All Forum Posts by: Tanner Lewis

The cash flow on this deal is going to be more defensive, the main ways to make money are through appreciation and mortgage paydown. Once your reserves are higher, you can start taking profits form the monthly cash flow on this deal. 

Dave Ramsey's opinions are better suited for the masses than real estate investors and entrepreneurs. For the masses, taking out debt on liabilities is a sure way to force your way into a bad situation. For example, you can use credit cards for vacations you can't pay for. 

Investors use debt to get into assets that can provide cash flow and/or appreciation. Yes, you do pay interest on this debt, but the returns outweigh the expenses. 

Hey Eric - I'm from Richmond, VA, be happy to connect. I've seen some decent multifamily deals there, but not a lot in NOVA mainly due to the high price points. Have you found any specific markets in which you see good multifamily deals?

Quote from @Bharat Joshi:

Quote from @Tanner Lewis:

100% financing is possible but not practical. Hard money lenders that offer it can do 100% LTC and 70% LTV with a higher interest rate and more points than other lenders. You get looped in, thinking they will fund 100% of the deal. Then they get the appraisal done, and the ARV looks too low, so they have to cut leverage to the 70% LTV loan amount.

An example of this would be:

Purchase a deal for $130k, needs $30k rehab, $200k ARV. 100% LTC is $160k, but 70% LTV is $140k, meaning the loan amount would be $140k, even though they "offer" 100% financing. You would go into this deal thinking they will hand you $160k, and then after two weeks, when the appraisal comes back, you have to bring $20k to the table to close.

To make the numbers work on that deal and get 100% financing, you would need to reduce your reno budget by $20k. These deals are very hard to come by, and even when you do think you see one, the appraisal comes in lower than expected, making you cut leverage. 

Thank you for this. I’ve run into this exact issue where they reduced the loan amount. It seems like I need to be sitting in at least $40k to get started as a new investor or partner up with an investor who has the money to bring. 

Yes, I would put that as a pretty good starting point if you are looking to flip. The easiest way is to bring on a partner who has a lof of capital they are looking to deploy, but I always encourage having sufficient reserves. 

100% financing is possible but not practical. Hard money lenders that offer it can do 100% LTC and 70% LTV with a higher interest rate and more points than other lenders. You get looped in, thinking they will fund 100% of the deal. Then they get the appraisal done, and the ARV looks too low, so they have to cut leverage to the 70% LTV loan amount.

An example of this would be:

Purchase a deal for $130k, needs $30k rehab, $200k ARV. 100% LTC is $160k, but 70% LTV is $140k, meaning the loan amount would be $140k, even though they "offer" 100% financing. You would go into this deal thinking they will hand you $160k, and then after two weeks, when the appraisal comes back, you have to bring $20k to the table to close.

To make the numbers work on that deal and get 100% financing, you would need to reduce your reno budget by $20k. These deals are very hard to come by, and even when you do think you see one, the appraisal comes in lower than expected, making you cut leverage. 

I'm not a fan of wholesaling when you have no money. However, I am a fan of ethical wholesaling. Wholesaling is a great option to diversify your toolkit of potential deal exits if you are an experienced investor, but I think you should always have the ability to flip the deal but decide to wholesale due to some other limiting constraints (e.g., not enough contractors, bandwidth, etc.). By getting a wholesale deal under contract, you are often times getting a seller out of a tricky situation. Maybe they are behind on their mortgage payments; maybe the bank is taking the house in a few weeks, or maybe they have to get a lump sum of money in a few weeks to settle a lawsuit. Whatever it may be, as a wholesaler with no intent to close on the deal yourself, you promise to solve the seller's problems while trying to assign your contract to a buyer without knowing what flippers are looking for, if the numbers work. If there are no buyers, you cannot fulfill your promise to the seller. You waste their time when they could've found a legitimate buyer. This puts the seller in a much worse situation than they started, and this burns a lot of people. This is why most people do not trust wholesalers. Most ethical wholesalers don't have the bandwidth to flip the deal and would rather just assign the contract to another investor in their network. If they are unable to assign, they can buy the deal themselves and still turn a profit. 

Cincinnati seems to have a cult following among investors. I've seen a lot of pretty high-cash-flow deals, and I think the ones that make the most sense are multifamily with 2- 4 units. It is a pretty good market for high-cash-flow properties, and it may even see some appreciation. I would just stay away from deals valued at less than $130k, as you will have difficulty finding financing, as many lenders have a $100k minimum loan amount. You can buy under that limit if you plan to use all cash, and it seems to work pretty well. 

Are you looking to lend your money directly? Or connect people with financing options?

If you want to buy a home and live in it for a few years before renting it out, I will look at low-money down conventional/FHA options; if you cannot qualify conventionally with your DTI, I would look at DSCR loans. Given your goals, the main drawback with these is that you cannot live in the property, so house hacking is off the table.

First step is to narrow down what strategy you want to pursue, then choose the market based on the strategy.