Connecticut Rehab Projects: Insights from a Local Lender - RCN Capital

Speaker: Mitchell Zagrodnik, Partnerships Coordinator, RCN Capital

Mitchell Zagrodnik: So here at RCN Capital in our home state of Connecticut, a lot of the trends that we're seeing with rehab projects currently are usually gonna be light to moderate rehab on these properties. Usually rehab budgets in the vicinity of $25,000 to about $50,000 getting put into these properties because the experienced investors in this market know their buyers, they know where they can get these properties values to and at the end of the day, their job is to get these properties sold and make a profit. So they wanna hit that certain marker where there's actually going to be a buyer's market. We're not seeing big heavy rehab projects trying to drive up property value so high because they know the budgets that we're currently in in this market. There's not gonna be many families looking for properties with super high values. At this time, we're not really seeing ad us out here in Connecticut either adding square footage, not in our market, typically condo conversions, not much. And then we don't do anything with really hotels and you know, super high multifamily stuff at this time. So the single family one to fours has really been our bread and butter and like I said, 40 to $50,000 worth of rehab with an average loan amount typically of around $300,000. That's what we're seeing right now.

Mitchell Zagrodnik: In this Connecticut market, we're not really seeing our investor clients have a lot of challenges. Lately, it's a higher rate environment, obviously a little bit volatile. Anybody who's, you know, followed the real estate market in the last year, year and a half knows this. But because the investors currently working with us in this area of Connecticut are a little bit more experienced, they understand the market, they know the trends, right? So they're doing less rehab on these properties and they're not trying to drive those values so high up to where they lose buyers. They're putting in a little bit here driving up the value just enough to where they're actually getting a solid return on investment because they know in this current market, budgets are tight, buyers aren't necessarily looking for high value properties. So really looking for those property values between $250-$300,000, putting a little bit of money into them and then driving up the price a little bit where they're getting those returns. We just see the investors getting a little bit more smart and savvy and you know, scaling their budgets where they can actually you know, still have a buyer's market out there and they're not trying to drive the price range up too high.

Mitchell Zagrodnik: A lot of the areas in Connecticut where our investor clients are finding success are mainly going to be in New Haven. Norwalk. West Haven has actually been a big one for RCN capital and a little bit of action in New Britain as well. Now, if you're not familiar with Connecticut, these are bigger cities in the state. New Haven and West Haven Norwalk, they're over near the water on the southern side, over near New York as well. And then New Britain is a little bit closer to the middle of the state. There's a lot of opportunity there as well. There's a college, there's a lot of commercial area. So I think investors are identifying certain, you know, markets that are a little bit more alluring towards the buyers and that's where they're seeing the most success.

Mitchell Zagrodnik: OK. At RCN capital, we'll do all kinds of rehab, typically. Cosmetic light rehabs, moderate rehabs, heavy rehabs. That's really what we're gonna see. Most of, like I mentioned here in Connecticut, a lot of what we're doing is gonna be light to moderate rehab, anywhere between 25,000 to 50,000 rehab budgets. That's really gonna be our bread and butter at the current moment here. Cosmetic stuff, you know, there's a couple here and there, heavy rehabs, we'll do them. It's just we're a little bit more strict on the experience for those types of properties, right? We wanna make sure that the investor has experience doing heavy rehabs previously. So we're a little bit more strict when it comes to our guidelines on those. But in this current Connecticut market light to moderate, that's what we're seeing the most of right now.

Mitchell Zagrodnik: So RCNS rehab loan program is pretty straightforward. We can do up to 85% of the purchase price and we lend 100% of the renovation costs as well, not to exceed 70% of the after repair value. Now, what's going to qualify a borrower for that? 85% of the purchase price is going to be experience mainly experience, but we also look at Fico as well. Now, what we consider an experienced investor is someone who's done three completed rehab projects within the last three years. Now, it's very important to stress that they have to be rehab specific experience, not just overall investment experience. So we really look deep into the rehab and we wanna make sure that the people doing these programs are qualified. Now, that doesn't mean that we won't work with a new investor if it's their first flip, that's fine for us, but we are gonna be a little bit more conservative on what we can lend. And we're gonna wanna make sure that there's someone on site that knows what they're doing. We can allow the borrower to do their own rehab, depending on if it's gonna be cosmetic or light rehab. But once we start getting into, you know, HVAC pipes, things like that, we wanna make sure there's someone on site that, you know, has certifications and those things. It's a 12 month term and there's no prepayment penalty. So there's a lot of flexibility with this program, right? Fix and flip, that's what we're seeing. Most of our investors in Connecticut do right now, you know, they're looking at their exit strategies to sell the property, but there's also that ability where they can kind of hold that property as well after rehab, they drive the value up of the property. They say, hey, I have a nice property on my hands. Now I can rent this out and keep that for passive income so they can refinance into that long term loan after rehab as well. It's called the BRRRR strategy. BRRRR, we see that happen a lot with a lot of our investors too where they decide they wanna hold. So yeah, that's some of the highlights we got on our program here, RCN.