All Forum Posts by: Tim Broxholm

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $85,000
Cash invested: $50,000

2500 sqft craftsman 3bd 1 ba on main level with a 2bd 1 ba MIL in basement. The home had some structural issues and we got a pre-bid from a contractor and factored it into the numbers. We will be all into this house for about $130,000 and flipping it for $170,000-$180,000. The property will have two key Target Markets: A house hacker as bottom unit could be a great rental, Air BnB. A family who wants seperate living space (MIL).

What made you interested in investing in this type of deal?

Great floor plan, great margins, contractors, inspectors, who came by kept saying if I passed they would take it.

How did you find this deal and how did you negotiate it?

MLS, with my realtor

How did you finance this deal?

Private money

How did you add value to the deal?

Played the Maestro. Built the team, created win-wins for everyone in the value chain.

What was the outcome?

TBD

Lessons learned? Challenges?

On structural you can have the contractor look, but the real decision maker is the engineer.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Agent

@James Roberts Both folks are individuals that I've had relationships with for quite sometime.  One is with Caliber the other is with a community bank in Montana (where I am from and where my investing is focused). 

The big key for me was to run the scenario with my banking relationships ahead of time to ensure they'd be able to service.

@Ryan Keenan HUD refers to the Federal department: Housing and Urban Development. In this case we are referring to the HUD Settlement Statement, which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.

@Alexander Felice

@Alexander FeliceJust want to say really enjoyed your EP of the podcast. Your model is one I am working on building in Montana. I've got a property, I just got under contract for $85,000. I'll be using private money to fund the acquisition and my HELOC to fund the rehab $40k. The ARV should be in the $160-$170k range and should rent for $1600 (SFR that is an up/down).

I was trying to  figure out the mechanics of the process of the delayed financing and who to communicate with to get everything on the HUD1. 

I greatly appreciate your response and help in what steps to take! 

I also read through the discussion forum for your episode and saw some of your responses, and followed up with two different lenders, and at first they said no, but then I sent them the Fannie guidelines and the link to your Episode, and got the green light from both of them!

Thank you again for sharing your wisdom! 

Hi Wayne, can you clarify what doesn't seem doable? In EP 301 of the Podcast, Alex Felice, discuss the concept and that he has done the delayed finance exception. Here is what he said in the podcast:

Alex: I got all my money back by 6 months later and then I found out about delayed finance and then I did 4. It takes me 8 weeks to do a Brrrr now."

Alex: So you close in the house 35 thousand dollars, the hud says 35 grand so when you go to get a loan even if you use delayed finance they’re going to say you can pay a 100% a hud or 75% whichever ones less. So the house appraises for whatever and I only paid 35 grand so you can only get 35 grand. That’s what everybody doesn’t like about delayed finance. You can only get out what you paid for the house.

So what I started doing was when I got the hud I went to the title attorney and I just said I’m going to add some stuff to that do you care? No we don’t care, why would an attorney care what’s on the hud? They don’t care. So here’s an invoice for 3000 dollars for my contractor, here’s 700 bucks for my insurance, can you add to it? Sure, now the downside is you have to pay for all of it upfront and they’re going to Escrow it to the insurance, they’re going to escrow it to the contractor and you can set it up, they do disbursements or what not but now the hud says 66 grand. And so when I go to the lender they’re like oh 100% a hud, we’re done. Cool 66 grand.

Brandon: That’s fast and interesting.

David: So if I understand you right Alex, you’re paying your rehab cost into the Escrow, you’re closing the cost of the house is going to the seller and the Escrow company is keeping your cost in Escrow which they disperse to your contractor as they complete the work. Is that correct?

Alex: That’s the way you should do it. I don’t do it that way, I pay my contractor full upfront, I don’t care because him and I are, that’s the power of having a great team. You can tell them Escrow it out you know as you tell them they will disperse it no problem.

Here is the link to Fanniemae's guidelines, which does show it  is possible:

https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html

Hi fellow investors! 

I just got a house under contract and based on the recent EP of the podcast the guest shared he was able to use delayed finance exception by getting the rehab costs on HUD-1. The guest said that you can wait the 6 month seasoning period and get 75% LTV on the ARV -OR- take 100% of what's on the HUD-1. For this project, it makes the most sense to utilize the delayed finance exception

I wanted to see if anyone could share the mechanics of this process. 

We are entering the inspection period and I'll be purchasing all-cash via private money, then funding the rehab.  Rehab should take 8-10 weeks, and I am working with a lender to make sure ducks are in a row.

Any advice or coaching would be greatly valued! 

BP community! 

I am using tools and education that I'm picking up in BP to build my RE portfolio.  I am working on some out-of-state opportunities.  My agent found an off-market deal for an 8-plex. I received initial information about the property ran the numbers meets both 50% rule and 1% rule and has a cap rate of about 6.5%.

One of the strategies I heard on the podcast was to inquire about owner financing since. The owner is interested and said they would be willing to-do owner financing for 5 years (contract for deed) with 15% down at 6% interest. The seller shared they re-structured their ARM loan 2 years ago for a period of 7 years so there is 5 remaining.

Would love the advice of some seasoned investors around:
1. What are some questions I should be asking if my goal is to cap the downside and maximize the opportunity?

2. Based on the current info are there any concerns about the initial terms you'd lean-into for deeper analysis? 

3. What are the next steps you would typically take to advance a deal such as this? 

4. Good, bad, ugly on owner financing and/or contract for deed on a deal like this.

Thanks! 

Tim

Thanks so much Jay! Your episode on the Podcast was actually one of my main inspirations and kick started my journey, to REI. I feel very honored for your advice and coaching! Thanks a ton! Please don't hesitate to let me know if there is anything I can do to add value for you!

BP community, 
I have found a person who is willing to do private lending for my first fix and flip. The individual is going to fund 100% of the purchase. From there I'll be funding the rehab. We have already negotiated percentage and terms including signing a promissory note and having the lender be first lien position on the SFR property.

The property is an REO. At this time I would not be able to show enough liquidity (proof of funds) until my private lender funds me.

I do have an LLC setup that I use for consulting and would be able to run everything through that entity. I have not set up an REI entity up at this point.

I want to ensure, I protect my lender, myself, and the deal. 

If anyone can share the process/mechanics of the actual funding process including:

1) Does private lender fund the project ahead of closing? 

2) In the Contract with Seller if they ask for proof of funds, how do you show that?

3) Is it easier simply to have both parties (private lender and myself go on the contract)? 

Any guidance, process, and/or insight would be greatly appreciated!

Thanks for the feedback Christian. The 100% LTV HELOC is available at Seattle Metro Credit union (SMCU) as well as Washington State Employee Credit Union (WSECU). I also have found several 90% and one 95% LTV options.