All Forum Posts by: Angela Holstien

I paid cash for a duplex in Pittsburgh, then applied for a mortgage under the delayed financing exception that I learned about here on BP. I am trying to figure out if it is even worth it to go through with the mortgage.

Here are the numbers I received from the bank and I am wondering if this mortgage is too expensive for the size of it.

Appraised Value: $60,000

Mortgage of $42,000 (LTV=70%)

30 Yr. Fixed Conforming

5.00% with -.125 pts.

Closing costs are approximately $3,140

Thanks for your thoughts.

I am getting started in real estate investing but my wife is concerned about what happens should a deal go south. I have not yet set up an LLC or corporation. Will she be financially responsible if I enter into a deal that fails? I will not be using traditional financing. I plan to use hard money or private lenders. Obviously I do not plan to fail. I am patiently waiting to find a truly great deal. I just want to put her mind at ease.

I've been a landlord since 2008, but only about six months ago did I decide I wanted to get more serious about real estate investing. I'm an engineer by day, which is why every time I hear an investor or a guru say they were an engineer in a past life, it catches my attention. I don't intend to quit my job, but I have become curious why so many have. The head of one of the local REIAs in Dallas/Fort Worth, a local multi-family investing expert, and the head of a turnkey investment company based in CA but focusing on Dallas are three examples that come to mind. 

Here are my possible explanations:

1. There is no particular abundance of former engineers and I am just noticing them more because I am biased.

2. Engineers are good with numbers and analysis and these skills transfer well to REI.

3. Engineering offers good entry-level opportunities out of college but in the long term is a lousy career path (many of the successful investors I've met quit their day job after about 15 years working in the corporate world).

Has anyone else noticed the trend or have ideas why?

Hi @Angela Holstien,

The market in DFW is really hot right now. There is not a lot of inventory right now.

Right now being a realtor, I do come into some occasional properties that are priced below market and do need some work. PM me with what kind of JV terms you proposing.

Hello all, 

I'm new to BP. This is my first post and  reply; wahoo! 

Ok so all of you have valuable points. I'm an REI GC from Dallas. I do different deals with my investors. On most of my projects I'll do the rehab for whatever is in budget or write my bid to meet the budget. My profit is included in the line items. Generally I make 20% profit. That pays for my overhead, an assigned PM to that property, and company profit. It's not really much at the end of the day but I make my return in volume.

With close investors that I know and trust we do 50/50 split. They do their part and I do mine. I do the rehab at cost, which means the investor gets 20% more into the project or saves it. I don't use any of my capital, just time, knowledge, and resources. After all fees are paid, we split it. I have to wait longer but make a larger profit. 

Hope this will help you have a different perspective on the situation or help you ask the right questions. 

@Ashley Wolfe This raises red flags to me. You pay the GC a premium for their services which INCLUDES properly managing subs. It's not fair for them to try and get you to agree to a split on the backend unless they are willing to split ALL costs with you including half of the outsourced rehab cost to the GC. Some people here say a good GC is worth the split. Sounds like bad business to me.

John

I couldn't agree more regarding what you are saying about a good contractor is worth his/her weight in gold!!

However, for an equity participation into the deal, especially one of a 50/50 split, there is no substitute for "skin in the game."

A good quality contractor can still make a good bid on the rehab and still provide a quality service for that bid. I also do believe in rewarding my team, and work in bonuses for coming under budget and for better timeframes.

The contractor is already building a spread into his bid. The 50/50 split without additional benefit is just license to double dip.

@Ashley Wolfe especially at the beginning, if you don't want to be taken advantage of, you need to be OVERLY involved in the process.  You need to study up on construction costs, you need to be a part of the buying process, you need to become an expert in pricing material, labor, timeframes, etc.

My true recommendation is that you do partner up with an experienced Rehabber on your first deal.  It could be an investor contractor like @John Ellis or an experienced investor like @Jay Hinrichs who knows how to manage contractors.  But either way, become an expert by leaning on their experience before you do it yourself.  You'll save yourself a lot of heart ache!!

I am doing some flips with a partner. We opened a new company under both of our names. He provides the cash and I do the work. After we sell, we split 50/50 the profits.

Hey Alex and Kevin,

Thanks for the feedback.  Yeah my current investment goals are fix and flip and not buy and hold.  

With any money partner relationship, anything is negotiable.  Lots of good ideas on here about splits.  

Kevin, I enjoyed the water fall structure you laid out just in case a potential deal goes south.

The feedback will help me do some thinking on deal structuring.  

Thanks,

James

Welcome to BP @Angela Holstien. This is a great site to find rehabbers. Upgrade your membership and you will be able to place ads in the marketplace section.