All Forum Posts by: Brian Sparr

Hi @Kevin Johnston -

Check out city-data.com for the demographic info and FEMA for the flood plain maps.

Good luck!

Hi @David R Miller -

Realtor.com gets its listings directly from the MLSes ... Zillow gets its listings from a mixture of sources.  Most likely, zillow is displaying the price from an outdated source.

I used to work at Trulia in their early days and this was a constant challenge we had ... we'd receive the same property from multiple sources and would need to 1) make sure we recognized that they were for the same property and then 2) decide how best to merge the data from each source when there were discrepancies (which was frequent).

Hey @Scott Peters -

Dry rot is caused by a moisture/water problem ... we see it a lot around sinks and bathtubs/showers.  If you're seeing it on a widespread number of joists beneath the living room, I would guess that you're periodically having standing water in the crawl space.  This could be caused by a few things, but the common reasons I've seen are that the property either has drainage issues or it sits in a flood plain.

If I were you, I'd try to get answers to 2 questions before I would consider moving forward: 
1) are there mold issues anywhere in the property?
2) what's the source of water and how easy is it to correct?

Good luck!

Hi @Suthy M. -

Just looking through your numbers:
  $114k income - $25k taxes - $37k expenses - $84k mortgage = -$32k loss

Even if I'm misunderstanding your numbers and your $37k expenses already includes the tax amount, you'd still be negative by $7k/yr.

In either case, that's a painful hit to take.  Plus, are you sure you can get 3.75% on a jumbo investment loan like this?

Before I drop $400k into a negative cash flow property, I'd look around at some other markets to see what that same money could generate for me...

@Victor Valle -

Knowing what you'd do with the $165k is the key piece ... until you have that identified, we're comparing apples to oranges.

If you're curious what that $165k could get you in the Raleigh/Triangle metro, shoot me a PM - I'm happy to share some thoughts.

Hey @Michael Temple ... as I was writing that up, I forgot that you were doing a cash purchase - so, a lender credit wouldn't be an option. If you were getting a loan for the purchase, though, lenders will offer a credit in exchange for taking a higher interest rate. Since the BRRRR model would have you doing a refi shortly after, taking a higher rate in the beginning doesn't really matter - if you can keep more cash in your pocket, all the better.

Hi @Victor Valle -

I don't think you've given a complete picture to us yet ... my initial questions would be:

1) If you sell and get the $165k, what does the new property look like (as in, cost / location / prop type / cash flow)?

2) If you buy out your partner, what's the $1k/mo cash flow going towards? And please don't say Voodoo donuts :)

3) last but not least, what are your goals for this investment?  Do you need cash flow?  Are you going for capital growth?

Hi @Nathan Auclair -

You say you "offered 7k above asking, minus closing costs" - which, to me, implies you were receiving a seller credit for all of your closing costs.

Are you sure that the $8k was for actual closing costs?  Or, was it simply the balance of your down payment?

When you buy, your money is going towards 2 primary buckets: 1) your down payment and 2) your closing costs.  You can reduce your down payment by either negotiating a lower purchase price, by increasing the size of your loan (although this can sometimes trigger even larger closing cost requirements) or by receiving gift funds from a relative.  As for reducing your closings costs, you can negotiate a seller credit, get a lender credit or choose to forego some of the optional (although highly recommended) activities during your due diligence period (ie, inspections).

Good luck!

Hi @Michael Temple -

I can't speak to the thought process of any of these people making 20 or 30 offers a month, but, here are some things that come to mind for me:

1) these properties that are listed for $50k, are they worth $50k? Will they appraise for that? Will they realistically get an offer in that range from anyone not trying to BRRRR? If they will, as an agent, I am 100% wasting my time - your time - the listing agent's time - and the seller's time by writing a formal offer up at half the value. If your agent is smart, the most they'll do is make a verbal offer at your price ... then, if the listing agent indicates a deal might be reached, then you formalize into a written offer.

2) I'd take a closer look at the rehab costs to try and find ways to shave it down.  If you're planning on doing this multiple times, can you buy some items in bulk to reduce the cost?  Is there a different type of product you could use (ie, wood floors vs LVT)?  Can you work with a different contractor who's willing to take a little less on each job since they know you'll be a repeat customer?  Get creative to get this cost down.  And understand, from the appraisal standpoint when this rehab is done, you will not get a higher valuation because you used more expensive products.  The $10k Viking range is viewed no differently than the $500 GE range - to the bank, an updated kitchen is an updated kitchen.

3) There's no rule that you have to pull 100% of your cash out of this deal after the refi - which is what your equation is currently doing.  Would it be the end of the world if you left $5k or $10k in the property?

Here's an idea for your example property ... take the $30k rehab and find a way to get that down to $25k ... get rid of the $5k closing costs by using a lender credit (ie, take a higher interest rate) ... leave $5k in the deal ... now, your equation becomes: $80k * .75 = $60k - $25k rehab = $35k + $5k (willing to leave in deal) = $40k offer price.  You're still below the ask, but at least now you're in the ballpark.

Good luck!

Hi @Steven Groshong -

While I understand you wanting to stay firm and get your $2500/mo number, don't lose sight of what the current vacancy is doing.

Let's say it takes you another month and a half to get it rented at $2500/mo - that's 3 months total of no income ... but, if you could have rented it on day 1 for $2250/mo, you would have collected $6750 during that same 3 month period.  Holding out for an extra $250/mo will take you 27 months to recoup the lost income.

Rent control and the cap on increases throws a twist into this for you, but I'd be doing whatever I could to get it rented sooner rather than later.

Good luck!