All Forum Posts by: Rashad Nelson

Haven't purchased yet, but I have some very strong leads, one I'm viewing Wednesday morning with my contractor.  I plan to purchase and renovate using my own capital.  

Example:

Purchase:  $10K (cash)

Renovate:  $35K (cash)

ARV: $70K to $75K (based on BPO or subject-to appraisal)

The actual ARV of this particular lead is $73K. When you say most lenders, who are you referring to? I have no such luck after speaking with numerous community and local bank associates here in Atlanta. I have two soft-money lenders that will do $50K minimum, but their interest and fees are quite aggressive.

Does anyone know of a good, cash-out re-finance lender, whether they're a local community bank in Atlanta or other type of soft money lender?  Here's what I'm looking for:

• $50K minimum loan amount
• 30-day seasoning requirement or less
• 70% to 75% LTV (based on end value of the project, not purchase and rehab costs committed)

I've talked to quite a few local, community banks here in ATL. Many lend based on loan-to-cost instead of LTV or ARV and at least a year or two of seasoning is required. There's no way an investor can scale-up their portfolio if they're required to hold on to a property for at least a year (or two years with certain local banks) before getting favorable LTV terms.

So far, my only option is Visio Financial, a soft money lender.  They check all the boxes above, but their terms are quite aggressive and recently, as of March 1st, their interest rates have skyrocketed to nearly 9% for a 30-year product (ouch!) and I have excellent credit.  The rents in Atlanta don't support such an interest rate.

I'm trying to implement the BRRRR technique (buy, rehab, rent, refinance, and repeat). Velocity of money and forced appreciation is the only way to scale. I can't tie up a significant portion of capital for each buy-and-hold project. Has any buy-and-hold investors in Atlanta have any luck in this regard?

Hey Fritz, 

That legal advice sounds legit.  I don't think a second opinion is needed.  What does getting a broker's license entail would be my follow-up question.  

Most of my deals are happening in Baltimore.  I've continually run into a brick wall with potential Atlanta deals because of my inability to find licensed GCs whose numbers can fit the models.  I get constant leads from various wholesalers and agents, but without a solid partner to get renovations completed at a decent price, its basically putting the cart before the horse.  

A business associate recently informed me of a lender whose willing to lend on projects as long as the subs are licensed, not necessarily the individual overseeing the project. I have a meeting this week a local wholesaler and a licensed architect with GC experience and a solid network of subs. I hope to JV up and finally get some ATL projects going. We'll see.

Hi Michelle, 

I'm sorry you missed out on this deal, bummer, :-(.  You definitely have the right idea - private money / financing is the answer.  Here's what you'll need to convince your future money partners:

Written Presentation / Proposal - I use a software called "Rehab Valuator", (rehabvaluator.com) developed by Daniil Kleyman, an investor / developer based in Richmond, VA. I use this software daily to evaluate every deal I come across. It can also be used to generate professional looking reports detailing the investment capital needed, profit returns, etc. Investment partners want to know what the potential return is and this report provides it. I pay $197 annually for the premium version. *Disclaimer - I am not compensated in no way, shape, or form for recommending this software.

Written Repair Quote - you'll need a very reliable, trusted, and licensed GC to provide you a detailed, written proposal of the work needed to get the property into the desired condition for resale.  

Subject-To Appraisal - this is the icing on the cake. You can hire a local, licensed appraisal to provide a subject-to appraisal to prove out the ARV. Since you're a licensed realtor, you most likely can just pull existing comps and skip this step, but getting an appraisal report ups the ante in my opinion. Plus you'll have a little skin in the game at this point (appraisal fee).

Organic Relationships - the best money partners are people you already know and trust (family, friends, close colleagues).  If the trust is already established, combined with these three deliverables, you should have a much better shot at getting them to invest with you.  

Credibility - of course, people will naturally ask how many deals you've done in the past. You mentioned you've done (9) deals, but didn't elaborate if they were investment deals or deals as a real estate agent.  You can definitely leverage that experience.  

I hope this helps.  I hope you get the next one, :-).  

Hey Fritz, 

By rent to own, I assume you mean owner / seller financing, where you completely own the property outright, act as the bank, and have an owner-occupant / buyer provide you a sizable down payment and pay you over time until they eventually own the property outright themselves, via the use of an amortized schedule (basically a mortgage).  Instead of being a landlord, you would basically create a note to either hold for residual cash flow or flip the note to a note investor or bank.  

I'm not sure how it works in Kentucky and you would need to verify with a local real estate attorney in your area, but you wouldn't need a realtor license, but per the SAFE Act passed in 2008, you will have to obtain a Mortgage Loan Originator (MLO) license through the NMLS (Nationwide Mortgage Licensing System).  

Similar to obtaining a real estate license, you would have to study certain materials, pass a scheduled exam, and get 20 hours of annual training every year per federal guidelines to maintain the license.  

Actually yes, I had a joint venture with a local, licensed spec builder for a new construction project in an up and coming area in Atlanta called Hapeville, just northeast of Atlanta International Airport. We had the JV agreement drafted through my attorney where I would fund everything - land acquisition, soft costs, hard costs and he would basically use his expertise and contractor network to run the construction from start to finish. No money out of his pocket, just his energy and time. The property was to be marketed and sold, I get back my original investment and we would split the profit 50 / 50.

Unfortunately, after the initial mock-up from our architect, he wanted to bail on the project.  He didn't feel comfortable with the end profit.  My numbers showed us making a total of $79K if we built something smaller, around 1850 sq. ft.  Guess he wanted more money.  I'm currently selling the lot for the same price I acquired it for.

You nailed the point on the head. Unless it's a JV, you can't make any money in this town, at least on the mid-tier projects.

@Andrew Quinn.  You got it buddy.  

Oh hey @Aaron McGinnis and @Account Closed

Hey Cliff, 

I just happened to see your posting.  I'm actually in the same boat myself.  I purchased a property in an up and coming neighborhood in Baltimore where my proposed repairs will be upwards of $75K and I could either rent the final product out or put it up for resale when it's done.  I'm leaning towards a flip.  

You can definitely always save money doing the project yourself by hiring / managing the multiple sub-contractors, but the question is going to be can you apply and pull permits yourself (same cities requires licensed GCs to do so) and do you have the time to manage the project yourself.

Here's what I'm doing, because I'm converting some spaces in my project and things can get complicated with framing.  I've hired a local architect to nail down the details of this project including the materials and finishes.  My architect can also present final plans to the city for review / approval for permits.  From there, I could either give it to my go-to GC to quote it, pull the approved permits, and get started or I could piece meal the project myself using multiple contractors.  The only problem with the 2nd option of using multiple contractors is that I would still need a licensed GC to pull the permit, per city regulations.  It may be different in your area.  Either way, my architect will also act as an on-site inspector to ensure the work is being done to spec.  

If your budget allows, I would consider doing the same thing, especially if you plan to manage the project yourself.  A hard set of plans eliminates all ambiguity.