Hey Everyone,
I am putting together a credibility packet as we have a meeting with a bank in the area and trying to start a relationship with them whether it is a line of credit to purchase more rentals or just a one stop shop for the short term and longer term financing. We thought it was time to put together a packet now as we have almost 2M in assets in our rental portfolio and want to take our portfolio to the next level in the next year.
I have a few questions for everyone on this topic though.
What all do you include in your packet?
So far I have our companies financials, personal financials, what our process is and how we buy currently, 3 case studies of prior rehabs we have done on rentals, also what we bought each rental for and how much equity and margin we get from every property. We want to make everything look as professional as possible because we would like to also use the same packet but tweak it slightly to acquire private lenders as well.
Lastly does anyone have a sample that they would recommend? I pulled a few from online to get ideas from but honestly was not impressed by any and did not think they looked to visually appealing and just thrown together.
I appreciate all the help and look forward to hearing from everyone.
@Kerry Baird on all of our deals we only use Hard Money to purchase and the terms of our hard money lender are they will lend 70% of the ARV in return we pay them 12% interest monthly and 2 points at closing. They will give 100% of purchase and 100% of renovation as long as it falls in the 70% of the ARV.
As far as the refinance portion we use a local broker to refinance into commercial loans that are 30 year fixed rate loans and we keep them in our LLC which the rates range from 6.25 - 7% typically. The rate typically is on the higher side (7%) if we are doing a cash out refinance (we rarely do) or the loan amount is smaller such as around $100,000 loan they wrap some of it into the loan. We are able to buy down the rate however we usually do not because of the cost that it involves is not worth if we only hold for 3-5 years before we start doing 1031 exchanges.
Thanks everyone @Amanda Kessler, @Frank Geiger, and @Ehsan Rishat. It is always nice seeing the before and after. The first property i talked about above was one of the worst houses we have done so looks wise.
I have been wanting to make this post for a few months now but been delayed so decided to put 2 of our recent houses in this post.
This past summer we purchased/rehabbed/refinanced two properties and both turned out great. The first house we worked on the agent/seller for a while before getting under contract. We found this house on the MLS and after being shot down multiple times in a 2 month time frame we finally had an offer accepted. Details for this property:
Purchase Price: $120,000 – 3,000 seller concessions
Rehab Estimate: $50,000
Estimate After Repair Value: $260,000
Loan: 100% of purchase and 100% of rehab – (12% interest for 6 months and 2 points)
After we did the inspection nothing extra popped out at us from our initial inspection of the house. Below are some before pictures of the property and as you can tell it was pretty rough shape cosmetically. Some of the larger issues with the house were the sub floor was rotted out in the bathroom, someone cut out all of the copper plumbing, house wasn’t updated in years and list could go on and on.
Contractor Tip
My business partner and I after purchasing a house we always walk through the house and make a very detailed scope of work and put a price next to everything to get an idea of where we are going to be at, this process typically takes around 2-3 hours for a property. After doing this we start calling contractors via different websites, post on our local investor Facebook page, etc. and get a group of general contractors and specialized contractors. We do all of this within a week after closing and then invite all the contractors to the house that next Saturday in a 2-3 hour window and tell them to come whenever they can in that time frame. On this specific property we had around 30 contractors come out we had printed off copies of our scope of work and walked around groups of contractors and told them to send us their bid and by that Monday (2 days after contractors came out initially) we had a general contractor start on the house. Here are some of the before and after pictures of this house:
Estimated vs. Actual
We estimated on this house if we were to hire everything out separately not to a general contractor it would be around $45,000 and the bid our general contractor gave us was just over $46,000 not including appliances which ended up being around another 1,000 total for 2 units. We hit our budget at the end of the project with no unforeseen expenses and now the property is fully rented out and refinance.
Final Numbers
The final numbers for this project were as followed purchase price $120,000 and renovation came in right under our $50,000 budget. Our initial closing costs were $7,000 which we paid out of pocket for this property and our only money wrapped up in this deal at this time. We have both units rented out now at $1,250 per unit for a total of $2,500 total which was slightly lower than we estimated before starting (estimated: $1,300/unit). After refinancing out of the HM loan our PITI is $1,418 per month. At the end of the day we will be cash flowing $1,082 per month before any maintenance/repairs to the property and make our initial investment back in less than 7 months.
Our next deal we closed on it 7/12/19 and this house we actually lucked out on. It was listed on the MLS for $89,900 and the ARV in this development is around $160,000. We put an offer on it for $89,000 with $3,000 concession sight unseen and was accepted. When we went to do our inspection we found there is a 2nd full bathroom that was not listed and also a full kitchen in the basement as well with a walkout basement.
We did the same updates we do to almost all of our rentals being new HVAC units, Kitchen, Bathroom, Flooring, Paint, etc. Also another cool feature to the property was the sunroom right off the kitchen that we though would have good potential for extra space so we put down flooring and a new fan out there for bonus space. This property we estimated $25,000 in repairs but only received $20,000 from our hard money lender for the renovation budget. On this deal we used the same general contractor that we used on the previous house since he did a great job, stuck to his numbers, and got the job done in very timely manner.
Below are some of the before and after pictures of the second property:
Final Numbers
The final numbers for this project were as followed purchase price $89,000 and renovation came in right over our $25,000 budget. Our initial closing costs was right above $5,000 which we paid out of pocket for this property and since we also paid anything over 20,000 for our renovation we were all into this project at $10,500. We had the property rented out before our first interest payment to our hard money lender (September, 2019) and we are now going through the refinance process. Because we had the second kitchen in the basement we figured it would be great to ask a bit higher in rent in hopes for a family to move in that might have a in-law that could live in the basement and that is exactly what happened. Typical rent in the neighborhood is around $1,400 to $1,500 on the high side we ended up finding a qualified tenant to rent out for $1,700 per month. We did no renovation to the kitchen in the basement at all and just by us lucking out and having it in the basement netted us 200-300 per month extra. After we finish with our refinance in October our monthly PITI will be right under $1,100 per month and we will be cash flowing a little over $600 per month before maintenance/repairs which will take us almost 18 months to get our initial investment back. Also this house just appraised last week and came in at $160,000 as expected and now we have $50,000 in equity at this house.
Property #1: We have a few projects coming up that we have closed on or have under contract. We just recently got an old multi family that is pretty cool building. Purchase price was $135,000 we have a $80,000 quote from our contractor and hope to be all into the property under $225,000 as we might run into a few things on this project as it is such a large renovation. The rent for the building should gross around $5,200 per month once it is fully rehabbed and occupied which will be great cash flow.
Property #2: We won a foreclosure on xome.com back in May and should be finally closing on that in coming week/month which we won for $72,000 and have a renovation budget for around $25,000 and an ARV around $130,000 and rent will be at $1,400. It is nice because we own the property attached to this which is why we wanted this house.
Property #3: We got court house auction property under contract from a local wholesaler for $95,000 and we estimated $15,000 in renovation with an ARV around $160,000. We also own another property on this street as well already so familiar with the area and will be renting for $1,500-1,600 depending on what time of the year this closes (hoping in the next month).
Property #4: We got this property under contract yesterday and is a 2 unit that wholesaler won at another court house auction and we got it for $84,000 with a renovation budget of around $25,000 with an ARV at around $165,000 and rents are going to be $900-1,000 per unit.
I hope to be giving more updates on the properties under contract in coming weeks/months and keep growing our rental portfolio to move into the larger Multi units in the next year.
Investment Info:
Single-family residence buy & hold investment in Middle River.
Purchase price: $97,000
Cash invested: $17,000
Purchase price was $97,000 with 6% seller help while using a Hard Money lender. We had to pay $6,500 out of pocket now it will be renting for $1,375 per month.
What made you interested in investing in this type of deal?
We were looking for a property but was not much on the market at the time and we wanted to get something soon. We just decided to leap in even though it was not our typical deal we did not just want to sit around and wait for a better deal for a few more months.
How did you find this deal and how did you negotiate it?
Found on the MLS and originally had the offer accepted at $97,000 and 2% seller help and then renegotiated to 6% seller help.
How did you finance this deal?
We used hard money and refinancing into a commercial loan to hold in a LLC
How did you add value to the deal?
We updated the kitchen, bathroom, flooring, paint, appliances.
What was the outcome?
Will rent for $1,375 and the appraised value is $160,000
Lessons learned? Challenges?
Get good contractors to cause less headaches in the process.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I am a licensed realtor in Maryland and I negotiated the entire deal.
Thank you @Yawo Akoussah definitely learned a bit on this project since we contracted everything out.
Thanks @Charles Brown Congrats on the first rehab. I want to get larger multi families however seems like you need to go to Cecil to get into cheaper multies. If you need help in purchasing a rental let me know, would love to help if you aren't an agent already.
Just finishing up on rental unit #8 last week and I will document another deal here in the coming weeks as we just closed on a 2 unit on 3/22/19 for the 7th unit in the business since starting last February and 10th unit for me overall in the past year and a half.
We closed on this property on January 18th and everything was finished around February 18th however we had a lot of issues pop up from the general contractor we used. We ended up having to go back through and have a lot of the work redone to get everything up to standard, instead of saving money with our original contractor; we ended up spending a little more.
This property was located in Baltimore County and was on the MLS and since I am an agent I view the MLS daily to see any new deals and found this one for $99,000 with an ARV of around $160,000. Since it was not on the market too long but the rents are pretty strong in the area we went close to a full list offer at $97,000 with 2% seller contribution while using Hard Money.
The work that needed done to this house was not too much just the typical updating as it was an estate sale and original owners. We ended up doing a new kitchen, bathroom, flooring, paint, repairs to any mechanical's, lights, appliances, etc.
After finishing the home inspection there were a few extra things that were brought to our attention like the furnace leaking a little, vent pipe to the furnace rusting from now being mounted correctly. Instead of asking for more money off the purchase price I just went back to the seller to see if they would increase the seller contribution to 6% which they ended up accepting. At the closing table we only had to bring $1,500 plus the $1,000 EMD which was a very low out of pocket for a rental.
Our Hard Money lender gave us $110,000 in total for the house even though we estimated it would cost around $16,000 to rehab but the numbers didn't fit quite into the 65% of ARV. After all is done we ended up spending just over $17,000 because we ended up buying a few extra things that originally we were not going to so we are all in right around $116,500 with only around $6,500 out of pocket and should appraise at $160,000.
I posted the house for rent last night for $1,375 and already have multiple people interested in viewing this weekend. This was our first house we contracted everything out on and was a learning experience managing everything and having to stop by the house pretty often to make sure what we want was getting done. After the refinance should cash flow around $400-450 per month before vacancy/repairs.
Thanks everyone for reading and hopefully another story to be out very soon on the details on unit #10. Below are some of the after pictures. If anyone needs help buying in Baltimore County would love to help you take the next step.
Sorry for the delay I have been out of town the past few days.
@Jeremy England We started the process originally after 4 months of holding the HML note. I haven't had any big issues with finding banks. I have used Sierra Pacific Mortgage for 2 of my loans, Suntrust, and now a local bank for the refinance of 3 loans.
@William Fant I almost went with a 85% HELOC and I was referred to Tower Federal CU by a Bigger Pockets member and the process went very smooth and my house appraised right where it should have not too low.
@Christina J. Thanks so much, I will definitely keep updating and trying to get more engaged in Bigger Pockets again.
@Nurzhan Abenov I do miss the Supra at times but in the long run it was worth it. Would like to purchase a GT-R or used McLaren 12-C by spring if I hit my goal of rentals by then. Probably not the wisest financial investment but want to treat myself some.
Thanks everyone for the kind words.
Hey everyone, I first want to say that Bigger Pockets has helped me out so much along the way with all the stories I have read on the forums. I hope my story can help someone else or motivate like so many others here have done for me.
I closed on my first rental August 10th, 2017 after reading forum posts and listening to a lot of podcast episodes. My first rental is still my highest cash flowing rental so far. Which I will link to below for the full breakdown on that deal:
Link to my previous post about this home with pictures/numbers: First Buy and Hold Success
It took me a little while to get that house rented, I didn’t get all the repairs done until October so the house was vacant until November because I was doing all the work myself.
In November of 2017 I decided to sell my weekend car (94 Toyota Supra) which helped me purchase my next three deals with a business partner, we did a 50/50 split on everything.
We are going through the refinance process now for the above three loans and doing a cash out refinance on the second two homes to try and pull back out around $30,000. Hopefully we are able to buy another three homes without putting any additional of our own money into the bank accounts.
My boss at my company decided to leave earlier this year in April and wasn’t sure if I was going to have a job after he left. As soon as he told me he was leaving I signed up for an online Real Estate class that day and started taking the class every night when I got home. In June of 2018 I passed my Maryland RE Test and now am a licensed realtor. In the short 2 months I have been a Realtor I have been able to help one couple purchase their first home which was great.Earlier this month in August I really wasn’t looking for a new primary anymore until my girlfriend was done her residency as a nurse but a house popped up in Towson, MD that I thought would be a perfect live in flip.
The best part about this deal was it popped up on the market and since I put a lot of my savings into the other 3 homes getting them updated I did not have that much cash available. Luckily earlier this year I got a 100% HELOC on my primary residence and using it for the down payment and closing costs on this new home and only using a small portion of the HELOC.
Thanks everyone for reading hope this helps someone or motivates them to get started in Real Estate Investing.
Hi everyone,
My business partner and I are looking for good contractors/handyman that will do a good/quick turnaround in Baltimore area. In the past we have done all the work but we are buying 1-2 homes per month now and can't do the repairs fast enough.
Currently we are looking for people to do drywall/painting/minor repairs around the homes. We have been using Thumbtavk to get quotes but wanted to see what other investors are using. Homes are in Essex/Dundalk/Rosedale areas.
Appreciate the help everyone,
Zack