All Forum Posts by: William Harvey

I think FlipperForce has the ability to do this!

Our plan has been to continue buying, but be EXTREMELY focused on what we estimate the ARV to be (when talking about flips). Seems like we are "catching a falling sword" where no one really knows when values will stabilize, so we are very cautious on what we estimate the ARV to be. If recent comps show it is $325k, we will likely add a buffer and use $300k or even less. We are extra cautious on rural properties and condos, and likely won't get involved with any of those types for the foreseeable future.

ARV is the biggest variable that can mess up a deal in my opinion, so logically, I think the most emphasis should be placed on that as well to make sure there is a buffer for the changing market. In early July we had someone reach out about purchasing their property....long story short we offered $425k and they decided to put on the market because they didn't like that offer price. After not getting results from the market, they got back in touch earlier this month and we ended up offering $375k due to the Fed continuing to increase rates and just seeing the market continue to worsen from when we first spoke to them. We ended up purchasing the property on the second offer.

While we are super cautious and careful due to the current market conditions, we are also breathing a sigh of relief since we are not competing with a million other buyers on each deal. Seems like the pendulum has swung back to the buyer side of the aisle for the foreseeable future and we are going to certainly take advantage of that!

We are typically doing flips and using hard money, but for one property earlier this year....we used hard money for the purchase and then started down the path of refinancing with a conventional lender (Wells). This route was complex, the rate sucked, and both myself and partner had to be on the loan personally. They also came back and had to lower our max LTV and that was the nail in the coffin.

We eventually pivoted and found a local community bank where we got 80% LTV (higher than the 75% from Wells) and the rate was a whole point better, and we paid 1/2 point instead of a full point. Granted, it is not purely apples-to-apples because our loan with the bank is a 5-year ARM vs. a 30-year fixed.

I highly recommend looking at the community bank route for anyone not wanting to deal with the headache and hassle of using a conventional lender. I was under the false impression that the Fannie/Freddie (conventional) loan products were going to be way better than any kind of in-house bank product, but that is definitely not the case as I have seen. 

@John Cervera I don't really think the market should be considered with flips since they are held for a limited amount of time. I would place my focus more on finding a rock-solid deal where it is a discounted price. The old saying "you make money when you buy, not when you sell" is so true. 

If I do tons of research and find the greatest market in the world where there are low days on market, healthy inventory levels, etc, but then I go out and overpay for a property, then that market research was a complete waste of time. 

I think every property in every market is a deal at the right price, so I would put more emphasis on your ability to find discounted properties than on the market. 

@Jacob Mistric Curious....why do you not want to just get into real estate investing where you buy the property on your own? 

@Allen Worley I've created several presentations when raising money for different properties I'm getting involved and what I generally do is put any raw pics and data into a powerpoint presentation, and then I send to someone on Fiverr to clean it up and make it "pretty." 

I'm happy to send you some examples if you'd like, and happy to show you the guy I use on Fiverr. Just let me know!

To touch on the second questions of the return to offer investors, I am unfamiliar with the ins/outs of a 21-house portfolio, but in the apartment syndication world it seems common to do a 6-8% preferred return to investors, and then a 70/30 investor split after that. Some groups have performance hurdles, and different structures, but this seems to be pretty common and is likely comparable to what you'd be able to do. 

@Alvin Roehr If it is their first house and they are planning to live in the property, then I would recommend doing the 3% down Fannie program if they have decent (700+) credit and an FHA loan if they have mediocre credit. I'm a former loan officer and the 3% down option is really cool, and a lot of people think that you need 20% down to do a conventional loan, which is not the case. It is also going to be a much cheaper option if their credit is good, when compared to FHA. But FHA is not a bad option either.

If they live in the property for at least a year, generally they can then go buy another primary residence and convert the original property into a rental. I did this for the first 3 properties that I purchased and it allowed me to put down a lot less money than I would've had to if I purchased as investment properties, and the rate for a loan on a primary residence is lower than if it were an investment. Hope this helps! 

@Daquille Ferguson I would 100% not do a cash out refi in this current rate environment, especially with your current rate being sub-4. I would do a HELOC. The beauty of having a HELOC is that if you are not using the money, meaning when the line is not drawn, it is not costing you anything. Whereas a cash-out refi you will be paying on it from day 1 until it is paid off. AND, the blended rate between your current rate and whatever the HELOC would be, would still be less than if you just did 100% of the capital stack as a cash-out refi.

I think of my HELOC like a low-rate credit card secured to my house. I draw on it to come up with funds for renovations on flips primarily. But when I sell the property I've flipped and pay down the line, I am no longer paying any interest until my next flip.

Hopefully this makes sense. Not sure where you are, but there is a credit union near me that I have gotten a HELOC with and they will do 100% LTV if it is your primary residence. I'm sure that you can find a hungry credit union that will do something similar. Hope this helps!

@Jacob Elbaum Is it possible to talk to the seller to see if this warrants making an insurance claim? I have never dealt with fire damaged home, but we bought a home from a seller earlier this year who was going through an insurance claim from a flood in their basement. We made our purchase contingent on the claim going through and the work being finished, and by virtue of that we were able to offer her a higher price and have some of the reno already complete by the time we purchased and took over. 

If this is not an option, then I would definitely talk to a restoration company first to see what this will cost. You'll more than likely have to get that addressed and signed off on by a restoration company before getting contractors in there. I think from a liability standpoint this is smart too because if you skip the restoration and just get a contractor in there....God forbid something happen down the road, you may be liable since you had knowledge that there was fire damage. If you get a restoration company to come in and get all the issues remediated, and they sign off on it, then I don't see how you could be liable if something happened in the future as a result of the fire damage. 

Hope this helps!

@Brandon Ribeiro I have had similar situations and I agree with @Jeff S. that some will take everything and others will want to just leave everything and have a "fresh start." We've seen this many times as well. 

If it were me, I would probably offer her a cash sale with a free rentback and then (assuming she will walk away with sale proceeds) refer and guide her to movers/storage to accomplish this goal. We had a similar situation where a seller who was in a "hoarder" situation wanted to take a lot of the items with him and also leave a lot of items for us to throw away (ended up filling four 30-yd dumpsters!). We gave him a 1-month free rentback and directed him to PODS where he was able to get some containers filled and ultimately get them shipped to his new address. Had we not helped him come up with this solution and "illuminate the path" for him, he likely would still be in the house. 

By doing the closing and then the free rentback, they are able to access the cash to pay for this kind of thing. And if you tee everything up for her and make it super easy, it should work for her. Hope this helps!