All Forum Posts by: Seth Cunningham

I have been looking into this for awhile now and running numbers on houses I see pop up. Looked at a good amount of houses, but have yet to pull the trigger on one.

Well I am going to look at a house today with my realtor that is FSBO that just had the tenants kicked out and carpet pulled up.

What I am trying to do is have an owner finance where I can put 0% down and use my cash for rehab to increase the value of the house.

The Facts I Know:

1985, laminate wood or old wood floors in living room and kitchen, carpet got pulled up from the rest of the house from what the seller has told us. 

1635 sq ft. on a 0.98 acre lot

Will find out more about condition today, but will need some upgrades in kitchen, new floors throughout, A/C system up to date, roof looks good when I did a walk around. Lots of DIY landscaping; High grass, pressure wash deck and fence, replacing some broke boards on fence.

Depending if I find anything alarming today, I am thinking ~10k, Most I want to spend is 15k for a rehab.

He is asking 149K (doing more research, but I think I can get it lower for what it is. I am having realtor get some more ARV comps one that would be a little nicer than what I would make it is 175K. Other houses that have sold that I know of without her are around that range also and similar appearance.

Mostly what I am looking for is info for the owner finance. He says he has a small loan left, will find out exact number today, and would be possibly willing to finance it. As I understand from what I read the best option for me would be a bond to deed and treat it as a regular loan through him. Then after I put in the repairs and let it season, would get it appraised and put in a conventional mortgage. Hopefully the market holds and if I can get the house for under 140K that will give me my 20% equity when I refinance.

What type of interest rate is typical with an owner financed loan?

If his existing mortgage is low, then is it worth the risk of the loan being called? If that happens, what is the worst that can happen to me if he can't write a check for it? I am assuming that is putting my rehab money I invested into it at risk, anything else and how would I salvage it if this happen.

Anything else to watch out for?

The initial numbers I have ran, assuming he will accept an offer to buy it for 130-135K, that would give me a decent amount of un-captured equity on the back end, and with rents for what would be improved to be around $1400 and assuming 4.75% (1% above current market) 

My cash ROI is 28%, cash flows $150-170 a month with estimated expenses( I want positive cash flow, but interested in equity capture so am acceptable with anything +$100) and Cash Flow / Mortgage is 124% with my doing my own property management.

My backup plan is a hard money lender that I am going to get in touch with after I have better numbers and pictures of the property to present him.

My last attempt would be to go to a private investor that I know. He would most likely give me a loan with no problem, except he is on the older side and has had issues recently, but is back in good health now, He normally writes his kids (spoiled 40 yrd olds that I do not trust) into the loan as their inheritance. Is this something that can be managed by the mortgage contract and if I plan on refinancing out after a year would it even matter as long as he resumes to stay healthy. I have not talked to a real estate attorney on this subject yet.

Any help appreciated on checking my numbers and financing, if you need more info and as I get more I will update.

Hey everyone, thanks for the reply. I haven't been home yet to see anyone and don't want to use my work phone out here for personal calls, so I haven't gotten any farther really. The broker that has it listed doesn't have a website or email that I can contact him/her with, so no telling how much I will actually look into this thing once I get home. If it is still around two weeks from now when im back from my brothers wedding I might try giving the broker a call and see whats up with this listing and the repairs that it needs.

I found this 4 plex near my market while looking for deals to practice on and, if profitable, to move on to the next step.

Property is a single story 4 plex, build in 74, and is located in a C neighborhood most likely. All 1 bed 1 bath, no covered parking gravel/grass parking . Definitely has some repairs needed, but not sure on the full extent. Looks mostly like it just wasn't taken care off, I looked up taxes and is an out of state owner. Im offshore working so I cannot go check it out to the extent that I want to yet.

Here are the numbers,

Asking 139,000 (down from 179,000 recently)

Current rent with 3/4 full is $1849 (650,600,599). With minimal upgrades inside I should be able to get 650 out of fourth is not a little more, depends how i spruce up the place. Only rents I could find were being listed at 800-850 for a couple hundred sq ft more.

So lets say rent: $2450 / mo

Noi: $1225 with 50%, I would manage though so really 40% at $1470

If 5% down piti about $1100 leaving me $370 if I manage.

After that I don't know how to estimate ARV for equity or possible hard money/private if I could find it. If going off listed at 139k I get a cap rate of 12.69 with 40%. Looked at 2012 data I found medium cap rate is for apartments ( all sizes is 7% high 12, low 4). Taking that 7% and my noi yearly of $17,640 gives me a value of of 252,000? Unless I use just the 3 rented giving me 190k. Makes more since. I know I need to try and get a realtor to try and see if there are actual comps, I'm just playing with numbers.

Looks like it may need a new roof, can't tell by pictures, so maybe 8k there? Basic washer and dryer in empty, unless I have renter provide, then just some basic cheaper floors/ paint and possible ac depending on age.

If it doesn't need a roof right away im thinking $2000, to get empty unit rdy, and upgrade others later on since they have tenants.

What do y'all think? Would really like some feedback even if negative. I'm not diving into this or anything just running numbers and if I happen to find a really good deal try to pursue it or figure out how to wholesale it to someone. Would be able to get a better look once I'm back home in the area and saw the empty unit, but would only do that after hearing from people on here first since I haven't made it to my local reia yet to network.

Well finished my worked a 12 hr shift, mostly looking this up, I'm off to bed.

Thanks ahead for any feedback,

Seth.

Unfortunately, I won't be able to get over there tonight @Braden Smith . I will try to make some this summer unless I am offshore working.

Been signed up on bigger pockets for awhile now to educate myself and network. Well I haven't been networking very well haha, so I am starting now so I can finally get this investment vehicle rolling.

I am currently in Mandeville, LA (just north of New Orleans) and have done a lot of self education (both online and books) and taken one weekend class. I work offshore so when I am home is random so haven't been home or made the time to drive 45 min and join the local REI group.

What I am currently looking for from this community besides continually educating myself is a Hard Money Lender for Louisiana that does ARV (After Repair Value).

The type of investments I am looking into are Single Family homes in pre-foreclosure or just in a weak state that I can capture some unrealized equity in through fixing it up, then converting my hard money loan into a conventional.

Appreciate any tips and advice,

-Seth Cunnigham