Newbie Soon to Be Starting Out - Need Help!

[Blake Byrd]

I have been learning a lot and absorbing as much about REI as I can and I've recently started to put the dream in motion. I have met with a wholesaler and have requested real estate agents that my fiancé and I worked with on buying our house to keep an eye out for us, and I'm seeing deals on a regular basis now. I want to buy and hold and flip houses and smaller multi-family starting out. I have several questions I am looking for guidance on:

1) My fiancé and I won't be hitched until May of next year. She has most of the liquidity strength and we will be primarily using her assets until we are married to do deals (if we came across the right one before we are hitched). How do we need to structure our business? Is an LLC the way to go? Any recommendations on good attorneys in Dallas to help with organization structure? Do I need an attorney for that? Different business entities for the rental properties and the flips? Recommendations on real estate tax professionals in Dallas?

2) We haven't created a formal business plan, it's mostly in my head. I would like a formal plan that I can present to investors in the future. Any recommendations on how to kick this off? Books to read? Sample Plans?

3) I work for a high end custom home builder and I have only been working here for 10 weeks. Through a strange series of events, without my boss being aware, I have got connected with his primary loan provider and have lunch scheduled with him next week. How do I explain to my boss what I'm doing? Should I negotiate working for him on a contract basis to free up more time for my personal investing? I'm very conflicted on this topic and need advice.

4) What questions should I ask the banker at our lunch?

5) The wholesaler I've been working with (New Western Acquisitions) claims he has never seen a deal come through that meets the 70% rule, should I avoid working with them in that case? How do I determine deals that are over 200k can come down closer to 80%? Nothing I have found reaches that 70% rule either? How do I determine if the deal can break that rule?

6) My future father in law is a highly successful entrepreneur and loaned my fiancé the money to buy our house which she now owns free and clear, but her dad is requiring us to pay the interest back to him, but no principal which he is gifting us. Her father and I have discussed investing together as he already does quite a bit of multi-family investing, but we have never formally talked about numbers. With his background as an entrepreneur (and now a clinical professor on the topic) he believes a formal business plan is important (one of the reasons why I want a formal business plan). How do I approach him initially about investing with us? I think he would frown upon us taking a HELOC against the house, which I want to use for repair costs, is this a bad idea? How would I bring these topics up to him (he lives in a different state)?

7) Most my fiancé's and I assets are tied up in other investments i.e. 401ks, fidelity accounts, diversified investment accounts, etc. Is it a good idea to take money from these for real estate investing? We have cash, just not near as much.

I apologize for being so long winded, but this is all happening a lot faster than I anticipated and need some help!! I'm sure I'll have more questions too. 

Thanks. 

[Richard Redding]

1) I do my flips under my LLC. My rental homes I don't, but I keep an umbrella policy. Figure out where you want to focus. I don't know that I'd jump into both right away.

3) let your boss know what you're doing. Sounds like he did you a solid by getting you a job in the 1st place. Treat other  people how you'd like to be treated.

4) focus on finding out what he needs to see on approving you for a loan and what he thinks other lenders would also want to see.

5) I'm in Austin, I don't follow the 70% rule simply because it's too hard to find a house under that parameter. I follow the 'can I for sure make 20k if my project takes 3 times longer than estimated (if neighbor calls permit office, this can happen) and costs 30% more'. So far we're averaging 35k net per flip.

Main thing is you need to know an accurate after repair value. Make sure your realtor knows what they are doing. Have the home inspected. You can have contractors bid the repairs prior to you even owning the house. Add 30% to the quote and then account for holding costs: utilities, insurance (quite high on a flip), interest, taxes, etc and round up.

6) do not take out a HELOC. Your paid off, homesteaded house can't be taken from you.... unless you give a bank a lien

7) No, do not touch retirement accounts

-to be honest, with no experience, I don't know you should start into flipping unless you can find a local mentor. I think renting and being a landlord is much safer. I really suggest duplexes.