All Forum Posts by: Spencer Cornelia

@Casey Powers and @Brandon Carriere I sold this property yesterday for $310k cash.  $5k concessions to buyer for repairs.

I had a backup offer for $330k.

In the end, we all were right.  I didn't have the funds to put ~$3k into it to have it sell for $330k but the backup offer shows I would have gotten it.  That's $70k more than I paid for it just 8 months ago.  So in the end (as always) I was right.

But, I must admit, this property didn't cash flow at all.  It was a headache, had multiple evictions, and non-stop repairs.  We closed yesterday and my property manager just called and said there's another leak.  So you're both right that these 4plex are not nearly as attractive as they seem on paper.

It was a negative cash flowing property.  The property insurance was $1000/year for previous owner, but was $3180/year for me.  That wiped out the tight margins.  Additionally, there were more repair expenses than anticipated.

It turned into a good deal because of the appreciation of Vegas.  I got lucky I'll admit.

I definitely will not be buying in an area like this again unless I get a HUGE discount.

@Kent Caldwell you mentioned that you were looking into small multi's in Vegas.  Tread carefully.  Casey was right - these buildings have years of expenses waiting to pile on the new owner when they least expect it.  BTW, why haven't you showed up to our monthly meetup? 

@Warren Sawyers I haven't seen anyone mention this: look for seller financing options.  My first deal was a 4plex with $20k down and $260k purchase price.  I was able to purchase the property because of seller financing.

Another option is a subject to deal with $20k down (or pay off back-taxes, repairs, etc).  Lease Purchase is another option - look for houses that have been sitting on the market for 100+ days and call the owner (or owner's agent).  Ask if they'd be willing to get creative to allow you to buy the property with only $20k down.  Remember, all you need is one 'yes' and you're in the game.

@Jeff C. I'll eat my words.  I've been putting a lot of thought into my comment recently and believe I'm wrong.  An A+ contractor wouldn't ask for as much money upfront.  I still believe you should pay for materials and/or a small draw upfront to begin labor.  But I think a true A+ contractor would finish jobs much faster than mine.

Since I'm new to this game, do you find solo contractors and hire them or do you find reputable companies with a big online presence?  In the next 24 months, I'll more-than-likely be in position to start taking on 3-4 at a time so I'd like to start networking with the best contractor options I can find.

@Janina S. I'm in Cincinnati and the lender is Cincinnati/NKY only - Greenleaf Funding

@Matt Schultz Hard money lenders will typically lend up to 70% ARV for someone doing their first flip so it sounds like you should be fine getting full funding for your property if your numbers are accurate. I'm sure they'll want to see some skin in the game so maybe 10% of purchase price as the down payment and they'll loan out 90% on purchase and 100% of rehab. In my experience, I've seen most lenders lend out 100% of rehab.

They will typically hold the rehab budget in escrow and will want to see work completed before releasing funds.  For example: they will likely provide line items for all parts of the house that need work.  As you complete the line item, you will request a draw, they will send someone out to ensure the work was completed, then release the funds for the completed line-items to you.

When the property is done, you simply go to a lender and ask for a refi loan into a 30 year mortgage.  The new mortgage will pay off the hard money loan (allowing you to sleep at night) and you'll now have an investment property with a good bit of equity :)

@Nicholas K. depending on what market you're in, finding BRRR deals using hard money is going to be very difficult. Hard money is very expensive and the points, fees, and monthly holding costs drive up your "all-in" cost. In order to do a BRRR, you should aim to be at around 70% all-in, which counts purchase price, rehab, points/fees, and holding costs. AND in order to refi into a long term note, you'll need cash to pay for closing.

Hard money serves its purpose - it allows guys like you and me access to a lot of money QUICK that we can use and make money with. My first two flips were funded with 15% interest rate and 3.5 points. Very expensive. My only real option is to sell the house as all the costs have driven my all-in number to 75% LTV and the other 80-85% LTV, which would mean I'd need to bring a lot of cash to close in order to BRRR.

In my relatively beginner viewpoint, I think you should focus on flipping and selling the first couple properties in order to get cash instead of doing BRRR.  Once you can get better terms from your lender AND/OR you can pay all cash for purchase and rehab, then you should expect a lot better chance at completing a BRRR.

@Greg H. these fake accounts are so obvious to spot.  They have under 8 posts and no votes, no picture, and a clear agenda.  They are some sort of bot that positively talks about a product, seminar, or guru after negative criticism has been given.  Susan May is just another example.

@Darren Koenenn what immediately comes to mind for me is insurance costs.  any idea what insurance costs are?  Given what happens to properties during weather dilemmas, is there a potential issue with the property getting damaged due to weather? (you never specified location)

Will the HOA allow weekly rentals? Will you have access to a great property manager?

To me, a lot of questions should be answered before even looking at numbers of a specific property.

@Jay Dang "Commercial loan - 20 year amortization, 15 year loan, 10 year fixed 5.36%"

Commercial loan vs residential loan. Commercial is typically used with 5+ unit purchases or when an LLC is used to purchase. In this case, it appears commercial was better as he could wrap 4 different properties into one note.

Amortization is the length of time it takes to completely pay off a loan.  So his monthly payments are based on the loan being completely paid off in 20 years.

15 year loan signifies that there will be a balloon payment at year 15, which means the remaining balance will be due on that day.  This typically means that the investor will have secured another mortgage and will refi into the new mortgage which would pay this current one off.

10 year fixed indicates that the interest rate will be 5.36% for 10 years.  At the end of 10 years, the interest rate will likely change.  I believe at this point it will be based on the current lending situation in the market.

@Greg Miller Looks like a solid buy and hold deal.  Congrats.  Feel free to fill in anywhere above if it wasn't correct.

@Jay Hinrichs exactly how I see it.  I'm just getting started but on the 4 deals I'll be selling this year, I'll be paying around $30k on seller's agent fees ONLY.  Moving forward, that will be an additional $30k profit on the deals I would be doing anyway.

Biggest reason to get your license IMO.  And the risk reduction of making 3% on sale AND buy no matter what so even if the flip breaks even, you'll still profit.