All Forum Posts by: Adam Melon

Hello, I'm exploring taking on my first flip project. I've done alot of reading and watching videos over the last 18 months. I've invested as a private lender into a couple flips. And what I'd love to get info on is the actual process and systems A-Z on a flip. I understand alot of the steps, but there are few steps where I'm not exactly sure how I should go about things.

Questions:

1. When searching for deals through a realtor or wholesaler and viewing homes, and not having that experience to just walk through a property and assess the rehab costs on my own, is it common practice to bring a contractor with you while doing a walkthrough to gage what needs work and how much it'll cost? Or do you have to put a property under contract first before that step?

2. When using private money to cover 100% of the financing, what would be the process of showing proof of funds after you sign the contract? Is it just as simple as obtaining a PML contract with the lender?

3. At what point does it make sense to use an architect? How much does their work generally cost?

4. When it pertains to design, do contractors do any consulting? Or is that solely on myself to come up with? What is common costs to have contractors do walkthroughs on SFHs and provide bids? As a first time flipper would you seek multiple bids from different contractors?

Thanks for your input! Would prefer to get the dumb questions answered on here lol

@Tony Shiwprashad

I'm new to the game too. I've done extensive research on the business and everything that goes into it. I'm ready to make a move, and have been building a network. We seem to be at about the same point, so let's connect and see if a partnership is something that can work for the both of us. I'm in NY too by the way and have family in valley stream. I have been doing a ton of research on long distance investing. I read David Greene's book on long distance real estate investing. I've got about 25 cities on my radar that I plan to Fisk through to invest in. Shoot me a PM if you'd like to discuss furthur.

I'm looking to flip homes long distance and I'm curious how others go about the process when dealing with contractors, and deciding on rehab/cosmetic work. I understand you have to vet and manage the contractors thoroughly to optimize results. My concern is with the process of deciding on home design overall. Is this something I should do my homework on myself? Such as searching for different kitchens, floors and ultimately choosing myself and letting the contractor know exactly what I want? Or is there some consulting contractors offer as part of their services. I love everything about real estate, but cosmetic decisions is something I'd prefer to outsource to a professional. Would utilizing a home designer over a contractor for cosmetic decisions be better suited?

Would it be possible to some how structure a 203k loan through an LLC on a quadplex, of which all 4 partners would occupy each unit as their primary unit? Rehab it, and sell after 2 years - pay zero cap gains collectively (Assuming the property doesn't appreciate by 250k, which wouldn't bother me a bit lol). While I believe its not doable from the research I have done, I just feel like with all of us living in it, they would make an exception. Just seems like a win win for all parties involved. All units are being occupied, and the bank has 4 guarantors on 1 loan. Just don't see how the bank is at risk. If whoever is reading this knows its not doable, whats the next best thing to do to make 4 partners in a quadplex work? commercial loan?

Thanks

So I have 3 potential partners that I am considering creating an LLC with. The partner with the most capital to contribute and probably the most knowledgeable on the real estate business has a pretty bad credit score. Without capital, things will be much harder for us to take off. But the others and myself are concerned his credit will hurt the LLCs ability to obtain a loan. The other 3 of us have good credit so my thinking is we'll be ok. But what makes the situation really tricky is we have to create an LLC to request a loan collectively. Which I believe means we can't utilize a conventional loan and have to request a commercial loan. Reason being banks dont honor conventional 30 year loans to LLCs(correct me if I'm wrong). So that means we have to create the LLC and have our operating agreement prepped by a lawyer. The fear is we spend a couple thousand for the LLC and we wont be able to qualify for a commercial loan. Yes, I know hard money lending is an option, but the concern of being able to refi is an issue we'll have to face on the back end of a hard money loan. So to boil up my question in simple terms. Can we partner with a guy with bad credit and be able to finance on our investment property? And does more partners increase our odds of getting approved?

@Lori Greene

Great info Jason! Thanks. One question. Do you know if the new tax laws have affected deducting the interest? @Andrew Bosworth said this earlier in the thread, "From my understanding, the new tax law no longer allows you to deduct the interest (if used for an investment property) - but I'm not a tax professional.." Do you know anything about that?

Hi Lory,

Unless you're investment properties are making $25 million a year, you're able to fully deduct the interest expense you incur. There are some caveats though. If you're doing a syndication, and have more than 35% partner interest as silent investors, you will trigger the interest expense limitation of 30%. To explain the logic, the government does not want to give a tax break to people who are silent investors. They give it to the active investors who are putting in all the sweat equity.