All Forum Posts by: Robert Arzola

You'll definitely want to get at least a rough idea of how much rehab is needed from the start. You'll want to have a good idea of what comps in the area look like as well, to see if the amount of rehab needed is worth it compared to the ARV for a good ROI. Once you have a rough idea of budget, you can get an idea of what you'd qualify for on a hard money loan. When you get under contract you can have a contractor help you fill out a detailed Scope of Work and then submit that to the lender. The Scope of Work does have to be done at the beginning of the loan process, though, once you start on the actual application.

Using your own money is always a good way to go, but, it doesn't give you much wiggle room in case something comes up and you have to use those funds for an emergency. I've helped several clients in the past who used their own money to start on a rehab project, and then end up running out due to something unexpected happening. Then they were in a bind and had to refinance and add the rest of the rehab budget to financing to finish the project, which of course slowed down the whole process. The vast majority of my clients who have large portfolios prefer to use hard money loans to keep their own money, and then immediately refinance or sell once rehab is done.

For your first few properties, I'd recommend going for a property that only needs light-moderate rehab, as you'll need a higher down payment and have less financing options if the rehab budget is heavy (as in, if the rehab is more than the purchase price, or there's significant construction needed). Once you start getting more properties under your belt, you'll have an easier time should you chose to do more heavy rehab.

Wow, you really detailed everything well here! Thank you so much! This really helps me.

I understand about looking for a property that only needs something moderate at most for a rehab. I need to get my feet wet and I know a full rehab would be waaay over my head.

1 Vote

Atlanta, Georgia

Quote from @Philip Joseph:

Quote from @Robert Arzola:

Hey everyone. I plan on starting my journey into BRRRR investing in Georgia - specifically in Macon and the surrounding areas and was wondering one thing about contractor bids. When is the right time to have them walk through the property? I want to get a number of contractors via referrals from agents, property managers, and so on, and would want to have 4 or 5 bids as David Greene suggests in his book on BRRRR. However, if doing a hard money lending purchase of the home, would it be best to do 1 itemized bid in the initial walkthrough of the property and then - if I decide to pursue the deal and get it under contract - do the other bids in a due diligence period? I do plan on paying the contractors for their time to do the bid as well. I know it could be costly at first, but it would mean having a good amount info to compare and hopefully make the best choice.

Whenever I used Hard money, I was required to provide them a list of all repairs that would be performed. They did not require a list of every fixture i will replace, but it should have all the major items broken down by labor and material. i.e Kitchen cabinets: $4,800, installation: $1,200. Join the Macon REI facebook page and check out all the previous questions...You will find several highly recommended contractors. Also, since you are only an hour from Macon, drive down and meet the contractors and possibly walk the property with one or two of them.

Cajun

I actually started joining some REI groups in Atlanta today and was wondering if Macon had a group so you answered that question! I did notice what you were saying about the list of repairs needed on the forums here and David's book, so seeing your post reaffirms that. I was thinking it would be a good idea to go down and walk through the property with at least one contractor so you're making me feel more secure in what I'm thinking, so thanks for all that!

0 Votes

Atlanta, Georgia

Quote from @John O'Leary:

Using your own funds and keeping 100% of the profit is not a bad days work, but using OPM is a strategic move for those aiming to grow a business rather than just pursuing a hobby. This approach can either elevate the caliber of your investments for similar returns or enable you to diversify and manage multiple projects by building a solid team and network. Both strategies have merit. Consider this: with $100k, you could purchase a property for $80k, invest $20k in renovations, and sell it keeping 100% of the profit. Alternatively, that $100k could serve as leverage to acquire three properties, possibly yielding a 70% return on each due to financing costs, which cumulatively enhances your return on investment. Another way of looking at it is an investor flipping a house with all cash with a ARV of $170k could see a 20% profit margin. However, another who leverages to buy a higher-valued property with a $275k ARV might earn a 15% margin but garner a greater total profit. These simplified scenarios aim to illustrate the potential benefits. Partnering with a HML who acts as a collaborator, rather than just a financier, can ease the transition into such strategies. Also, spreading your risk can safeguard you from the setbacks of a single deal going sideways, ensuring a quicker recovery and sustained momentum.

For me, it would be starting the business in general haha. I do need to learn more in general when approaching things like BRRRR as I would still have to find my "core 4", you have given me quite a bit to think about for when I'm ready

0 Votes

Atlanta, Georgia

Quote from @John O'Leary:

Every situation, and the timing is different. Before finalizing your terms with a hard money lender, it's crucial to nail down a reliable budget. Changes in your budget can impact the original terms offered by your lender. It's helpful to know your lender's limits on loan-to-cost (LTC) and loan-to-value (LTV) to gauge the flexibility you have with your numbers. What you want to avoid is basing your loan on estimates and discovering, after closing, that your actual costs are significantly higher, which could leave you in a tight spot. Once you've closed, your lender won't be able to modify terms or increase the budget, and more often than not, actual costs are likely to surpass your initial estimates.

Thanks, John! It's clear I have a lot more to learn as I continue on. The other option for me would be to save over the next few years and dive into the market with and do it all with my own money, which would probably be the safest way since there would be no lenders. I will continue learning about the HML's, and work on going to the REIA meetings to learn more.

0 Votes

Atlanta, Georgia

Quote from @James Wise:

Quote from @Robert Arzola:

Quote from @James Wise:

Quote from @Robert Arzola:

Hey everyone. My name is Robert Arzola and I'm dipping my toes into REI and have been considering guesting in some of the different GA REIA subgroups along with the New Investor Sub Group. I've been reading various books, including a few from Bigger Pockets, and want to be a BRRRR investor in Macon, Columbus, and other parts of Georgia and Ohio (I'm located in Henry County, GA).

Do you think I should go to general GA REIA meetings and the New Investor subgroup first before going to the other subgroups (rehabber subgroups) or just dive into the other subgroups?. I'm not a member of the GA REIA, but am considering it for when I want to really dive into REI (still learning). I understand trying to find my core 4 and whatnot, but don't fully understand the rehab part and need to understand the best way to estimate the costs of a rehab and even when to start getting the bids for a rehab. I'm assuming it would be in the 7-day due diligence period, but not sure. No, I'm not saying I understand all the other aspects of BRRRR and REI, but the rehab part is something that I feel is incredibly important for analyzing a lead and getting a good deal to lock down some equity.

Lastly, if there are any current investors here who would want to possibly meet up and talk to me about some of these things, look at deals or if you're doing a rehab nearby and would be open to me seeing it I would be more than happy to buy you lunch and/or get you a beer for your time. I will admit, I don't have that much else to bring to the table as of yet unless you need orchestral/hybrid music written for an ad or something like that.

If you need any background on me, I'm a film/game/trailer composer and am the music supervisor of a trailer music library. Any input would be great. In terms of funding for deals, I don't have any at the moment, but have been saving and am even considering doing hard money loans to really get into the game. I do understand that knowing what I'm doing would be crucial before even considering hard money, but do want to keep my options open.

If you read all that, thanks!

Saw some keyword alerts for Columbus in here. Just wanted to say we've moved into that market this year and it's been great for us. I really dig that market. Prolly my favorite market in Ohio for long term growth potential.

I've seen your videos over the last couple of years, James. Great stuff. I went to school in Ohio and have been in Columbus a ton and love that city. I do think Columbus and the surrounding areas will grow a lot, though the traffic is gonna be bad. Once I get a groove going here in GA, I do want to start things OH. I have to work on getting my Core 4 set (Agent, Property Manager, Contractor, Hard Money Lender/Refinancing Lender) before that happens though. I know you pretty much cover 3 of those core positions on your own in OH

Thanks man, glad you like our videos. I always recommend starting out close to home if it's possible. Good luck down there.

Thanks! Hope to talk more at some point!

0 Votes

Atlanta, Georgia