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Fix and Flip Using Hard Money [Live Example]

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    Hi Guys, Bryan Schroeder here with FasterFunds Lending, today we’re going to walk through a house that actually we’re buying and we’re going to rehab and retail it.  We’re going to flip it.

    We’re going to talk a little bit about how if you are going to use a hard money loan how that would work on this house and we’re going to show you how I would look at a house, run some numbers, and just kind of talk through the process.

    So, we’re over in Maryland Heights, on a street called McKelvey. It’s a little bit of a through street, there is some traffic that goes up and down this street so, you know when you’re thinking about resale and looking at comps, I would beat it down just a little bit just that people are going to prefer to live as you know, not on the busy Street, but like a block off or something.

    So, when you’re looking at comps just think about things like this. The house definitely needs a pretty good-sized rehab, and we’ll be talking about that as we go through it.

    Out front here, there’s a couple of trees, they’re kind of close to these power lines. The power lines don’t really bother me, they might bother a few end-user buyers, but this is a popular area, I don’t really think it’s that big of a deal.

    But as far as these trees, to me, they just need to go. We’re gonna budget getting rid of all these trees.  I’m gonna estimate about $2,500 to clean up this front yard, as far as getting these trees out of here.  

    These brushes out of here, and just making some nice little landscaping. The house is a three bedroom / two bath house with a two-car garage all ranch style house.

    The house needs siding, windows, and a roof and stuff like that, but we’ll talk about that as we go through and sketch out what my budget is for this house. And that’s what the front looks like.

    Hey guys, we’re out in the backyard here over at McKelvey and I just wanted to show you what we do out here in the backyard.

    The house, obviously, the roof, gutters, siding, and windows all need to be replaced for sure on all of that. The roof, I don’t know if you can see in the video or not, the roof is alright. It’s just a three tab shingle roof rather than an architectural shingle roof which I like especially on our flips, especially if you’re doing new siding, new windows, and making the house look beautiful.

    So, I’m going to budget in a roof, but I don’t know if we’re gonna replace the roof or not. But I’m gonna budget that in, so just throwing out some numbers, I think we’d spend about $5,000 on a roof here.

    I think we’d spend about $6,000 on siding, and maybe $3,000-$3,500 on windows. So, there’s a fair amount of work that needs to be done on the outside here, but when it’s done, this house will look beautiful and brand new.

    Let me remind you if you’re looking to borrow money on a house like this, FasterFunds Lending will fund 100% of the purchase, and we fund 100% of the rehab as long as you bought it at the right price where you’ve got room in it for your numbers.

    So, keep us in mind for a purchase and rehab funds on your next flip.

    Hey guys, we just walked in the front door and we’re standing in the foyer here. You see in my hand, I have notes, this is how I do things, it’s kind of old school. I don’t know, I’ve done this for so long this is just the way I do it.

    I always bring with me the tax records and some comps so, I know what I’ve researched before we left the office what I think the house is worth, ballparking it and I have a lot of houses that sold right in the neighborhood here. In case I want to go drive by and see how that lot compared to our lot and so forth.

    I also like to know exactly what the square footage of the house is, so this house is 1,232 square foot, so it’s just a good thing to know when you’re figuring out the how much rehab is on different things.

    So, I’m going to kind of talk through it all, what our plans are for this house, and I’ll throw out some numbers while doing it, so you’ll kind of have a feel for what we’re gonna do.

    So, we’re gonna put an engineered hardwood floor pretty much through the whole main floor in here. This house was built in 1979, during that time frame they kind of compartmentalized different rooms and stuff so we’re gonna try to open this up a little bit.

    There are some structural walls in here, so, we’re not gonna do a ton, but we will open this up a little bit. So, we will talk about that while we’re going through here.

    So, through the foyer, the living room, and the dining room, we’re gonna go with the engineered hardwood floors.

    We’re gonna pull some of these walls back just to make this opening a little bigger. And this little wing wall here, to me it doesn’t really do anything so, we’re gonna pull that all the way back to that wall. This wall doesn’t really accomplish anything so well just pull it out of here.

    So that will make this living room and dining room kind of feel like it’s together.

    Coming around the corner here, this is the kitchen. The way the kitchen is set up now is just all on that one wall. We’re gonna pull this little wing wall back. This is a structural wall here so well have to make sure the header is up here properly.

    We’re gonna make this kitchen more of an L-shaped kitchen.  So, from that corner to this corner over here. We have a window here, and all the windows here need to be replaced.  Since this needs to be replaced anyway, we will pull this over here, and pull the sink underneath the window.

    The dishwasher will be next to it, then over here, but it will be a nice L-shaped counter with a window over the sink. We will give it a nice layout here.

    So just ballparking it, a kitchen like this is gonna cost us about $8,000. So that will cover the cost of the cabinets, countertops, appliances, and getting all of that installed.

    The flooring, we’re gonna do that in hardwood, which I think we will spend between $4-$5 per square foot, so this will cost us $6,000 for flooring.

    Then painting this whole house, there are old slab doors, we will put in six-panel doors and update the hardware on the doors, and update the lighting.

    On the ceiling, there’s this popcorn ceiling in here. We will make this a nice smooth finished ceiling. So anyway, all of our painters do wall repair and popcorn removal, and not replacing the door but painting the doors.

     In here we’ve got paper on some of the walls, it looks like it will come off fairly easily, but there’s prep work on these walls. So, in a house like this, I’m gonna say it will be about $4,000 to paint this house.

    Alright, we will go with the same hardwood floor all the way through here, some nice grey walls because of that’s what’s in these days. This wall over here is a structural wall, so we’re gonna leave this wall for the most part.

    Get rid of that paneling and make it a nice grey wall.

    This house has got a fireplace, this is probably a personal preference thing. But I don’t like it. I’d prefer to create more of an open space than to keep this fireplace. So, we’re gonna pull this fireplace all the way out of here and open up this room to the kitchen. So that’s what we’re gonna do.

    Come down the hallway here, we’ve got three full bedrooms and two full bathrooms. So, the first bathroom here was gonna do a new vanity, mirror, light fixtures, and a new toilet for sure. Now that bathtub and ceramic tile surround, you could possibly just clean that up and reglaze it and put new hardware in here and it would be fine.

    When we’re walking through the house, I’m throwing down how much we will spend on things and then figure out a little bit as we’re going. I threw $3,000 down for this bathroom. It will make this bathroom all brand new and it will be really nice.

    In the master bedroom, it’s a pretty decent size. Like I said earlier it’s got slab doors. So, we will put in new doors, light fixtures, windows, and the hardwood floor throughout all of this.

    And then there’s a master bath suite here. It’s kind of small, the house was built in the ’70s. But we can make this nice with new vanity, new mirror, and new toilet. We will give it a new shower with a ceramic tile surround to make it nice. Since it’s so small it’s worth putting in that extra money to make it really nice, so I’ll put $3,000 for that bath also.

    Then the rest of the main floor here just consists of two spare bedrooms or kids’ bedrooms. They’re not overly big but they’re fine for a second and third bedroom on a ranch style house like this.

    And guys, I appreciate you going on the tour with us. We’re gonna go down to the basement but just remember FasterFunds Lending will fund you the purchase and rehab on a project like this.

    Hey, guys, we’re down in the basement now.  The basement is unfinished and on a house like this, all that we would really do is paint the walls and obviously get rid of all the trash. Holy smokes, between down here and the stuff that’s upstairs, there’s a hauling bill.  

    You could probably get all of this in one 40 yard dumpster. And a 40-yard dumpster will cost us about $450 and about $500 for someone to fill it. So about $1,000 in hauling for a house like this.

    And we would just paint all the walls a white color and the floor gray, just spruces it up nice and leave it unfinished. You could finish this room but I don’t know if you’d get your money back one it. You’d be doing extra work for what’s the purpose?

    I want to show you a couple of things here, this basement, gutters, and downspouts just weren’t maintained properly. There’s a little bit of water coming down on the sill here. Back there in that corner, there’s been a lot of water damage over time and some termite damage.

    When you have water right next to the foundation, especially a wood foundation, it encourages termites to come in. If you see right over here these are actually termite tubes. So that’s something for you to look at whenever you’re doing rehabs.

    I think this is minor damage so I’m not that concerned about it. The treatment would be about $600-$700 and then $500 in repair work. So not a huge deal but it’s something to be aware of.

    As far as the systems go, the hot water heater here is from 1989 so we’d probably replace that.

    The furnace looks to be good.  We would just get a check on it from a heating and cooling guy.

    All the plumbing, is PVC, black PVC but there are no concerns here. We will have some plumbing work because we will be arranging the kitchen upstairs. It’s no big deal but you are in Maryland Heights so, you definitely wanna get permits for that.  They’re pretty picky over here.

    The electric box is a Sylvania box. It doesn’t have a main shutoff so some inspectors will want to have that replaced. We would just leave it until we’re asked to replace it. Sometimes you’ll get away with not having to worry about it, and sometimes you’ll have to replace it.

    It’s obviously been fine for about 40 years so I don’t think there’s anything wrong with it but an inspector might make you replace it. Other than that, it’s just an unfinished basement, a nice good-sized basement, tons of storage, and it will look great when we’re done.

    Hey guys, we’re back in the living room I just wanna wrap up this video and tell you a few things. So, when I go through, walking through the house I’m kind of old school. I like to write it on a piece of paper because a lot of the times we’re talking to the seller while we’re doing that.

    And you know, I’ve known people to take notes on their phone while talking to the sellers, and I think sellers get irritated with that.  Just a quick tip. I’ve noticed myself doing that before and sellers think you’re talking to your friends while you’re negotiating with them on their house.

    I write it out on a piece of paper that a way they can look at it with me if they want to or whatever.

    I added up our rehab on this, which was landscaping, trees, roof, siding, windows, kitchen, flooring, paint, two bathrooms, hauling and cleaning, a hot water heater, light fixtures in baseboards and stuff, and miscellaneous. I came to $45,000.

    Having it broken down like that is helpful when you’re doing construction dispersing because they will want to see it broken down like that. So, it a good way to do it.

    So, if our total rehab is $45,000, this neighborhood is about a $200,000 neighborhood, if this house was not sitting on a busy street, I’d call it a $200,000 house. 

    I knocked it down to $190,000 just because of that busy street, there are just some people who won’t want to live on the busy street.

    So, I used $190,000 for my ARV (after repair value) and with FasterFunds Lending, we will fund up to 75% of the ARV to you.

    If you want rehab dispersing too, you’ve gotta subtract off the dollars you’re going to spend on your rehab. So, in this case I took $190,000 * 75%, cause that’s where we will want the spread to be for us to lend 100% on the deal. That brought you to $142,500. With the $45,000 rehab, if you want us to fund 100%% of the rehab, you’ve gotta subtract that off.

    That brings us to the purchase price or the maximum that we would allow you to pay for at $97,500. That’s if we’re gonna fund 100% of the deal. If you wanna put some of your money into the deal, you could pay a bit higher than that. That’s how we look at it from a lending perspective.

    Arielle and Suzanne would love to talk to you about any of your needs or rehab funds that you need. Keep us in mind at FasterFunds Lending, and I enjoyed doing the video with you today.

    [Suzanne] Hi everyone, this is Suzanne and Arielle with FasterFunds Lending, today we just wanted to share with you a little bit about ourselves and who the FasterFunds Lending team is.

    So, my role in the company is to make sure that all of our borrower underwritings go through, people get their pre-approval letters, and I’m there to answer any questions after they’ve been pre-approved.

    And the biggest part of my job is to make sure that all of the property underwriting gets taken care of.

    So, when you get a house under contract, I go and walk through it with you, and make sure your numbers make sense to you. This is because the biggest focus of our job is to make sure that there are win-win situations.

    So, for you, it’s that you will do well and make money on the property. And for us, so we know you’ll pay us back and get approved for a loan in a good manner.

    So, I personally have some experience flipping homes in the St. Louis area, I’ve been doing this for the past four years. And I also own a couple of rental properties. Our team, as a whole, has 23 years of experience.

    Arielle, would you like to share a little bit about you?

    [Arielle] Sure, I’d love to. My name is Arielle, I’m also a local St. Louis real estate investor. I am also part of the FasterFunds Lending team, and I help all of the new clients come on by explaining what hard money is.

    I help them get started with their new flip projects or rentals. We also work with co-sales as well. I just kind of help them transition into using hard money, educate them and help them make their business a little more profitable.

    As far as my experience, I have 10 rental properties and I’ve flipped a handful of houses every year, so any time I can help a borrower, add back to their projects, answer any questions for them, or give advice, I’m happy to do that.

    Our whole team…we love working with investors and giving back by helping other people grow their businesses.

    [Suzanne] So if you’re looking for a lender that cares about win-win situations in the St. Louis area, please give us a call.  We would love to share with you about our program or answer any questions you may have about hard money lending in St. Louis.

    Rachel Mendoza
    Author: Rachel Mendoza