All Forum Posts by: Vince Abernathy

Still have this place…. Learned a bunch.

If your PM sucks, get rid of them faster…. You get what you pay for with a bigger firm that is cheaper.

Anyone ever buy out this way? Thoughts on the pros and cons……. Any contractors go out this far?

BRRRR Strategy - First property.... I was unaware about the 6th month seasoning requirement by most lenders, but I found two that would refi after the rehab is completed. What would you do in this situation or is there another option I am not seeing?

Purchase price: $137,500 ($44,000 in to the property... loan at $101,000)
Appraisal: $180,000  
ARV: $195,000
Est rehab cost: $7,500

Scenario #1: 75% LTV cash out refi at 4.25%...
Cash out: $45,250
$6,250 still in the property.... principal and interest $719/month
Cash flow estimated at roughly: $250/month

Scenario #2: 80% LTV cash out refi at 4.25%... 5/1 ARM mortgage. Prepayment penalty appears to only be in the first 3 years.
Cash out: $55,000
All money out plus roughly $3,500 in pocket.... principal and interest $767/month
Cash flow estimated at roughly: $200/month
My plan would be to refi around year 4 or so before the adjustable rate kicks in.

Is ARM too risky or my plan should work roughly as expected? Did I miss anything on the ARM? Any help is much appreciated! Thank you

@Juan Campos  I chose the property management company today. They checked all the boxes I needed and were very responsive with all my calls and questions. The deal closes on the 9th and I will have them pickup the keys. They will get the utilities going and they said they could have a bid to me for the work needed within 48 hours. Depending on their schedule, I think it could be ready by the beginning of March. Once I know the cost of repairs, I will officially start the refi process  and hopefully have the appraiser out shortly after the repairs are completed, but before a tenant ever moves in. 

@Cody Richard Have you considered the BRRRR strategy? The strategy isn't that different from what you are doing except you would be finding properties that need some work that can help you refi and get your initial investment out. I won't considered any properties that are occupied already or there is little to no difference between the AS-IS and ARV. I plan on holding my properties as long as they are profitable and tap into the equity if ever needed or let the renter payoff my mortgage and I collect a check each month.

@Cody Richard I am spending a good portion of my funds on the down payment and definitely couldn't do two deals at the same time right now. My plan is to start the refi as soon as I know the rehab costs so I can get the process going and hopefully have the appraiser ready for when the repairs are completed.

@Juan Campos   This will be my first deal (COE Wednesday). Its definitely more risky being out of state without a network in place, but putting in the extra time to read reviews on vendors, calling vendors, BP forum reading, facebook groups, etc. It also helps the property I am buying is a good deal with light rehab (make tenant ready plus paint, fixtures, and updating the full bathroom). I am also hoping using the property management's contractors that they will do good work and won't over charge. I assume the PMC uses these vendors frequently and they do solid work at a reasonable price.

@Blake Ramsey I was always looking out of state. For example, I am buying a place for 135K with 20% DP in an A+ area. I am not sure where I could find that in SoCal, but if I could find it, it definitely wouldn't be in a good area.

Since I found an area I like out of state, I will try to stick to that area and build a network of good vendors, but won't be married to the area. It probably just the way I value properties, but I have found way more potential deals in Texas than I did when looking in Columbus, OH., Louisville, KY., or Atlanta, GA. area or maybe I was just late to the party in those areas.

I keep remembering extra things as I type haha Another thing I would do that might be obvious some, but not all, is line up your lender before you have a deal you like. I tried getting one when I found a deal I liked in Columbus and they were very slow to get me the things I needed. After that, I started talking to lenders to figure out who had the product I needed and then who was the most responsive. Get someone's name with the lender, talk to them, build a relationship. When I first went under contract, I would text my POC at random times throughout the day and get a response within 10 minutes. I am doing the same process now for the refinance portion. 

@Blake Ramsey    I am in SoCal, so the choice for other places was made for me $$$ haha

I took out 50K on a cash out refi to get started. In hindsight, now that I am close to closing on my first property, I would have taken out more, but was being overly cautious. 

I have family out side of St Louis. They have been sending me photos of the snow all day. Stay warm!

I am closing on my first next Wednesday. I was focused on Columbus, OH and I felt the numbers were too risky for being out of state and lack of experience. I put one offer in at 85K (10K over list) and was beat out by a 110K offer. I switched to Texas and was beat out on the first two, but got the third which was the best of the three. I was under contract in two weeks after I switched to Texas vs a little over a month in Columbus, OH. I used a hard money lender. Here are some things that I learned that I didn't know:

-I was requesting rehab funds. The lender wanted a bid from a general contractor plus insurance and their info before closing and access was only available once for the appraiser. I was able to get a GC in there at the same time that had great reviews and he ghosted me. I got one or two text replies from him, but no phone call or bid. Now I am funding the rehab myself.
-The lender was requesting 1 million dollars general liability. I should have asked why, but got an umbrella policy anyways for my personal house, cars, and this investment property. It turns out it wasn't needed because I was funding the rehab myself.
-The lender also required storm insurance which was harder to get than I thought, but made 50+ calls since only TWIA in Texas provides it, but they don't sell directly to consumer. They just have a list of 1000 of agents that can provide it on their website. Some of the people I called didn't even know they were on TWIA's website, but got it worked out.
-All property management companies are pretty similar in fee structure, but if someone isn't calling you back when they are trying to get your business, I doubt it will be better when they have your business.

I will end up using a property management company to oversee the rehab and for leasing. I am not interested in taking tenant calls or finding tenants and the property will still cash flow each month with all money out and little extra on the refi. The hard part now has been waiting and not moving too soon on the next deal in case anything else comes up that I wasn't expecting.

But I felt ready when the numbers made sense. My strength is probably on the valuation side based on my prior work experience. Everything else I made work as it came up. 

Hope this helps!