All Forum Posts by: Account Closed

Hi BP!

I recently purchased a fourplex to house hack and found one in a great location in Miami with a value-add component (rents significantly under market). I closed on the fourplex and as soon as I lifted the tile to begin renovations I discovered the wood trusses and sub-floors are shot and needs complete replacing due to past termite activity and leaks (it's a 100 year old building!). Long story short, I'm significantly over budget for the rehab since I am completely gutting the fourplex (new structure, electrical, plumbing, HVAC, etc). Talk about a first rehab experience. I've held onto the deal because I strongly believe the location is in the path of progress and at the end of the day, it will cashflow. 

I am currently heavily considering refinancing into Fannie Mae Homestyle Renovation loan to help finance most of the renovations needed. I understand this is a fantastic product that helps me hit my exit strategy before renovations begin! The reasoning for this is that refinancing is based on ARV and up to 75% LTV. Exactly what I am trying to hit with my refinance after the renovation. Please correct me if I am mistaken!

However, the challenge with this loan (and any other exit) is the ARV. How can I accurately calculate the ARV on a completely remodeled fourplex when no remodeled comp in the area has sold? I am confident of the value of the remodeled fourplex based on the income approach and market cap rate. However, as this is 4 units ARV is based on comps.

Here are some of my ARV considerations:

• - How significant is a jump from C3 to C2 condition in the appraisal value? 
• - I currently have the time and opportunity to add an extra bedroom into each unit as they are quite spacious (ca. 1100 sqft and they are all 2/1s). Is this a no brainer?
• - Can two duplexes be used for comps?

Here are some general information on the deal:

• Purchase: 620k
• Renovation: 230k
• ARV: 1.1M
• Refi: 75% LTV

Looking for any help from other investors, agents, appraisers, lenders familiar with the Miami market (33135) that can give me better direction to accurately calculate ARV.

Hi @Alejandro De Varona

Curious to know what you ended up doing with the estate? Hope you had success whichever way you went!

Hi @Cliff Mitchell just without getting too deep into the expenses used, I quickly noticed two things:

1) how are you planning to finance the acquisition? Most banks and mortgage brokers have a minimum of 50k.

2) Refinance period of 24 months? Typically banks require a seasoning period of 6 or 12 months. No need to wait longer to refi. Also, the refinance would give you a cash out of 70-80% of ARV. Assuming an ARV of 100k is correct, your new loan would be for 70k-80k. Which would bring down the principal and interest and therefore, more cashflow.

Hope that helps!

@Mo Hass Not a lot of information provided to go on and I'm not sure how much experience you have. But a property for 35K wouldn't necessarily mean it's in a D class neighborhood. I think more likely than not it's in need of major repairs. Personally, I stay away from warzones (D class neighborhoods) and focus on C and B as long as it cashflows. A quick rule of thumb is the 1% rule, so a 150k house should bring in 1,500 in rent per month.

Hope that helps!

The HOA fees are a real cashflow killer. It would definitely make me shy away from this deal. A quick analysis that I do when a property has HOA fees is to add the monthly HOA fee (times 100) to the purchase price.

For example in this case:

Monthly HOA of 165 x 100 = 16,500
+ Purchase price of 80,000

= 96,500

Now I consider if I'm able to hit the 1% rule based on the 96,500. If the property can rent for 1000 a month, I would look into it. Otherwise, I would look for the next.

Hope that helps!

Hi @Daniel Cruz I recently heard of wegolook .com and that they can even assess a property/condition while providing videos and pictures. However, I've never used this service, but you can check it out to see if it suits you.

Have you considered asking your agent? I'm sure a good agent would not mind and can even provide their own assessment.

I like to store everything digitally by property / folders. Just scan and store and you have quick access whenever. Don't really know how scalable this system is, but for the time being it works just fine.

@Brandon Wright stay on the forums, listen to the podcasts, and keep asking questions. Eventually once you have something to offer (deal, capital, hustle/time) you'll find a partner offering what you're missing. Then, a partnership is born

Much success!

Hey @Deepanshu Madan! Congrats on making it to your first closing! Do you mind sharing some some details? I also have a property in this zip.

Hi BP

Today is supposed to be my closing date on my first investment property and it has been quite the experience up to this point! And of course, some last minute developments came up just the day before closing. Yesterday my lender communicated that in order to get the final conditions cleared for underwriting each of the preexisting tenants (3 in a fourplex in FL) must sign a letter stating "I formally waive the rights to purchase the property I currently lease at...". The reasoning behind this I believe is that the lender feels threatened my the tenant's lease for not exclusively saying they do not have the right to purchase. To be honest, this is all a bit over my head with all the legal technicalities, but I'm just concerned the lender is trying to think of a ruse to get out of underwriting this purchase by making the purchase contingent on tenants who may not have a clue the property they live in is being sold.

Have you seen such a requirement before? If so, how did it go and what happens if one tenant refuses to sign?

Yanier