All Forum Posts by: Zach Norton

@Stephanie P. thanks for the response. I agree with you. If I can get the property for $50k and can get out of the Reno at $20k, I would be right on the money at a $100k ARV.

@Lucas Duce thanks for the response. That could be a possibility. I will check with my realtor to see if that is an option. 

@Stephanie P.

Thanks for the response. Could you help me understand why the numbers do not work? Here are the numbers I have come up with. These are based off of the most conservative numbers I have. Assuming I purchase at full price and keep rent the same.these are based off of a conventional loan for 30 years at 4.5% and a 25% down payment that my lender gave me. I believe I can buy it cheaper (high 50’s) raise rent to current area rates ($650-$700/unit), and pay less in rehab costs ($20000). I am still coming up with a 15% coc roi. I project this number to be closer to 20%. Thanks 

Thanks Joseph. I will look into those options. Are you familiar if these lenders will lend money towards the renovations costs as well? I am hesitant to use my LOC money because I am fearful I will have no way to refinance and pull money out of the property to pay it back. Then I will be stuck with multiple loan payments and will not be able to finance my next deal with the LOC. thanks

Hello BP,

I have purchased two BRRRR properties this year using personal LOCs through my lender. Both homes were purchased with cash and most of the renovations were paid out of pocket. Both are doing well and are rented and making income. I have recently refinanced the first one and currently have $50k LOC money to use. I cannot refinance the second until early December due to the seasoning period, but at that time I will have another $40k available ($90k total).

I have recently come across a duplex in my area that has been on the market for over a year. It is listed at $70k. Both units are currently rented for a total of $1225/month. One tenant is paying $575/mo and has been for the past 7 years- the current owner says he just hasn't raised rent because the guy is a long term tenant (has been there a total of 12 years). He also told me that the other unit was just rented this week for $650/month. After renovations, I believe we can get $700 per unit per month ($1400) which is consistent with local rates. My realtor believes the duplex would be worth somewhere in the low $100's ARV. After walking through both, they definitely need some work. updated kitchens and bathrooms, paint, carpet, etc. The big issue is the foundation. It will need to be repaired by a contractor- luckily we have used a friend on the past two rental properties who always comes in at about 1/2 the cost of competitors in the area (estimate the cost will be somewhere around $10k). I believe we can be out of the total rehab in around $20k. We do most of the other work ourselves.

If I were to continue using the BRRRR strategy and pay cash for the purchase and the rehab with the LOC's, I would need a total of approx. $75-$85k. I would then have all of my LOC money tied up into this property until the 6 month seasoning period and would not be able to capitalize on any other deals that may pop up in that time. In addition, when I went to cash-out refi, I may not recover all of the cash invested if I were to get a low reappraisal. I am wondering if there is a different way to finance the purchase and the rehab cost. would you suggest a hard money lender? A conventional loan? Or, forego the deal altogether. How would you finance the deal if presented itself to you?

I have attached a rough analysis based off of a conventional loan situation- 30 year 4.5% and 20% down. This assumed we purchase for $65000, put $20000 into it, and continue the rents as they are currently. total investment would be $36000 cash. monthy cash flow after expenses would be $570 ($6837/year). COC return 18.99%. I believe these to be conservative numbers.

Any advice is greatly appreciated! Thanks in advance!

Hello BP community, I am relatively new to REI and am looking for advice on financing a potential multifamily unit . First, some quick background on my current rental portfolio. My first two investment properties are single family homes that I purchased earlier this year utilizing LOC's and the BRRRR method. I purchased the first home with a $50,000 LOC and put approx. $12,000 of my own money into the renovations. I was initially going to flip this property but as more expenses piled up I switched to the BRRRR. I have great tenants in the house and have done a cash out refi. The second property was purchased with a $40,000 LOC and is also currently rented. I cannot cash out refi this property until early December.

My next prospective property is a multifamily duplex that needs quite a bit of rehab. The home has two units, each the exact same. both are 2 bed, 1.5 bath. one unit is currently rented for $575 and rent has not gone up in over 7 years. The tenant has been there for 12 years and pays month to month. the second unit was just rented within the last month for $650. total rental income per month is $1,225. this number will increase after renovation and based off of market trends. I project rent could be $700 each per month after rehab.

Each duplex needs foundation work, new carpeting, paint, updated bathrooms and kitchens. The listing price is $69,000 and has been on the market for over 1 year without much in the way of offers. We were able to speak to the owner at the showing who states he is motivated to sell and just wants out. I believe we could purchase for high $50's with cash. Renovation costs will be in the ballpark of $25,000- $30,000. I believe we can be in for less than $90,000. my realtor believes comps to be in the range of $110,000-$120,000. My intentions are to buy and hold the property to rent.

My questions is how to finance it or if it even makes sense to do the deal. Should I pay cash with the LOC funds I have available in hopes of getting a better sale price? I could then wait until December to renovate with the funds from the second LOC once they become available and continue using the BRRRR method, all while making $1,225 from the current tenants. My other option is to purchase with a conventional loan and keep the LOC for the next property or properties that become available. I have never purchased an investment property using a conventional loan. I believe my lender requires 20% down.

Any advice is appreciated. If I can answer any additional questions, I will do my best. Thanks in advance.