All Forum Posts by: Steven Goldman

What are most peoples terms with contractors regarding payment plans/schedules? Obviously they vary, but from an investor side of the table what do people shoot for?

Thx

I advise reading J Scott's Bigger pockets book on estimating rehab costs. He covers the customs on timing of payments. I find that if you prepare in advance a good scope of work and a budget and payment schedule with the contractor you reduce friction and risk. In any event if you hand a contractor a big junk of money at the start off the job you are screwed from that point on. I learned that one time the hard way. The reason a rehab lender wants a draw schedule is it insures the work is completed before they release the fund's. If its good enough for the lenders than it should be for you as well. I wish you luck!

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Quote from @Brady D'Hont:

Hello,

What are most peoples terms with contractors regarding payment plans/schedules? Obviously they vary, but from an investor side of the table what do people shoot for?

Thx

I recommend the bigger pockets book on Rehabs by J. Scott. he talks about the appropriate way to pay contractors for work performed. I must say I never let a contractor or sub contractor get so far ahead of his work that if he does not complete I am stuck. That happened to me one time and will never happen again. I advise a good scope of work and payment schedule in writing in advance of the commencing the work. It reduces friction with the contractor and risk. If you hand a general contractor a big junk of the budget up front you are screwed form that point forward. I like to have the materials or appliances on site before I pay for them. Good luck.

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Quote from @Scott Russell:

I already have a renter willing to pay rent. I was gonna pull enough cash out to where the rent will cover the mortgage amount? (do a cash out refi for my cost and leave profit in the house)

I haven't dropped the price again. Does it look bad to repeatedly drop the price on a house? I have dropped it 3 times in the past three months. If I do a big drop will a buyer think something is wrong? I have about 35k of wiggle room until I break even.

I would rent the property out and refinance it. If you slowly drop the price only the bottom feeders will show up to buy it. If as you say the neighborhood will start maturing in 2-3 years than cash out and let a tenant carry the property until it reaches a higher value. Keep in mind you may need to invest some money in the property to get it ready for market in a few years. Good luck!

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Atlanta, Georgia

Quote from @Sharma Parth:

Hi guys - looking to get into the Pennsylvania market for my first BRRRR deal and was wondering if anyone has good leads/contacts/groups to get alerts on them I am looking at something within the $120K-$140K range for purchase price + repairs.

Would love to connect with local sellers/investors + agents/companies who are offering inventory for such deals.

Thank you!

Check out my most recent project. It was a little more expensive all in than your price range but is typical for a smaller investment project. Unless you go into the Northern tier of Pennsylvania your budget is a little light. Feel free to reach out to me.

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Investment Info:

Townhouse fix & flip investment in Upper Darby.

Purchase price: $88,000
Cash invested: $35,000

This is a 1100 square foot row home in Upper Darby. The property was acquired form an estate while it was in mortgage foreclosure. Exterior rehab. windows, electrical service, concrete and and paint. Interior rehab includes, kitchen bathrooms, flooring and carpets. New breaker box and some rewiring. Time to completion 120 days.

2 Votes

Alex Gomez tell him Steve Goldman from G2loans sent you. Check your messages.

1 Vote

Quad Cities, Illinois

Quote from @Jose Gonzalez:

Wanted to know if I can withdraw money invested into a fix and flip to fix the property?

Ex I invested 30K into a home. This money was income I had earned and had already been taxed on. I just want to get the money back that I used to fund the properties rehab to fund my next flip. The profit that was made is not being moved.

Hi Jose, you can take out equity or other money available from your investment property with a HELOC.

Home equity loans, home equity lines of credit (HELOCs), and refinancing all allow you to access your equity without needing to pay taxes. In many cases, the interest you pay on your loans can be tax-deductible.

Good luck! Most HELOCS on investment properties are limited to 80 to 90 LTV..

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Denver, Colorado

Quote from @Donna Coulter:

Hello Bigger Pocket Community, I live in Detroit, and wondering what investors or rehabbers are paying, on average, to rehab homes these days?

Good morning Donna: I completely agree with the posts that encouraged you to understand the actual costs of the components of you particular rehab. Having said that I have found that the costs of rehabbing a 1200 sq ft. row home needing medium grade fixtures to be around 60-65k. However, you started discussing roofing members and other more intensive construction. Typically a rule of thumb range is $100.00 dollars a square foot to $300.00 dollars per square foot depending on your grade rehab. In many cases those numbers do not make any sense. We hire our own subs and perform as much of the work as possible. You should get a scope of work form and do your homework to figure out the actual costs for each job. Good luck!

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Detroit, Michigan

Quote from @Joseph Taylor:

Hey Community!

I am looking at buying my first investment property. The property is in San Diego, CA. I am wondering if you can help me figure out the process of my first flip.

I’m a licensed general contractor so I have a very good grasp of what the construction/rehab process will be like as I have been the contractor for 75+ Flips.

There are two main questions I have with the process. Both questions revolve around the way that my money and loans will work. I will purchase this property using hard-money. I plan to keep and live this property.

First Question- Who and how do I use to con vert my hard-money loan to a mortgage? Which bank or institution can help me with this?

Second Question- How can I get at least my down payment back out of the deal?

Here’s the scenario:

Purchase Price:$520,000

Out of Pocket= Down Payment-18% ($94,000) / Closing Cost/Fees-$110,000

Construction Loan-$60,0000

Total Loan Amount-$468,000

@ 11% Interest= $4455 Monthly Payments

Estimated ARV-$675,000

Please let me know if all of this looks correct and how I can go about getting at least my $110,000 back out of the deal when converting to a 30 year mortgage.

Also, any advice would be greatly appreciated!

Thanks so much in advance!

Joseph

Hi Joseph, congratulations on your first property. If you are BRRRRing and keeping the property than your refinance will be 75 percent of the appraised value of the improved property so long as the debt service coverage ratio supports that loan amount. Usually a 1.0 DSCR is necessary to get a reasonable rate on the refinance. To understand your loan amount you must know the fair rental value of the property. If you are flipping than purchase price-loan payoff and settlement charges equals proceeds. You should use a flip calculator to see what your likely proceeds will be after all expenses. Good luck!

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San Diego, California

Quote from @Austin Ralls:

My main strategy has been fix and flips and I've built up enough cash and relationships with private lenders that I want to start getting rentals added to my portfolio and investing strategy. With that said, refinancing the loan is bringing a whole new vocabulary and I'm wanting to get some clarity even though I know this will be looked at as a dumb question.

When I finish with my remodel and I'm going to refi the property and I want to do a cash-out refi, will they give me cash proceeds if I refi at the 75% and its more then what I owe my HML?

So if I have $65,000 invested in the property and its arv is 100,000 will i be able to get that additional 10,000 in cash proceeds as part of my "Profit" or is it only allowed to cover what other loan is on the property? Again, I know this is probably a dumb question because the answer is within the question, but I want to get clarity before I just push all in on this model.

Thanks!

Congratulations on successfully flipping! BRRRRing is a different animal. In todays market when you BRRRR you can expect to leave some of your money behind in the property. The higher interest rates and lower LTV (75percent) have made a cash out refinance on a BRRRR more challenging.

Another limiting factor on obtaining cash out on a BRRRR is the rent. You rent must support the payment including principal, interest taxes and insurance. That is the debt service coverage ratio. Debt service coverage ratio is determined by dividing the monthly rent by the payment including principal interest taxes and insurance. A minimum of 1.0 is usually necessary. the better the debt service coverage the lower the interest and the higher the loan amount.

So do not start BRRRRing if you do not have enough money to leave some of your investment behind in the property you are refinancing. On occasion you will hit a home run but do not expect to be a 50 home run hitter. Remember you will not only have the purchase price, lenders fees carrying costs and settlement charges from the purchase but you will have also have lenders fees and title insurance from the refinance. Good luck!

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Kansas City, Missouri

All Forum Posts by: Steven Goldman

Steven Goldman has started 15 posts and replied 503 times.

Post: Payment agreements with contractors

Post: Payment agreements with contractors

Post: Fix and Flip - Need advice keep or sell

Post: Suggestions for good markets/town/neighborhood for first BRRRR deal in Pennsylvania?

Post: 146 Normandy drive Upper Darby PA fix and flip

Post: Insurance Recommendation for Flipper

Post: Can I withdraw the money invested into a fix and flip?

Post: Average rehab cost

Post: First Investment/ Flip - Loan to Purchase Process

Post: Cash-out refi details