All Forum Posts by: Bridgette Delva

@Brandon M. do you mind sharing the agent/firm that you use in Florida?

@Oliver Lazaro no LLC, not sure what benefit we would have for the one time deal.

HI @Oliver Lazaro the most risk adverse step would be to consult with an attorney and draft up a contract with them; this would be the most conservative way, to ensure neither party will lose and all risk is managed.  Of course, the least conservative way would be to have no agreement (which I would never recommend).  For our first investment partnership, we just used a loan template doc that we found online and personalized it to our terms then signed (with notary).  This is a legally binding doc and if it ever came down to it, it would be enforceable in civil court.

As for how you could structure the deal - that's totally up to you two.  If you're only looking at it as a loan then you'd want to simply charge interest on your money; something like 10-15% for private money. This method would ensure you get your money back independent of how the deal turns out.  You would set a repayment term and repayment amount (lump sum or installments).

If you want to benefit from the profit on the flip, you could simply say you want your loan amount in full plus "x" percentage of the profit.  Since he put in 45k and you're possibly up for 25k, rough math would say that you'd be up for ~35% of the profit.  This also ensures you get your money back in full but could also benefit from the profit.

Of course you could do a combination of the two (anything in between) where you still charge interest on your loan AND you share in the profits.

The way you craft the financials is totally up to you guys and what you feel comfortable doing.

Hopefully that helps. 

**Please note that I am not an attorney and have no training in law so these are just suggestions based on experience. 

@Matt Camilliere my vote is 1000% for #2 - cash flow is king in our world.  We are starting as a first generation of investors so we don't have the luxury (yet) of solely betting on appreciation.   We are only investing in cash flowing properties; we're also working on flips now but the focus is buying undervalued or distressed properties using today's market value for the ARV. We still don't invest under the assumption of appreciation alone, we're adding value to increase the value of the home.

Hope that helps!

You're most welcome!

Hi @Gabriel Menescal, we like to learn as much as possible about the local economy in addition to your standard cash flow analyses and COC returns. I love talking to locals, property managers, realtors and people who live in the area of interest. You'll get amazing insights into where people work, what companies are moving in or out (therefore, bringing jobs), info on traffic and commutes, etc. I'd call a few different PMs and Realtors just to get their perspectives.

We look at market activity in the area and school ratings.  Depending on they types of neighborhoods that you want to target, you may or may not care about these things but income level, median home prices and appreciation can all help indicate the type of market.

On a macro-level, you could follow the trending cities; those will be more competitive but they're more likely to be fruitful.

More quantitatively, you definitely want to do your cash flow analysis and aim for a ROI return of at least 8-12%.

@Jimmy Lieu ahh, I understand and thanks for clarifying.

First step is to determine how much you can afford to do. Say you want to do $5,000 in upgrades...

I would certainly not run out and get brand new cabinets as a first option. If you are hands on, I’d first try to sand and maybe paint them myself. Second option would be to pay someone to do that. It may cost you anywhere from $1000-2500 depending on your market and how many cabinets you have. People pay for updated kitchens: renters and buyers alike. Unless they’re falling apart, I wouldn’t replace cabinets.

I would 100% paint an updated and neutral color in the house. That’s cheap and improves aesthetics 1000%. Painting outdated window seals, baseboards and doors are icing on the cake.

Do things like update light bulbs to white vs yellow lighting. Change hardware on the kitchen and bathroom cabinets. If you can afford it in your budget, update light fixtures.

Ultimately kitchens and bathrooms sell and rent houses so do what you can to make those look amazing and functional. Replace bathroom fixtures if needed because those can get pretty nasty.

Other small things like replacing warped or missing HVAC registers add a small touch.

Curb appeal is also nice but I’d limit that to the things that don’t need maintenance like mulch or crushed rocks or something.

These are just top of mind ideas to get you going but start with a budget and maximize it!

Hi @Jimmy Lieu!  Since you use the term "fix" that leads me to believe that something is broken or wrong so I would absolutely "fix" anything that's broken.  Cosmetic items are hard to quantify BUT they can absolutely turn off potential renters.

I would say that I agree, to a certain extent, that you could look at other properties and then determine if you should fix the issues but our personal investment style is that we want our properties in tip top shape so we can get tip top rent so we attend to the small and large items.

For example, we are getting $3200 for our single family rental in a market where comps are, at best, $2300.  That is because we have several "wow" factors and there are no opened ended cosmetic "fixes".  The way we think about renters is that they will pay what they can afford and will pay for the house that they "want"; this is very different than buyers, who generally can only buy what the bank will lend them and that's limited by what the market says the house is worth.

So, my point is that if those cosmetic "fixes" will deter potential renters or prevent you from getting the most optimized rent, just fix it.  Besides, if renters see that you don't care enough about your property to fix the small things, they'll treat the same way as you do.

I'm also curious as to what type of "fixes" you are referencing.

Hi JT, I don't have an answer but I would recommend you start with understanding the terms of your lease first as that would be the first place that would offer you guidance on if they can do it.   As a tenant, you would be responsible for returning the unit in the same condition as when you took possession of it so it's normal to get charged for damage but I don't understand why they would charge you for a vacancy unless it's in your lease terms.

A few questions:

Did you break your lease or did it end on the term?  

In what state are you located? 

Did you have to pay a pet deposit? How much damage was done by your pet?

Hi @Victoria Jackson just to add to Justin's comment that you can use the BP rental calculator tool for up to 5 analyses as a free member or unlimited as a paid member.