All Forum Posts by: Inam Rehman

Hi BP, i have a deal that i am looking forward to bid on but need your help understanding the refinancing part of BRRRR deals. So lets dive into the details of property:

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ACQUISITION

Property: 3 bed 1.5 bath SFH foreclosure and being sold at $50k

Average resale value = $90k-$100k

Rehab estimate: $30-35k

Will bid on this at $20-25k max! I dont think its interesting enough over this price point.

So Acquisition cost = $25k + $35k (rehab) + $3k (closing) = $63k (will finance this with renovation loan)

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Now lets assume conservatively that ARV is $90k which brings the 70% of ARV to $63k.

My question is how do i calculate how much money i can get out of this investment after refinancing ? Let me do the math here i dont know if its accurate or not but please guide me here..

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RENOVATION-LOAN

Initial Renovation Loan = $60k @ 5% interest (assuming)

20% down payment = $12k 

Finance Amount = $60k - $12k = $48k

Cash in = $12k (down) + $3k (closing) = $15k

REFINANCE

Appraised property value = $90k

Amount owed on property = $48k

Refinanced Amount at 70% = $63k

Cash out = $63k - $48k - $4k (closing) = $11k 

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Is my cash out statement correct ? Is this how banks will refinance ?

Thank you for all your help! :)

Hey BPC!

So i have visited two properties today and they were one of my preferred ones based on rents/location etc. Heres what happened:

Property 1:

Listed for +100k so i expected something in great shape!! On the outside i kinda had an idea what i am stepping into .. Porch needed paint job.. could see spider webs on windows. First unit i entered was a DISASTER!!! even disaster wouldnt comprehend what i want to say ! Couldnt even see floor because of dirt .. smallest bedroom ever with dirtiest stuff laying around.. for bathroom i had to ask the tenant "is this working and even in use?" had hairs all over ..moldy wet floor and whole unit had disgusting odor!.. i simply cant say enough about this unit.

Second unit: Sigh of releif had clean hardwood floors.. clean kitchen..clean bedroom (windows had spiders etc but looked fine) ..living roof floor squeaked in few places when stepping on those spots..second bedroom was cleanish ..pantry had HOLE in roof with umbrella being used to contain water leakage.. overall no bad odor etc

Third unit: Clean hardwood floors..cluttered kitchen (but thats not relevant to house itself) bedroom was clean ..bathroom had hole in floor near bathtub and when stepped on it moved downwards and seemed like cant withstand too much weight.. two broken windows but still intact.. had similar hole in one room being used as storage.

Basement was cold and seemed to have moist air.. yellow glue like stuff used to seal around windows and pipes.. very cluttered.

Most of stairs in house squeaked and some felt loose.

Conclusion:

Noway im paying +100k for this i wouldnt even consider this 3 unit but 2 as one of unit was not liveable at all !!!

Property 2:

Listed for +50k Got to see only 1/3 units.

Common entrance was SMELLY as in ALL kind of smells !.. Floor in kitchen was UNEVEN (Had a dip in middle) and same with bathroom and was very obvious uneven floor.. bedroom were all plain ..hardwood floor which needed to be replaced all over !

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So what do i make of all this? Would i find all properties like this in +50k range? Where do i compromise and where i shouldnt ? I dont think i would let my tenants live in place full of bad odor or broken roofs !

Please Help!

You guys are great as always !

I am not working with Listing/Sellers agent but i am not sure if the person i am working with has had investment properties experience or not i guess ill ask her today.

@Jean Bolger You are right i will definitely work with buyers agent.

@Ramon Jenkins Thanks man! I will definitely broadcast deals and let BP community help me decide once i have narrowed down to which properties i am interested in. Right now the list is kinda long around 10 properties :)

@Zachary Taylor When you say an agent who is investor too wouldnt he want good investments for himself and might keep me away from what he has eyes on (great deals) ? Just a thought.

BP !!

I have finally after months of researching properties scheduled a visit to duplexes/triplexes that seemed interesting to me. I am really nervous and have no idea how the whole buying process goes! What to look for in property!

I know when property looks good on outside but im worried i might miss something big before putting down an offer which i believe is before we are allowed to do professional inspection.

So basically first time buyer, will be meeting a "real" real estate agent for first time ever and so much more!

Can you guys please help me with some Do's and Dont's !?

@Adam Johnson I am still trying to get my feet wet so dont depend upon my advice. What i am thinking and trying to execute is to start with city and its surroundings that i know better and since Duplexes+ are hard to sell and even harder in smaller cities i might end up having a great deal.

Later on depending on how my first investment works out i will decide if and when to move to bigger city like Milwaukee and Chicago.

@Brie Schmidt Thank you Brianna. It makes sense to me now.

@Laurie Souders I am not willing to commit fraud and wont ever! I was just curious about my situation as i explained in comment earlier. Any thoughts over that ?

@Brie Schmidt Thank You. I do understand how bad it can be. I am just trying to understand what Owner Occupied really means ?

My current status is; im living in a hotel (out of state) for past year or so for job reasons and i do not have any apartment leased. So if i buy owner occupied property but still keep on living in hotel for say atleast 6 more months after purchase would that be valid way to do FHA ?

I am looking to get an FHA loan on 3 unit where i will be living in one of the units. My question is regarding the term "Owner Occupied".

Lets say i keep one unit for myself and pay all bills etc but i live somewhere else? Is that legal and valid way to do it ? What if i set my personal address to that unit ? and my wifes address for where we actually live?

Just trying to understand what my options are? As the property im looking at is out of town where i work/live as of now.

Jenkins Ramon that was great what you just did. Thank you. My plan is to buy and hold and get mortgage via FHA. So by law I will have to stay there with my family for least 1 year. Which means i don't want in bad areas nor too cheap property. It all comes to SFH won't give me money but multi will.