All Forum Posts by: Rodney Marcantel

Talking with a Hard Money Lender (HML) about options with getting funds out of my rental property with a rough valuation of $250K after updates and adding a 3rd bathroom (4/3) and hardwoods, LED lighting, Granite Island, etc. Paid $211,200 a year ago and own the home free and clear (no mortgage or leans).

HML: 11% - 18% (locked for 5 years then adjustable). No closing costs. Up to 3% penalty if closed the loan out in less than 3 years.

My questions...

• Is this a good strategy to get funds for flipping and what would be the best way to use the funds if my credit isn't perfect (over 700 though)? I'd like to flip 2 to 4 houses this year depending on how long the buy, flip and sell process is. We were turned down by a bank to get a HELOC on our personal residence that we also own free and clear.
• Would it be better to try and get a mortgage on the property (knowing I will have to play closing costs) but get a lower interest rate?
• Is this a good HML proposition?

I like this book. I also have the BP flipping book as well.

http://www.rehabinvestingbible.com by the guys at CT Homes on A&E Flipping Houses.

Cabinets: RTA Store or Cliq Studio.

Granite: local stores. Prices can vary quite a bit, so shop smart.

Bath fixtures: Big Box stores and faucetdirect.com

Flooring: LumberLiquidators.com and sub contract labor to install (found on craigslist.com)

Just need to do online research to find pricing and locations that work for you. Advantage to shipping cabinets for instance is if they are out of state, there's no sales tax so the shipping cost somewhat offsets sales tax if bought locally.

I use software to determine the higher markets where activity/growth is happening. My RE on my power team also lets me know where the hot spots are and if a property I'm interested in is in and around a hot spot. She also does all my comps anytime I need them. 

Having an RE Agent on your power team is golden. I found mine from selling 2 homes and buying 2 homes through her (one of which is a rental). I also have a great Title Company Lawyer I work with who gives me great advice anytime I call or email. Can't stress enough the importance of a power team to work and navigate the buying and selling in the RE market.

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Very nice work. Well done. I wonder if it would have been better to open the wall between the stove/microwave and the dining room and then add an island parallel with the sink and make a large open kitchen dining area. Probably could have asked more for the home if that was done. But as always it comes down to cost versus return on investment.

In my area, the more open the space the higher the asking price. I tend to want to open space except where a large beam is required unless it's a full gut and then I strongly consider it as it improves resale value quite a bit and can usually end up in a bidding war which all of us want.

In my opinion, they type of insurance you'll need is based on two options. Answer this question: Does my GC (General Contractor) have Builder's Risk Insurance? If the GC is licensed, then they should.

• If you are GC and not a hired GC, then yes, you need builder's risk insurance on top of home owners insurance.
• If you hire a licensed GC, you should verify if they have Builder's Risk insurance and if they do, then all you need is a home owners policy.

Have you tried Craigs List? I found a good and very inexpensive professional hardwood floor person who installed all the hardwood in 2 days. Needed one day to level concrete floor before installation. Paid $2,490 for materials and installation. This was engineered hardwoods from Lumber Liquidators ($1.69/sq.ft.) for 700 sq.ft. of flooring to cover formal living, dining, entry and all hallways.

Level of rehab for flips versus buy and hold is a very broad question, but to simplify I would suggest the following.

Flips

• Open layout as much as cost will allow. That means opening up walls and in some cases putting in a header. 
• Kitchen: New cabinets (but not at big box stores), New custom counters (granite or quarts), New floors and likely new or newer appliances.
• Bathrooms: Cosmetic updates to total gut depending on how old they are.
• New Carpet and Hardwoods as needed.
• Interior and exterior painting as needed.
• Landscape within budget

Buy and Holds

• Don't open walls except where no header is required as needed.
• Keep cabinets in kitchens and bathrooms unless damaged. Just update hardware and/or paint cabinets.
• Updated counters with non-custom granite or corian for high end look without high end price.
• Update carpets and use laminate hardwoods where appropriate.
• Minimal paint and landscape.

Options...

• Leave roof - risk that house will sit longer and eat into profits due to holding costs and run the risk that a bank won't fund the loan for a buyer.
• Replace roof with 25 year shingles - costs you more up front but is great selling feature and eliminates the chance that a bank won't fund due to the roof. 

Bottom line... would you purchase the home for your family if I gave you $8,000 discount on the purchase of the home to replace the roof. More headaches for you the buyer and chance that a leak could form sooner than later. As a buyer, you'd probably pass on the house since you don't want to deal with the headache of finding a roofer and dealing with the pain of a roof replacement nearly after you bought the house.

Show you are trustworthy and dependable flipper by being a full service seller and who knows, your buyer may refer you to another buyer down the road because of how well you took care to sell a quality and like-new home (to them). Hope this helps. Blessings.

Great job on those properties, @Sharad M. Impressive results.