All Forum Posts by: Kenneth Bell

@bryan

I love the product. Was this in Plaza Midwood proper or on the fringes. I have done some in fill in Wesley Heights and in Parkwood and in Dilworth but the HDC here can be a bit over the top. Where else are you building?

Rich,

The concept is simple I build and sell to investors pre-construction at a lower price. When we market and sell, they get the spread. It works well in hot markets. I build a spec that pre appraises for 320k I give it to my pre construction investor at 285k he secures construction loan. My marketing team markets right away. When we sell that spread is his. He has the option to sell at whatever price he likes. 60% of my investors had contracts before the CO. Worked well in high demand markets. I made a little less but the leverage was in the house and investors got great returns. Not sure if anyone else used the strategy.

Craig working with a good investor may get you both results. You get the benefits of higher returns and more passive involvement. I have partnered with leverage partners before. Good "smart "investors" will partner with leverage, if they can contain their greed. You both will be more successful in the long run. Finding the proper match is the key!!!" Anyone can buy real estate, but not everyone is a real estate investor" TPM

Has anyone ever used preconstruction investors to fund their specs. I used too all the time and it worked great did know if anyone else does the same?

This is a pick your poison type situation. I have been on both sides of the equations. I think the answer lies in your strategy. If you are a lender rather conventional or hard money your only way to make money is with fees(points) or over time with interest. By nature hard money is not the type of financing that most investors seek to keep any longer than they need to, because it is so expensive. So depending on who is at the other end of the money you are lending if they are smart they will try to be out from under you as soon as possible. This could be a good thing if they are a savy investor and come right back to you again for their next property. A good flipper can have a property rehabbed and sold in 6 months or less depending on the complexity of the rehab. So for arguments sake you are charging 5 points on the front end and 12% to make the numbers easy. So on a 6 month flip, if you leverage the entire 100k you can make 5k in points and another 6k in interest payments. 11% return is not bad.If you managed to have the 100k out for a year then you could pocket 17%. Year over year most people would do cartwheels over those returns. A savy flipper however should be able to match those returns pretty easily. On the other hand a buy and hold or cash flow real estate investor would have a hard time reaching that return year over year, but in the long hall if he bought wisely and got himself from underneath your very expensive hard money terms he may see high double or even triple digit returns. My mentor taught me to hold property for wealth and flip property for cash it depends on what you need. If all you have to put into real estate is a 100k then I think a good return would be between 12-15%. If you took the same money and you were in the right area you could use the same cash, maintain a lot more control and make 20-30% on your money pretty easily. I dont know where you live, I know in some parts of the country you cannot enter the market very cheaply. Personally unless you have a lot more to leverage I would invest directly in real estate. Conversll if you could leverage your 100k to a LOC of say 500k then I may take a different approach...my long winded 2cents!!