All Forum Posts by: Steven Goldman

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!

0 Votes

Kansas City, Missouri

Quote from @Nathan Frost:

Hi, I am looking at a deal where the purchase price is at 70% or less the ARV. How could I get with the bank and get this property with no money out of pocket or very little?

Hi Nathan: You need to find a JV partner who has the cash for the down payment. The other alternative is to find a private lender who is willing to give you a bridge loan on the purchase at 100 percent financing. You can then get permanent refinancing at a later date. Otherwise, you need some money to make this work!

0 Votes

Wichita Falls, Texas

Quote from @Ben Aaron:

I hope I understand your questions, I will base my answer on what I am doing.

I'm using a hard money lender for the purchase + rehab costs. For rehab, I sent him SOW with the budget and what I'm going to do.
On the closing(using your example) it will show 60K for the seller and the additional 20K will show on the buyer as a credit( Will not receive it), this money I will get back after paying it and sending the lender construction draws. I'm using 0% APR for 12 months cards to fund it and helping my clients get it as well, After that once I have my tenant moving in I am doing the refinance 70% from ARV of 120K = 84K like that I'm paying back the hard money lender and I will pay the card and close the balance of the card.
Hope it answered your question

Just a word of caution about the plan to use your credit cards for funding. Your higher credit utilization will crash you credit score and increase your permanent mortgage interest rate. Be careful.

1 Vote

Quote from @Cory King:

@Patrick Goswitz Depends on the contractor. All of my work is a material plus labor type of payments so I'm not paying a contractor a premium for buying the materials. Some will float the cost themselves, but you've gotta also be quick to pay them draws on time so they can pay their guys and keep it going.

Cory points out that their is more than one way to execute. One of my friends follows this template and is very successful. I think the most important consideration when entering into a relationship with a contractor is your need to control costs. All of you interactions should be viewed through that lens. Whether you use a fixed price contract, a labor plus materials approach or, have a contractor as your partner. You can not control the costs if you are not familiar with material and labor prices. Accurate and controlled construction costs together with savvy buying equals success. Know your costs and your market! Both current value and after repair value.

1 Vote

Knoxville, Tennessee

Quote from @Elijah Therrien:

I recently bought a 4 bedroom/2 full bathroom row home in the Overbook area 2 blocks from Saint Joes University in Philly, PA, with a full finished basement with a third full bathroom plus garage on this level. I am planning on renting the 4/2 on the upper two levels and living in the basement. I am debating turning the oversized garage plus a little of the other finished space into 2 bedrooms (walkout basement/garage so both would have windows), or leaving it unfinished as a garage. There is enough space either way for me to live so not worried about the livability, more considering what will be worth more when I go to sell the property in 5-15 years. I am very handy and would do the garage -> 2 bedroom conversion myself and would cost maybe $5-10k, obviously keeping garage as is would be free. Parking is also pretty easy on the street and the driveway has 2 parking spaces.

House technically is all attached so when I sell it could also leave it separated as two units (illegal, but with variance is allowed in zoning if I put the hassle in), or open it up and make it all one unit again. I plan to leave the staircase, just adding a wall to separate that could be easily removed. So house in the end could be: duplex (4/2 + 2/1), duplex (4/2 + Studio with garage), single residence 6/3 without garage, or single residence 4/3 with garage. I am trying to decide which would make the most financial sense. Thoughts or things I might not be considering?

Thanks in advance!!

Jaron congratulations on your acquisition! If you can convert to a legal duplex and the rents justify it I would consider it. With St. Joes around the corner and their lack of upper class housing it would be a good college rental. If you do a legal conversion you will have better options on the back end. The City of Philadelphia can be difficult if you get caught wit ha illegal conversion by zoning or L & I. You should also talk to your insurance agent as a illegal conversion might create insurance issues should something go wrong. Good luck!

0 Votes

Philadelphia, Pennsylvania

Quote from @Jay Lee:

@Matthew Crivelli @Steven Goldman @Peter Mckernan @JD Martin
@Chris Seveney @Ben Aaron @Alan F. @Account Closed @John McDonald @Nick Dallaire @John Clark

Thank you all for your help! Do any of you have an attorney in mind for this situation?@JD Martin

Where is the property located?

0 Votes

Quote from @Elly Manuel:

Greetings to everyone, What are the best states or cities to do the Brrrr method with greater cash flow and appreciation?

Hi Elly, Sarah's list is accurate. My humble advice is to pick a area close to your location and search for undervalued or deferred maintenance properties. The city or neighborhood is not the main issue. It is finding a property that you can purchase at a deep discount and then add value. If you are not experienced at BRRRRing you should limit your search to a location within your footprint. This allows you to actively manage the project and learn from your participation. You can branch out after you have some experience.

3 Votes

Hi Sino, I am an investor, rehabber and mortgage broker in the Philadelphia area. The City of Philadelphia is not landlord friendly. It is also very difficult to navigate the Licensing and Permit offices. I prefer the surrounding counties many of whom are more landlord friendly and have more reasonable Licensing and Inspection. I buy in Delaware County and I would be glad to share my investing experiences over the last 30 years in the greater Philadelphia area.

1 Vote

Quote from @Jay Lee:

I'm investing with an equal partner and unfortunately we're defaulting on our hard money loan because we don't have the money to pay it off and we won't be able to sell the home by the due date. A contractor also put a lien on that house. What would be the impact on my credit and would the lender be able to force us to sell our personal real estate if we are personally guaranteeing the loan? Any advice would be greatly appreciated. TIA.

Most lenders want to resolve the problem and not foreclose. The contractors mechanics lien will be discharged if a foreclosure occurs. If you personally guaranteed the note than the lender can choose to attempt to collect a deficiency based on the foreclosure laws of the state where the property is located and or the language in the note or mortgage. My advice is speak with a lawyer and follow the lawyer's advice. In the meantime let the lender know you are having a problem and see if you can work it out between the lender and the contractor and avoid further legal hassles. A foreclosure on a property owned in a LLC may or may not show on your credit report. It still best practice to try to resolve the situation you created. Good luck.

2 Votes

Wow, I do not even know where to begin in response to the varied answers you received. If the owner of the property is deceased than how you acquire the property is controlled by the probate laws in the owners location at death. My most recent property was an estate property. We located the decedents wife only to find out they were divorced before his death. We then located his children. If the owner died without a will than all of the potential heirs must agree to sell the property. If the owner died and left a will than it is the executor decision to sell the property and convert it to cash. Either way an estate most likely will have to be opened in order to convey title. Some of the issues you may find yourself dealing with are unpaid municipal charges, taxes and judgements against the Property or the decedent. I had to negotiate all off those issues with our most recent property. It took three months to resolve those issues before we could write a contract and close on the property. The benefit of navigating those waters is we purchased at a greatly reduced price. Good luck.

0 Votes

All Forum Posts by: Steven Goldman

Steven Goldman has started 15 posts and replied 514 times.

Post: Cash-out refi details

Post: Buying a home at 70% the ARV or less.

Post: Delayed Financing with Rehab cost included (BRRR method)

Post: Purchasing Material For Contractors

Post: Oversize Garage or 2 Bedrooms? Overbook Student Rental Area

Post: NEED ADVICE! Unable to pay hard money loan

Post: I’m new investor

Post: Investing in Philly for beginner.

Post: NEED ADVICE! Unable to pay hard money loan

Post: Vacant property of deceased owners