All Forum Posts by: Scott Hubbard

Why not go direct?

1. I put ads in Craigslist and other online sites stating cash for old jewelry, watches, etc.
2. Estate sales

You may need to educate yourself on testing procedures, but you can buy at wholesale prices.

Newer construction usually means lot of useful life remaining in the systems. Good Luck!

1. Max rehab of $3K? There is no such thing, in my opinion, of a $3K rehab in a single family much less a multi-family. When your buying an investment property, your not just replacing broken items, your, in fact, fixing future problems which will mitigate future expenses. In a multi-family, you have double the fixtures, appliances, doors, HVAC, etc.... this means you have double the reason to mitigate future expenses and you will undoubtedly spend much more money than $3K...... or wish you had.

2. Seems to me your much more focused on the 50% rule and CoC which can be a poor metric. The 50% rule is a guideline and, in my opinion, you need to look at mitigating future expenses by addressing those things that are at the end of their useful life. By doing so, you will increase your out of pocket, but decrease your expenses and your vacancies.

3. Using a CoC calculation when you have fixed costs and/or a fixed rate of return. When investing as a principal in an investment property, your expenses and revenues will never be fixed. Therefore, using a CoC calculation is merely another guideline at best. A CoC calculation would be a much better metric if your were the lender loaning to another investor with a fixed APR.

4. I would much rather you utilize a CAP rate and a return on investment (ROI) based on full capitalization and expenses. Since I do not have your full list of expenses, it would be hard for me to put a ROI analysis.

5. You need a benchmark! After you calculate the CAP rate, you can use comparables to make sure your paying a similar rate. With a ROI calculation, you can compare the return against other investment choices like treasuries or bonds, or loaning the money to another investor also know as opportunity costs.

However, based on your initial analysis using the CoC and the rules, it looks like a deal worth looking into in my opinion.

Good Luck!

In some states, "splitting commissions" with non-licensees can be a violation of state law. This is true in California, Arizona, and several other states.

I believe it is a conflict of interest if the broker is in charge of the acquisition, management and marketing of the property and is being compensated over and above any other partner's split. This is not only my belief, but is the opinion of several attorney's which have drawn up partnership agreements for me.

I suggest, any commissions paid to partner brokers are reduced proportionately from the their proceeds so it is fair to all parties. I also make sure any partner brokers who are partially compensated through commissions are not solely in charge of acquisition and the disposition of property.

Make sure you do research to make sure people are willing to pay for sunrooms. These can be expense to convert due to the need for energy efficient windows and insulation. In my experience, your likely going to need to discount the square footage value for a sunroom. For instance, if your getting $100/sq ft for the house, you may only get $70.00/ sq ft for the sunroom while it cost you $85.00 to renovate it.

1)In looking at the pics, you really need to have a good general contractor take a look at the sub-floor structures as it look like it suffered from severe water damage. 2) If you have not already, you should budget new engineered flooring because even if some of it is salvageable, you're not going to be able to match it up. 3) Going to convert downstairs space into a master? You do not need to reinvent the wheel, so I have to ask is this necessary? At a $189K price point, do buyer's expect a large downstairs master to living space? My experience is that they prefer large open concept kitchen to dinning to living area. Most will settle for a smaller master if they can entertain family and friends these days. However, I know that 50's houses typically have a small master, so I am just giving you some food for thought. 4) Make sure you check for mold. 5) Once you close and rehab, make sure your remove the pics in Zillow ASAP.

Comps really do not have enough information like year built. You should try to use comps that were built in the same decade.

I think #2 is a very good comp and may support you not having to rob some downstairs space for a master. I am not a big fan of changing layout because you can run into a whole of structural problems running plumbing through subflooring, weight of bathtubs,etc. Do not be afraid to do what other rehabbers have done before you. If they did not change the layout, then why would you?

Good Luck!

A few things that jump out at me.

1. 6% per annum return is low even with first position as Jon as already stated.
2. Commerical lending is not having the same problems residential is having unless the property is in some sort of distress. You should get very detailed market data as I know several hotels are struggling right now and it could be difficult to get cashed out if they continue to struggle.
3. Are they pooling capital? These types of investments should be registered in the state of Arizona and quite possibly may need to register with the SEC. So I would check with the Arizona Corporation Commission or Attorney General just to make sure.
4. How are you going to get cashed-out? Are they going to re-finance again? There should be a severe financial penalty to the owners should they fail to meet their timeline.
5. Ask yourself, do you want to own a 156 room hotel? Because one of your outs, should the investment plan fail, is foreclosure.

I personally pay 8 or 9% return to my deed of trust investors on much less risky assets. Sounds like to me that your not getting a risk premium on this investment.

HELOCs are not available because they are residential loans guaranteed by individuals and what you seek is a type of commercial loan or credit line which are available to seasoned companies with proven financial track record. There are BLOC's Business Lines of Credit which will allow collateralization of residential income properties.

You might be able to get around the fact your entity owns the property by either transferring the property back into your personal name or by some personal guarantee or cross-collaterization agreement. However, since you put the asset into an LLC, I am going assume you care about asset protection and further this discussion just a bit.

My advice to you is to seek out local banks where much of their business is derived from commercial lending.

Big Banks like Wells Fargo, BOA, Citi, US Bank, and Chase utilize lending programs aimed to service large swaths of depositors. Commercial lending for real estate expansion is a relatively small demographic thus it flies below their radar. The smaller more nimble banks such as state chartered or regional banks are better able to service you.

If the LLC that owns the property is part of a legitimate business, is profitable, then you stand a good chance of securing some kind of funding.

Legitimate, in this case, means that the entity is part of an overall business investment strategy whereby you have a business plan, tax returns, and the funds you seek are for further business expansion.

If, however, the LLC is a stand alone entity, is not profitable, or is not legitimate, then your probably better off putting into your personal name and securing funding that way, or still talking to local or regional banks to see if they have any loan programs available where you might be able to secure financing.

Good Luck

Actually abandoned properties pose a higher risk for the lender so they will generally change the locks on the doors and may choose to expedite the foreclosure process.

I would ask the LA the following questions:

1. Are the owners cooperative and are you in contact with them?

2. have you been in contract with BOA or submitted any previous offers?
3. Are HOA dues current?
4. Are there property taxes up to date?
5. are the utilities on?

These are all important questions because you need cooperative sellers and you need them paying HOA, taxes, and keeping their utilities on.

Good luck!

I have not had this particular issue with Suntrust in the past, nor have I with any other lender for that matter, but I can say that YOU will not be able to purchase this property because the file has now been flagged. This means, you, as the buyer, are pretty much screwed on this deal. And, your probably flagged on future deals with Suntrust too.

here's what I would do.

1. Unless your intention is to hold the property, I would find another investor or buyer.

2. You should find out if the investor is Fannie Mae or Freddie Mac, which sounds like it might be the case. If it is, your likely going to continue to have problems with "anti-flip" restrictions so you will need to decide if this particular deal is worth pursuing. I avoid any deals where Mae or Mac is the investor due to the restrictions.

3. Stop using the standard option contract. I use a standard PSA and instead use the marketing and resell verbiage in an addendum. You should spend the extra time with an attorney to put this addendum together to make sure your the language is clear and concise.

This will still give you the ability to look for an endbuyer and may still allow you to list in the MLS (check with your association rules).

Typically, if the PSA does not say "option" or have option language, then it has a better chance of getting accepted. However, these days, most contracts are read very carefully, so you may need a plan B.

Good Luck!

In my market, it depends on the type and location of rental. I believe luxury rentals will see an increase as there is low vacancy rates somewhere around 3%. I can only see demand increasing as I see more and more strategic defaults occurring. Therefore, I believe the rental rates in this sub-market will be much higher. This analysis includes SFR's and MFR's.

On the other hand, for the lower socioeconomic blue collar rentals (B class), I see rental rates will remain the same or a slight increase as we are still in the absorption period where vacant units are being converted to rentals. There is still much supply and competition with cheap money, so I expect a lower cost basis to negatively impact rental rates.

The middle-class is also in a transition, but has been in higher demand recently probably due to post-foreclosure tenants looking to rent. Supply remains moderate with vacancies being around 7%. I expect a slight rate increase mainly in properties with a good central local.

My assumptions are supported by new construction project starts. We have two Class A "luxury apartment homes" projects underway which are expected to do well.

We are also seeing some infill SFR and small MFR projects going up as well. The common thread to all of these projects are that there in locations well-suited for commuting and are aimed at the higher-end or luxury demographic.

In my opinion, with interest rates low, I think it can be a good time to build if you have a good location and demographic.

I am personally looking into new construction opportunities and in the process of putting a JV together. I expect this particular sub-market to outperform over the next 4 or 5 years.