All Forum Posts by: Zach Westerfield

@Jesse Woodall I think a better question is are you prepared to jump into flipping? In my opinion, flipping is one of the best ways to create cash quickly, which in turn can be used in other passive investments. However, it is a very challenging venture, and I think one of the riskiest in real estate. Do you have experience in construction or rehab, or other types of real estate? What about in project management? 

Not trying to turn you off, I'm a flipper myself just want to make sure you are prepared for what you are getting into. At the very least, read J Scotts books on flipping and estimating rehab costs. Once you are prepared, how you fund the flips shouldn't make a difference. The key to flipping is putting together your numbers up front. There are 4 major components to a flip: 1) the capital to complete the deal; 2) the initial purchase; 3) the renovation; 4) the sale. You cant control the sale, the market does that. Step one is to get a good idea of what your end sale will look like (both ARV and finish level). You can mostly control and predict the rehab (this is where experience comes in), but there can always be unexpected things that pop up. YOU HAVE FULL control over the purchase and the capital. If a hard money lender wants 15% interest, simply factor that into your purchase price and find a deal that works. If you cant find a deal that works with those numbers, then look for cheaper capital. Good luck!

Can you 1031 property 2? thats the first ive heard of the 15 extension to military, im interested to see if that is true as military myself. 

@Jay Yoo I used hard money on a project earlier this year. Rate was around 10% with 2 points

@Jay Yoo banks will be reluctant to give a conventional loan on distressed properties. Look for hard money lenders, private money, or commercial rehab loans from banks. From these sources you can find anywhere from 65-100% of the funds needed to complete the project. Use your cash to make up the difference, and to use as a reserve fund. When the project is complete, then refinance into conventional financing. 

As for finding deals, its a tough market pretty much everywhere for finding good deals. The good thing about the BRRR method, not ever deal has to be perfect. Maybe you do a deal and wind up cashing out only 90% of the ARV, no 100%. thats still a better return than doing the traditional 20% down method. Most of the good deals i have found in the last two years have been major rehab projects that most other investors shied away from.

@Amit Roginsky congrats on getting started. As for the private money loan, you can structure it anyway you can imagine, but ideally you want both parties to be comfortable. If you dad is okay with it, i would recommend interest only payments for 12 month. I would also have clauses to extend and restructure, in case something goes wrong. Think through the "what-fis" and what you will do if things come up. Have that conversation up front, and make sure your dad is okay having the loan out there for 2-3 years. If things go wrong, it may take you a while to pay him back. The good news is if you analyze your deals correctly, the BRRR method is great at erasing mistakes over time, and you will eventually pay him back. Im speaking from experience here.

As for long distance investing, do you have rehabing experience, or are you able to leverage someone who does. Be careful taking on rehab projects with little to know experience, unless you have a GC or PM or friend in that area that you TRUST 100%. Otherwise, i would recommend starting closer to home until you get some experience. With little money of your own, you dont have much room for error if a rehab goes bad. I would say an okay deal close to home would be better than a home run far away. In today's market, home runs typically mean high risk (for new investors). 

If you insist on going long distance, read several books on flipping and managing flip rehabs. BRRRR is the same as flipping, with the exception that you "sell" the property to yourself at the end.

Good Luck!

So far I haven't had to purchase with cash first, I have just used the bank and skipped that step. However, the bank said there would be no problem refinancing, if i wanted to buy a property that requires a cash purchase such as foreclosure auction or quick close. 

As for the rest of the question, yes. The bank gives 80-90% of the estimated ARV (they are usually conservative on this). This is provided up front, so i dont have to bring any cash to close. I use this to purchase the property and rehab, making up the difference with personal reserves and 0% interest credit cards. once complete i rent out the property (or sell, as i flip as well). i can start the refinance around the 4 month mark, and just make sure they close after the 6 month mark. This way, i have very little of my own capital tied up. if i do buy for cash, it shouldnt be tied up for more than a few weeks.

if you are worried, open a second account, and transfer the money needed to that account monthly. give them that information. 

Many banks (that will do them) have tightened requirements on delayed finance. Im sure the mortgage experts will correct me, but i dont think you can pull out as much equity as you could a few years before. It is a challenging product to use, and many banks have never heard of them. 

I have stopped using them. I found a local bank that does rehab loans. These are interest only, 12 month loans. I can either purchase the property with them, or purchase with cash and immediately refi with one. Then I conduct the rehab, and wait the 6 month seasoning period for a cash out refi. This strategy allows me to use less cash, and move quicker without the hassle of trying to do a delayed finance with a bank. 

@John Woodington was the road always on his property? Road or no road, if the right of way exists, you have legal access to use it and he cannot block you rebuilding the road. You should not have to pay him.

@John Woodington 

Caveat, i am not a land investor (yet), but grew up around farming, and one day want to go back to it. i can provide a little insight on your questions just based on my own experience.

1. Farmland is not the best investment, numbers wise. whether you are working the land yourself, or renting to others generally it must be debt free to be profitable. Trust me, as someone whose life long dream is to get into farming, its very difficult to make the numbers work if you have to mortgage the land. even for land owned free and clear, expect returns in the single digits. As for rent amounts, there is no single combined source to determine land rents that i have found. Im currently looking for farmland for rent in georgia for my expanding cattle heard, and its difficult to determine what to expect. my best advice is talk to local farmers in the area. most farmers of any size rent some amount of land, and should know what the going rate it. If you dont know any, your local Natural Resources Conservation Service (NRCS) office can most likely help you out. 

2. Yes, being landlocked decreases the value. but are you landlocked from a legal sense (your property does not touch an access road) or do you just not have a proper driveway? If the former, you will need to work out an easement with a neighbor to get access to the land. the best way to do this is to buy the easement, so there are no legal issues down the road. this would give you the most value for your land. If no neighbor is willing to sell, you will need to work out a right-of-way. 

as far as rebuilding the road once you have access, your local NRCS rep can help with that. They can help you determine soil suitability, lay out the road and grading plan. you will then need to hire a grading contractor to build the road. You will also want to check for any needed permits in your county. 

3. I believe you can work something out with your cousins/siblings now, but i would highly encourage you to get an attorney involve and get it property documented and recorded. The easiest path - everyone agrees to sell their share to you, yall all agree on a price, and get your parents to write this into their will. or have them set up a trust and name you as the beneficiary. Either way, get a lawyer involved. These things can get nasty, and no one things probating a will can cause a family dispute until it happens to them. No matter what the path, you will have to agree on a price and buy out your relatives, unless they are generous enough to give it to you. 

On that note, valuing land is not very straight forward. unlike houses, which generally have the same components, land can vary greatly. Irrigated vs non-irrigated, are wetlands present, are their conservation easements, soil type, access can all play into the value of land. in general, its worth what someone is willing to pay for it. What someone is willing to pay for it is based on its future use. does it have future potential for commercial development? if so the land will be valued much higher. 

There are a lot of what ifs and family dynamics at play, but if a buyout is in your future, you may want to wait to make any improvements until after. hope this helps.