Author Topic: REIA deal  (Read 2947 times)

Bourbon

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REIA deal
« on: August 28, 2014, 09:51:23 PM »
Finally got around to going to a REIA meeting. Very interesting, and there were several deals presented to a panel for review.

I was intrigued by one. Two homes  side by side near university going for $37.5 each. Current tenants under market, but seller recommended doing a 50k Reno, then renting to 4 college students for $1600.

Sellers also offered to assist with setting up Reno and finding first tenants.  They have been investing and flipping for ~5 years, and have several similar rentals in the same neighborhood. It sounds like this is part of a larger 9 home wholesale and they are selling off two for reno funds.

Numbers look good to me, sellers seemed established and trustworthy and the idea of some mentoring had me excited.

Anyone want to talk me off the cliff or should I dive in?
« Last Edit: August 29, 2014, 06:16:31 AM by Bourbon »

Another Reader

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Re: REIA deal
« Reply #1 on: August 28, 2014, 10:07:28 PM »
Generally, deals presented for sale at REIA meetings are not particularly good.  In your shoes, I would go look at those properties and then look at anything else that looked appealing on the MLS.  Do this for a few months and see what you can learn.

The best use of REIA's is to meet real investors, not people that want to sell you something.  If you can sift through your fellow attendees and find a couple of those, it will have been worth your time to attend.

Bourbon

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Re: REIA deal
« Reply #2 on: August 29, 2014, 10:34:47 AM »
Generally, deals presented for sale at REIA meetings are not particularly good.  In your shoes, I would go look at those properties and then look at anything else that looked appealing on the MLS.  Do this for a few months and see what you can learn.

The best use of REIA's is to meet real investors, not people that want to sell you something.  If you can sift through your fellow attendees and find a couple of those, it will have been worth your time to attend.

Thanks for the advice, and was definitely suspicious after I left the first meeting wanting to snap up some deals. My plan was just to go and observe, but the numbers look good to me.  Better than anything I have seen by watching the MLS.  There was a deals table that had some interesting options, but nothing that I got me too interested.  Then the meeting opened with several people pitching deals(some already on the table in the back).

This meeting they had a "Shark Tank" style event, and had 8 properties pitched to some experts/regulars and all got feedback.  The deal I am interested in was presented here, and I heard several positive comments on the deal.  I've gotten some more details and it sounds like it is part of a 9 home wholesale deal.  The gentleman who found the deal is a broker who has done a few flips and will be keeping one of the homes for a total gut and will then hold it as a rental.  He brought in two long time members who specialize in the college market on the deal who will also be keeping several homes each.  Most of the homes are on a street a few blocks away and they are selling the two that are by themselves to help pay for the renovations on the others.

I had a follow up call with them today.  They are closing on the larger deal today, and according to them expect these two homes to go today/tomorrow or will be posted on trulia/zillow and hope to unload them in a week. 

Again I didn't expect to walk out of my first meeting with a deal, but I think the numbers make sense.  I just got a copy of their repair estimates and they look reasonable, with the exception that I would consider re-siding both homes.  I'm trying to get a siding company I have worked with before out to look at them today.  The numbers look right, and the big seller to me is the help offered with contractor contacts and guidance on the projects. 

arebelspy

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Re: REIA deal
« Reply #3 on: August 31, 2014, 09:31:34 PM »
A few relevant RE sayings:
"Once in a lifetime deals come up every few months."
"The next deal is right around the corner."

Take your time to learn what is and isn't a deal for your market.  The RE market moves slowly.  You won't miss it.  Attend a few meetings.  Check the MLS daily.  Network with other investors.

Don't buy real estate for at LEAST 2-3 months.  If you're that new, the learning time will more than pay for itself.

I've done many deals with people I've met at REIA events.  None of them were pitched to the whole group.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Bourbon

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Re: REIA deal
« Reply #4 on: September 02, 2014, 07:54:11 PM »
So despite the two names I recognize most on this forum as RE experts telling me to walk away and wait, I'm going forward with the deal.  I just want to acknowledge that I am being given good advice and not taking it.

One home is currently fully rented with combined rents of $875, the other is half rented and bringing in $450.  All tenants are on month to month leases, no deposits, and landlord was paying utilities.

It turns out to be a small world, as one of my employees actually owns and rents out one of the homes across the street.  She had looked into purchasing the homes but couldn't swing the full 9 home package.  She has suggested she would have offered $55k ea for the homes I am picking up and probably paid more, done some minor renovations and sold for $90-95k.  There is one home in the package that may still be available that is across the street from the two I am getting.  It is the neighbor to the home coworker currently owns, both had previously been rentals that she inherited from her mother, and she is interested in taking it if possible.

I spoke with the local investment geared bank that everyone seems to use.  They offer a 6 or 9 month investment loan at ~6.35%.  I would borrow $75k for the price of both houses, with $105k available for renovations and 20% of the total due at closing.  This can be in the form of cash or equity in another property.  Interest only is paid and at the end of the renovation it can be refinanced into a longer loan with them or elsewhere.  Interest only accrues on the renovation funds as they are accessed. 

The interest rates seem high to me, but I'm used to retail owner occupied rates from early last year.  I have the cash for the down payment, and could alternately setup Heloc's to cover the renovations and do them one at at time.  I don't know that I would be able to do a cash out refi at the end of the renovations though, waiting to speak with my normal broker tomorrow.  Path of least resistance sounds like the local bank for the reno. Any thoughts on the financing?

arebelspy

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Re: REIA deal
« Reply #5 on: September 02, 2014, 08:06:38 PM »
Congrats! 

In my experience, it's easier to start with the correct financing than try to refi into it later (based on the credit climate we've had the last few years - it used to be easier to do it the other way around, but not recently).

Plan your exit strategies now.

Good luck.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Bourbon

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Re: REIA deal
« Reply #6 on: September 03, 2014, 09:03:42 AM »
Congrats! 

In my experience, it's easier to start with the correct financing than try to refi into it later (based on the credit climate we've had the last few years - it used to be easier to do it the other way around, but not recently).

Plan your exit strategies now.

Good luck.  :)

Thanks.  I'd planned to ask for a sanity check on the rates the local bank is offering, but got in touch with my broker.

I spoke with the broker I have used for my personal residence and he quoted me a current rate of 4.625-4.75 on a 30 year investment property loan at 75% LTV.  So about a point or more better than the local bank for long term financing. 

He also confirmed that they do do a cash out refi(at slightly higher rates, 4.75-4.875), so if I wanted to avoid the investment bank I could attempt to tap my home equity($65k in current home, $60k in rented former home) for the purchase and rehab the homes one at a time.

I think it will make the most sense to go ahead and do the rehab interest only loan and then get whatever rates are available from my internet broker.  No need to obsess over the short term rate and jump through hoops.

Bourbon

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Re: REIA deal
« Reply #7 on: September 04, 2014, 09:49:30 AM »
More thoughts and this may necessitate another LLC thread.  I'm setting up time to talk to an attorney(haven't used one before except for closings) about putting the properties into an LLC.  This won't be a problem if I go with the Investment bank financing of 6% on a 15 year note, but would keep me from getting a 30 year note at 4.75 from my regular lender. 

Do I just need to look around for better commercial loan financing or does everyone with an LLC just have to eat 1%+ higher rates?

sonnys

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Re: REIA deal
« Reply #8 on: September 04, 2014, 04:47:28 PM »
Congratulations.  I recently spoke to a lender about financing to a LLC that I am planning on opening and he mentioned that he can personally give me a 30 year fixed loan for 4.25% and I should then move the title to the LLC using the quit claim process.  I read that some banks can accelerate the payments if that is performed but he mentioned that his bank is not going to bother me as long as I am making the payments.  I would be glad to hear other people's experiences in this matter as well.

Thanks,
Sonny