All Forum Posts by: Trent Stone

If your numbers check out I think it's a solid deal. I would raise your capex and repair budget probably closer to 10% each, the property looks a little older and stuff is bound to come up, especially if you aren't putting in any repairs up front. Also increase your vacancy rate to 10-12% and see if it's still a positive cashflow. Get the rent rolls and the P&L for the last 12-24 months. Look at the absolute worst month and see if it was still positive. and 11cap is pretty high unless you are in a war zone, I would double check all those numbers and all your expenses, but if they still pan out, I would pull the trigger. Good luck!!

Depends on what area you are looking to invest. We are doing all our investing in Indianapolis. Hard-money lenders will usually ask for 10-20% of the purchase price and will fund the entire rehab. ie. Buy a house for $100k with $50k in rehab that will sell for $220k. You would only need to put down $10k plus a couple points and fees, maybe call it $15k-$16k. Which still leaves enough in reserves for a contingency budget. 2-3 months later, sell it and do it again or wait for the seasoning period, refi and do it again. 

We are always looking for partners. We get a deal or two a day across our inbox, let me know if you have any interest. Best luck either way! :)

If I were in your shoes I would absolutely use a HELOC to invest. Use it as a downpayment on a cash-producing asset or use that money to get a hard money loan and flip something. The way the market is right now, I'm leaning heavily into flipping, just my 2-cents.

I assume you are asking about counting the rents towards your personal income? 

Let's say a lender wants your DTI(debt to income) to be under 50%, and you make $10,000/month. That means ALL your debt payments everywhere should be no higher than $5,000/month. Now let's say you want to buy a rental property that rents for $1,000/mo (not including expenses). For the sake of the lender they will count $700 of the gross rents towards your gross income. Now 50% of your net income for DTI will be factored using $10,700, instead of your original $10,000. Hope that cleared it up for you.

I've been meaning to make a formal list, so this is a great question. It's all part of your due diligence period. I'm sure if you check for a due diligence check list you can find something better, but here's what I look for:

-Get an inspector to get you a full inspection. Make sure everything is up to code and has permits. If you plan on doing any expansions or repairs make sure they will be permitted as well

Ask the city for any and all information they have about the property, it's free and should take ten minutes.

Have the title company run a title search for you and get title insurance so nothing comes back to bite you later.

Get your contractor to walk the property to look for anything your inspector might have missed and get a quote for any repairs you may need. 

Talk to a property manager to make sure it will rent for what you need it to. Ask if there's anything you should be aware of about the neighborhood that will impact your rent prices. ie. new construction, gentrification projects, a new Amazon plant opening, etc.

you MUST get the rent rolls and a 12 month rental history and P&L. Make sure that even in the worst month you would still be positive cash flow. Find out your rental demographics. Are you going to inherit any section 8 tenants? You'll definitely want to know that information. Is there an HOA? They take a lot of your cashflow and a lot of control you have over your property, buyer beware.

Have multiple exit strategies if you need them and make sure you are conservative with all your numbers so you don't get caught with your pants down. I would say at a minimum, have your Realtor, PM, and another investor look at the numbers. Make sure the cap rate is realistic for the area you are in. ie. If you found an 8.5 cap in a A neighborhood, it's probably too good to be true. So just be aware that the numbers can be explained and make sense.

I'm sure I'm forgetting something but I hope this was helpful. 

I would talk to the smaller banks and credit unions to try and do a "portfolio" loan, meaning they lend their own money, not like the big banks like Wells and Chase. They can take all your houses and treat them as a single property ("Blanket Loan"). Depending on your credit, income, history, etc. you should have no problem pulling out 70-80% of the equity. Find yourself an investor savvy mortgage broker and ask them to shop around for you. I would also interview 10-12 banks myself to compare rates and find someone who is willing to give you the type of loan you want. One downside is if you ever plan on selling any of the houses then it's hard to break them up and get new loans for your buyers. But if they are positive cashflow and you want to hang onto them, then I'd say go for it. I don't see a point in keeping all that equity tied up when you can borrow on it for around 4% right now. My 2-cents. Good luck!!

Take the money you have and use it as a downpayment for a hard or private money loan. You can find a lot of them that will take 10% of the purchase price down (plus some points and fees) then they will finance the rest of the purchase and 100% of the rehab. Once you are ready to refi they will count 70% of the gross rentals as income towards your dti for a traditional mortgage so you shouldn't have any problems as long as your credit is good.

We have been able to find partners who have put in 100% of the money for our deals. Network with wholesalers and investors.The key is to find a GOOD deal. Ideally 65% ARV all in. That way even if something goes wrong your investor is still protected. By month 5 you should start the refi process so as soon as the seasoning process is over by month 6 you can get your equity out and pay back your investor. I would keep all of your money out of the deal and keep saving during the project in case you can't pull out all your money on the refi, then you can pay your investor out of pocket and keep your equity in the project. Win-win for all. Don't be afraid to walk away from deals if the numbers don't work.

I know it's a lot to digest so let me know if you have any other questions. Good luck!!

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Yeah, the extra supply isn't always a bad think, but be keenly aware of how it will affect the supply/demand curve. Also, make sure you are comparing similar asset classes too. If they are multimillion dollar highrises and you are looking at $1,000/mo, you probably won't be impacted as much. But, as Grant Cardone says, "If the cranes are at play, stay away!". He's a big advocate of staying away from the new construction for the most part just because of how it will change the rental market.....It's not a no-no, but just be very aware of how it will impact your property.

Yes, %100 something to look at. The new construction will completely change the rental economy and you need to plan for it. Right now in a small city by mine in Utah they are on track to put up 35,000 new doors in a 5 year period. Sure rents look great now, but you couldn't pay me enough to invest there because I know a market correction is coming and I know there will be an enormous amount of excess inventory soon. Know your market, make sure you have a very solid, conservative cash flow to account for fluctuations in the sales and rental markets, and make sure you have more than one exit strategy. Plan a few years out at least. Pay attention to gentrification projects, housing growth and appreciation, job growth, and economic growth, etc. i.e Are any big companies planning to build or shut down near by? Very important to know, but not hard to find out.