All Forum Posts by: Sarah Linkenhoker

Hi Justin,

My husband and I just attempted our first BRRRR in the Bozeman area. We bought the property this summer with the plan to convert it to a duplex. We bought the property for $265k this summer and are currently in process of renovation. Our original plan was to convert the property to a duplex to maximize our cash flow, however we ran into issues on this approach with the appraisal. There just aren't enough comps for multi-family in the area to drive the appraisal price we needed to cover the remodel and pull our money out, it also pushed the loan price to a point it would barely cashflow. We decided to keep it a SFH and will sell it at the beginning of the summer.

I've been watching the market over this time and I think there are a few issues with BRRRRing here right now: 

1. It's really hard to get a good deal on anything. Maybe depending on your price range you could find something less competitive? We have friends trying to buy in the 350K range for the last 4 months (mostly Belgrade or west of town) with no luck and I think that competition is pretty steady all the way up to the 500-600k range in Bozeman proper. Like you noted, there aren't a lot of fixer-uppers and the ones that do exist are in really desirable parts of town so they sell anyways. 

2. Reno costs in the area are very high. We've found a lot of contractors who just throw out numbers to see if they will work. We got a quote for $10,000 to pressure wash and paint a large deck. We've been able to keep our current project in line by having relationships with the contractors, but you will still end up paying a plumber or electrician $100+ per hour if you don't know them. I know friends who have had a hard time finding contractors for small jobs, so just finding someone to do the work could also be an issue.

I'm not sure outside of Bozeman. We own three properties between Three Forks and Bozeman and are considering pulling the equity out and switching to a market where our equity will go further. I'm trying to look into some of these other semi-local markets as well so I'm curious if you find anything.

Thanks @Patrick Britton. I definitely don't have regrets about buying the property. We have learned so much over this process and I think we are going to launch into the next one with a bit more knowledge. 

I almost didn't post this, because I was 90% sure we were going to sell, but good to hear that others aren't seeing something here that we aren't. 

Purchased a property a few months ago, this was meant to be our first official BRRRR but appraisal came in lower than expected and we are wondering what to do.

Purchased the property for $265,000 (This included $212,000 from the bank and about a $60,000 private loan) The home is a SFH that we have speced to convert to an up/down duplex.

The appraisal came back at $421,000 (which was for a SFH with an ADU). This means that we've got about $124,000 in remodel budget from the bank to work with. Based on the estimated project costs, $124,000 is at the lower end of our budget, I think we can do it, but there will not be much wiggle room.

Let's say we can complete the project in that budget. That means we are sitting with a loan from the bank for $336,000, but we need to pay back our private lender the $60,000 out of our own pockets (potentially a refinance of another property). 

If we keep the property, we are estimating the total monthly income from both units to be $2750. The mortgage would be $2140+insurance+tax+buffer = $2650. So we are looking at $1200 in cash flow annually. 

Other option is to flip the property. After talking to our real estate agent, I'm thinking we will be able to clear $500,00 with potential to $550,000. 

As much as I want to be a buy and hold investor, it seems like there has to be a better deal out there. We are leaning towards selling, but I want to know if anyone has a different take.  

Spoke with my lender on the current property, thought I would post his response here. 

He said that since I am the only one on the current loan, if we pursue the second loan under just my husband's name then there shouldn't be any issues with the underwriting of my current loan. So the plan will be to have him apply with our partner and leave me off the loan. 

@Mason Hickman @Chris Svendsen

Thanks for the challenge on those numbers. I probably am underestimating them, I was assuming that they would be low after the rehab. Also running my refinance loan at 4% for a loan of $280k, keeping PM costs at 0% because we self manage our properties (also maybe underestimating my own value). 

The market I am in is just really rare to get any house under 300k and to be into a 5 bedroom for around $325k seems like to good of a deal to pass up. But, to @Mike Dymski's point, maybe flipping is the answer. I will look more into that as an option. 

We have our first potential BRRRR property under contract. Yay!

Wondering if I can get some feedback on whether this is something you would pursue? I realize that everyone's goals are different, but we are looking to start building our wealth and real estate portfolio. Here are the details.  

SFH

Purchase Price: $265,000

Estimated Repair Costs: $50,000

ARV: $400,000

Total Cash in Before Refinance (including loan costs): $324,000

Total Refinanced Loan: $280000

Estimated Rental Value: $2000

Estimate Monthly Expenses (Insurance/Tax/Utilities/Vacancy/CapEx/Etc) : $1775

Monthly Cashflow: $225

Total Cash left in the Deal: $44000

Cash on cash return: 6.10%

Total Equity after Refinance: $120,000

I've got this feeling that this is just close to being a good deal, but also close to being a bad deal. Any feedback or advice on what to watch out for in this potential transaction?

My husband and I just went under contract this week on a proposed BRRRR. This was done with the verbal agreement of a partner that we have been talking with to help with financing.

Since going under contract, the partner has gotten cold feet, but is still willing to help out. Previously, the plan was to keep the property under a shared LLC with him at the end, but now it doesn't sound like that is going to meet his long term goals. He willing to help us finance the project, but not necessarily be in it for the long run.

In terms of the options for financing, he is willing to help us for the down payment on the project, but looking to leverage his relationship with a local bank where we have discussed a construction loan to handle the rehab costs. 

I'm feeling that the financing is going to be very convoluted with the way this is working out. Can he take the loan out without being the owner of the property? Or can we put him and one of us on it and then refinance at the end to just be in one of our names? I honestly think for us it will work out better in the end to own the property without a partner just wondering how to structure this up front becuase we won't be able to fund the project without him.

Sounds like two votes for following up with the first lender! That I can do. 

@Erica Larence-Penna  Based on my conversations around the first loan, I don't believe there is any need for my husband to sign that one, so I don't think it would go both ways. I have thought about making the application in just his name, but I wasn't sure if that would cause issues  when they go to look at our joint bank account? Who knows what those underwriters are up to. The second lender is aware of this, but its a unique situation with a small bank and we are working with a partner that has good relationships there. 

My husband and I are currently under contract on two properties. 

The first will be our primary residence. The loan is currently in process, appraisal is done but not back yet and I was told it should be headed to underwriting this next week. Closing date is July 22nd, so in 28 days. This financing is being done under my name only. 

The second property is just under contract and we are exploring our financing options. Close date is July 30th. This property is a BRRRR deal that we are looking at financing via a construction loan.

My question is, if we start pursuing this second loan, what are the chances that it screws up underwriting for the first. Is there going to be red flags if they see that we are looking at a second loan? Or is it only the second loan that is going to be impacted? Can I ask my 1st lender this question without getting in trouble?

@Shiloh Lundahl 

1. How long are you going to want to live there? We are thinking a year, or at least through the rehab. 

2. Converting to a duplex may have issues unless it is zoned for more than 1 dwelling. Unless you are just adding a guest house or renting out the basement or something like that. We are going to confirm this, but its outside of town and we aren't aware of any covenants

3. What is the price of the house? Asking is $299,000. Our numbers put our offer around $260,000

4. What are the estimated repairs and what is the estimated ARV and the estimated length of time for the rehab? Estimated repairs are $70,000, estimated ARV $450,000, estimated length of rehab... this is the part I am less sure on. I think we could get one side ready in 6 months, but both in 12 months fairly safetly

5. What is your credit like? Are you prequalified for a loan for the higher ARV? Both my husband and I have good credit, I  think I am 770 and he is somewhere up there as well. I'm not prrefqualified for that.. and not sure what considerations I need to make there?

6. Do you have the ability to buy the house in just your name or a spouse or significant other’s name? I think we could potentially but it in just my name, but need to work that out. I make around $95,000 and my husband didn't report much last year because he started a business so it would mostly be based on my income anyway. 

7. Could you use 0% interest credit cards that are just in the name of the spouse not getting the long term financing?

Interesting consideration and something that I hadn't looked into. I will do some Google-ing, but let me know if you have any recomendations.