All Forum Posts by: Zachary Peacock

@Michael Seeker That is great insight. 

@Erik Hitzelberger I would love to talk with about better investment opportunities in the Louisville area in terms of Turnkey properties needing little to no updating or rehab work. I want to begin building a portfolio of cash flowing properties soon, but only after doing my due diligence and shopping my options. 

The Portland investment experience was eye opening, fun and educational, but after running all the numbers and listening to advice from other investors, I am positive I can find better deals and make bette money. 

Thank you guys for reinforcing my sentiments. I knew I wasn't crazy or cynical for thinking my money will perform better else where in the city. @Kevin Nalley @Erik Hitzelberger @Jason James @Jay Leisten

@Erik Hitzelberger What are your thoughts on investing in the Portland Neighborhood? Are you familiar with the PII (Portland Investment Initiative) ?

My concern is that the appreciation will not be there. There seems to be very little infrastructure to lure in demand for rental housing. 

Where do you suggest looking for Turnkey rental properties in Louisville? I think Turnkey with minimal rehab needs is a better route. 

There is a group called the PII (Portland Investment Initiative) that are heavily invested in the area. What are your thoughts on the potential for appreciation here? 

We are buying two full rehab homes for <$25k in total - our strategy is going to be to fund the rehab with a hard money loan, build equity once the rehab is complete and then refinance the homes to get out of the hard money loans. 

Is this a good strategy?

What are the major variables we should consider? 

@Brent Coombs Immediately after the rehab is done, the ARV will be in the $80-$100k range.

A big part of me thinks the $65k rehab expense is high. Other investors in the area have succeeded with the same model. 

@Michael Plante - This is a buy and hold play, so we are hoping the value down the road doubles or triples in value as has happened in other areas around Louisville in the past. But initially, it would be valued ideally from $80k-$100k 

@John Leavelle Thanks for this advice!

We are buying the properties outright for cash, very low price points, but again, the need significant amounts of work. 

The obvious plan is to rehab the homes and build value beyond the rehab and purchase price so that we can refinance and pay off our rehab loans quickly. We are still shopping for the best way to fund the rehab costs though. Any suggestions right out the gate? 

Is it a better idea to borrow in "chunks" as needed, or in one lump sum? I have been referred to a few small local banks and credit unions to shop loans. Any suggestions? 

Here is the story: I have partnered with two other individuals who are passionate about real estate, and have experience with rehabbing shotgun style homes, but I worry they have limited business savvy.

The goal is to buy severely distressed homes outright for <$25k, finance the rehab costs, and then rent them for 5-7 years as cash flow properties before selling when the market is in our favor. Sounds like a solid plan right?

Here is my dilemma - Yesterday the lead on the project, the guy who has experience with a rehab, said that he and the other partner had discussed paying $500 OUT OF POCKET per month for the first year or so to help pay down the loan for the repairs. I am not into this idea. It defeats the purpose of an investment. The idea is to make money. 

Here is the basic math House #1 - $7k purchase price, total gut job/rehab - estimated $65k in rehab costs. Rents in this area follow the affordable housing rates so we would be grossing roughly $650-750(max) - After our general expenses we would have a cash flow of $437/month - but this is without figuring the cost of paying back our rehab loan. 

Word on the street is that a business loan is hard to find with a term longer than 5 years, which at $65k over 60months is roughly $1083/month..... Not good.

Even if we all contributed $500 (an arbitrary number) we would still fail to pay off our loan even within the first 2-3 years! 

I feel like I am missing something in terms of how rehab financing or business loans work. If we can get a 20-30 term on our loans, we will be fine, but if not... there is no money. The property will not be cash flow positive, and we will have busted our tails, only to end up spending more money each month just to keep afloat.

The fact that the guys are ok with losing money the first few years is preposterous to me. 

How can we make this work? What am I missing in terms of the loan term and financing options?

In my mind, the gross rents simply won't fund the rehab costs. It seems like being able to acquire a property for so little would be an advantage, but right now I think I'm better off breaking away, shopping for good deals on turn key properties, and borrowing against them.

Any feed back (constructive and positive in nature) would be great!