All Forum Posts by: Tony Pellettieri

 No doubt about the amount of work, and often money, that goes into sourcing deals. All sage advice clearly from an experienced wholesaler about how to get a deal to the closing table. 

Thanks KC! All great points.

I’m leaning more towards #2 as my upfront capital invested for repairs is much less, I’m still cash flowing positive about the same monthly, and the property will already be rented satisfying that requirement for the loan. If it is in fact 3 months before we can do a cash out refi, the entire rent - T/I will be cash flow adding a few thousand extra to the bottom line.

Although the ARV is less, we're still pulling out more net cash, while investing less upfront. When we decide to sell, we can always complete the full rehab at that time. Currently the area is a little rough but many remodeling projects are taking place which is part of what is helping the appreciation of property in the area.

Hey Mike, Thanks for the insight. We've been talking to some Private Lenders/Brokers recently that say they can do a DSCR cash out refi in 3 months or less. Pulling all of our cash out of the deal, and then some, whether we're using our own capital or a mix involving private capital is the goal, in regard to the time value/expense of capital. Perhaps there is some mistruth in what they've told me. Trust but verify as they say. Looking forward to gaining exposure to see all of the nuances involved and gain that experience.

When looking for properties to invest in, should an investor rely on wholesalers to present deals to them?

We typically do not rely on many of our opportunities coming from wholesalers, but that's not to say we're not occasionally interested in something they have to offer.

In addition to scouring our farm area while we drive around to and from our properties, and looking at aged(100 day+) listings and new low priced distressed condition listings on the MLS, which is where many of our deals come from, we reach out to local agents in the area we're looking to invest and let them know we pay cash. We let them know what kind of properties we're looking for and if they come across something or someone brings them something we may be interested in, to let us know FIRST.

In return for doing so, we agree to any of the following.

1. If the seller would agree to sell us the property prior to it being listed, at an agreed upon price using a closing/title agency to complete the transaction, we will pay the realtor a finders fee.

2. If the seller would like to use an/that agent, we will let the agent also represent us so he/she may earn a dual commission for representing both us and the seller. If our plans are to sell the property in a short period of time, we may also agree to let that agent list the property for us when we go to sell it so they may make a round trip on their commissions.

When a business is trying to grow, we've found that finding more potential deals is often times a company's most important mission and can also be the single most difficult challenge.

Utilizing wholesalers is an easy way to find opportunities, simply because they find the opportunities for you. Because it's so easy, many investors utilize this as their primary source of deal sourcing. With that being said, depending on the wholesaler, the deals they bring you can vary...

They can bring you good/great deals. They make money, you make money, or lots of money.

They can bring you bad deals discuised as good deals. They make money, you dont make money, if you take the deal.

They can bring you what were good deals, that are no longer good deals. They focus on making too much money.

They can bring you bad deals. This often happens because they are not deal makers. Many wholesalers have not practiced the product they're selling enough to become effective at deciphering between what is a good deal and what is not.

Nothing against wholesalers, and honestly we will likely start our own off market deal sourcing campaigns, but to us the chances of a wholesaler bringing us a deal that is a better deal than we can find/source after they've charged their fee to make it worth their time for finding the deal, It's not a deal we're interested in.

On the flip side, every once in a while, a wholesaler underestimates a deal's potental, sometimes more often than not, due to their limited understanding of what makes a deal a great deal.

We're always open to looking at deals to see if maybe they missed something. If so, they still get paid, we get a deal, and we both make money.

If you're interested in executing the BRRRR strategy, there are a few books I'd highly recommend reading/listening to on audible(my preferred method)

1. Buy Rehab Rent Refinance Repeat

2. FLIP

3. The Book on Estimating Rehab Costs

These books will talk about the ins and outs of finding contractors and other members of your rehab team, scheduling any many of the other aspects involved in the processes or Rehabbing and BRRRRing,

 The structure often depends on how involved you are/want to be, and in addition, what % of the capital required you're providing. Some investors like to provide 100% of the capital but don't care to do any of the work and be as uninvolved as possible in the process, and they work out a 50/50, 60/40, etc. Other times they invest 50% of the capital and help out with some of the aspects and may be satisfied with receiving 25-40% of the return. It all depends on the arrangement you and your partner can come to terms on.

 Hey Drew,

Our current business model is acquiring/rehabbing houses with various exit strategies. Learning the business by myself primarily through books, as well as practice, failure, mistakes, and consulting with others, was a process that required an abundant amount of time/capital.

I would definitely recommend the option of partnering with an experienced rehabber on your first project. The amount of insight and knowledge you'll gain by not doing it yourself and learning from the MANY mistakes you WILL make is invaluable. Do your due diligence on whoever you decide to partner with. Take a look at how they're managing their current projects and see if they're someone you could see yourself working with.

More to the point, there are many ways to structure the deal, it just depends on the deal itself. Perhaps a good method to start with is getting to know a recommended local RE attorney through referrals that has experience in the area in which you're looking to invest, be that now or in the future and have legal contracts prepared to make sure the capital you invest is protected.

We have our 3rd Property under contract and plan to close in a week. The house is in a high appreciation area. Trying to figure out what the best exit strategy is. We are open to suggestions for different strategies than we're currently considering. We've been told seller financing may be a good option and we're open, just don't know how it would all play out, please advise.

We plan on paying cash for Acquisition & Repairs. This would be our first DSCR loan, and while I believe I have an idea of how it will all play out, looking forward to seeing the process.

Initial thoughts when putting property under contract were [repair, Rent, DSCR c/o, hold]. We will be taking possession with renters in place that are currently paying $750 a month. The plan is to wait to give them notice until day of closing, as requested by the seller. Rehab timeline less than 1 month after they vacate.

Now considering letting them stay, raising rent to $900/mo, completing minimal repairs as the house is currently in acceptable shape to them & good condition overall, DSCR c/o on a lower ARV. Will need to increase reserves going this route to account for future repairs. This will require less cash invested, shorter time frame to complete, and more cash we take from the deal.

Exit Strategy 1 - Have current Renters vacate, complete SOW, get new renters @ market rent, cash out on max ARV, HOLD.

ARV: 126,000

Acquisition: $60,251+ Closing $925

SOW Budget: $15,750

Rent after Rehab: $1,000

DSCR c/o $100,600 Loan @ 7.5% 30yr LTV80%: $840 PITI + Fees +/- $4000 (2pts+undw/orig/leg)

Cash Flow: $160 before Reserves

Cash Out - Cash In - Fees: $19,674 (100,600-60,251-925-15,750-4000)

Exit Strategy 2 - Have current Renters stay, complete light SOW, raise rent, cash out on lower ARV, HOLD.

ARV: 110,000

Acquisition: $60,251+ Closing $925

SOW Budget: $2,500

Increased Rent: $900

DSCR c/o $88,000 Loan @ 7.5% 30yr LTV80%: $752 PITI + Fees +/- $3800 (pts+undw/orig/leg)

Cash Flow: $148 before Reserves

Cash Out - Cash In - Fees: $20,524 (88,000-60,251-925-2,500-3800)

 Lancaster, SC