What is your HONEST OPINION of my investing model?

[Shiloh Lundahl]

I have had various feedback from praise to criticism on the model I use as I invest in real estate. I base a lot of my model on the opportunity I wish I had at the beginning of my real estate investing career and partially on what I did have. Anyway here it is and I would like to hear any and all feedback from those who wish to comment.

I buy houses that are below the medium price point for the area. I want my "all in" to be at 75% or lower of what the ARV will be (including purchase, rehab, carrying costs and hard money costs) and my "all in" needs to be at 145k or less that I can rent out for up to $1300 a month. Then I refinance and suck as much of my capital out of the property as possible (your basic BRRRR strategy). Then I lease option the property where the tenant/buyer gives me $3900 for the option to purchase the property within the specified time frame (usually either 3, 4, or 5 years depending on when I want the proceeds from the sale). The tenant buyer pays a premium rent for the right to buy the property and they take care of most of the repairs so the management of the property is pretty light compared to a straight rental. Following this strategy usually produces 3 times the profit of a regular flip and nets about 50k - 60k in profit over a 3-5 year period of time per property.

In order to do this and scale this model, I usually purchase a property with hard money and then I refinance it into a 20-year commercial loan or portfolio loan. In order to fund the rehabs, I use private money from individuals who want to learn the process of lease optioning a property. These private money lenders will lend me anywhere between 10k and upwards of 40k for a rehab. I then include them on my investor/private money lender WhatsApp group and I show them the process of acquiring properties, managing the rehabs, advertising for tenant buyers, managing the properties, etc. And I share with them all of my contacts and my paperwork. And I make myself available for calls and questions through the process. The private money lenders earn 8% - 10% APR on their money while it is invested and they get to learn throughout the process.

I personally would have loved to have had someone provide this opportunity for me when I was starting out where I could learn the process by watching an experienced investor buy cash flowing properties. And all I needed to do to learn the process and get access to the investor was to fund one of his rehabs. And then I would get my money back plus interest. That would have been awesome for me.

The criticism that I get from some people when I explain my model is they say, “that’s it? You mean I fund the rehab and we don’t split the profits?” If I fund the rehab then I want half the profits.” Even though I found the property, coordinated the hard money, and have established crews to do the work, I have the successful track record, and I have my assistant manage the whole process.

Tell me what you think of my model. Do you think I am being helpful to people or that I am taking advantage of people?