living in the property then he should have to cover the difference.

It doesn't sound like a great deal though especially since you are family. If you are set of doing the deal then i would make sure you and your brother are clear about the responsibilities up front and treat it as if you where a silent investor with no responsibilities for the property. But like @Damaso Bautista said mixing family and business rarely ends well.

Yea i would definitely recommend looking for ones that have 2 bathrooms, especially if you are going to be renting the other rooms to people you dont know. I started out doing a house hack to friends and it worked for a while and was great but eventually the lines between friend and tenant get blurred and you have to watch out for that. 

Depends on where you are in Newport, if you can get close to the base then you will always have good quality tenants and guaranteed rent.

Tremon, If you are looking to get started i would recommend doing a live in BRRRR. This will allow you to put little money down 3.5% if you use a FHA loan and then fix it up while you live in the property. After 6 months you can refinance the house (Assuming you have added sufficient value). In this market it is hard to find a deal like this. If it was me i would look to do a house hack with a FHA loan.

I have a property that i am looking at renovating. I have a solid budget and plan the only thing that i am worried about is the stair case to the second floor/ attic. The property was built in the 40s so when they built it there where very few regulations on stairs treads, riser height ect. The stairs have a narrow tread and a slight spiral in the beginning. They by no means meet code but i believe are grandfathered in (as long as i leave them the way that they are). My question is, if i renovate the house but leave the stairs alone how much more liable could i be if a tenant slips and falls? The stairs lead up to a finished attic that will be the 3rd bedroom.

Investment Info:

Single-family residence buy & hold investment in Midlothian.

Purchase price: $120,000
Cash invested: $28,000

This was my first buy and hold investment that i never lived in.

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

I was a eager investor and was looking for just about anything to invest into. I liked the area and the houses where not expensive but the rents where high for the prices of the homes.

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

I found it through a whole seller. The was advertising it as a buy and hold with tenant in place.

How did you finance this deal?

I financed it with a conventional loan.

How did you add value to the deal?

Since there was a tenant in place and he was okay with staying i did very few renovations. We updated the stairs that went to the house and then added a new balcony door. that was about it.

What was the outcome?

The tenant is still in place and is a very low maintenance tenant. the Cash on Cash ROI is at 17%.

Lessons learned? Challenges?

The biggest thing that i found on this was that keeping a good tenant in place is worth keeping the rents low. I could raise the rent by maybe $75 to $100 but i dont think that the current tenant would stay. He has never been late on a payment and when something comes up he just fixes it.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $180,000
Cash invested: $180,000
Sale price: $245,000

This was a 3br 2ba that was vacant for a few months. I got a hard money loan at 12% interest only payments for 4 months for the 180K purchase price. I financed the renovation cost my self. It ended with about a 23k profit before taxes.

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

I knew the area and was confident in the comps. I had a friend that lived in the neighborhood so it was an area that i knew fairly well.

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

I found it through a friend that lived near by. Went over to the house one day when he called and said that guys where there moving things out of the house. One of them ended up being the owner. Since i knew the area i made him a cash offer and he took it! We did a little negotiations over the phone and settled on a price that we where both good with.

How did you finance this deal?

The Deal was financed by a hard money lender. The hard money lender financed 100% of the purchase price at 12% with interest only payments. The renovation was self financed and completed in about 3 months and 1 month to sell.

How did you add value to the deal?

We added a front door to update the curb appeal. The inside was in decent shape but the kitchen needed to be updated with new appliances. Painted the cabinets and the whole hose. We added a see through railing to the 2nd floor to make the space feel more open.

What was the outcome?

We had a little trouble selling because the first contract feel through due to the buyer financing. The second offer wanted to have some minor changed including a new hot water heater that we ended up replacing. End of the day we came out with about 23k profit before taxes. I did not to a 1031 simply because i didnt have another house to invest into yet.

Lessons learned? Challenges?

The big thing that i learned was that just because you can do the work that doesn't mean that you should. I did a lot of the work myself and ti was extremely tiring.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $248,000
Cash invested: $15,000

This was a primary residence that i did a Basement renovation and the two bathrooms and then refinanced. The area had a highend mixed use development going in just outside of the neighborhood and the first apartment building finished up right as i was refinancing. The are had a lot of growth and i was able to refinance and pull close to 50k out of the property while also increasing my equity because the value almost doubled.

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

The house was not appealing to most because it was outdated and the previous owners where smokers so i need some work to be up to the standard of the neighborhood. I also new that the development was going to have a positive impact on the area.

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

It was on the MLS in a area that i was hoping would grow in value.

How did you finance this deal?

for the financing i think i put 10% down and moved into the property and did a live in flip. Once the renovation was done i did another conventional refinance.

How did you add value to the deal?

The renovation involved re-carpeting the house and a full paint job. What really added value was the additional SF that i got from finishing off the basement which added a bed room and an additional living / kitchenette area. The two other areas that i updated where the bathrooms. After the renovation and the down payment i think the total cash left in the deal was about 30k.

What was the outcome?

The overall outcome was an increase of 10% and 50k cash out that i used to finance a nice flip.

Lessons learned? Challenges?

Definitely capitalize on being in the path of progress, if the mixed use development had not been successful then the neighborhood that i was in would not have increased in value nearly as much.