All Forum Posts by: Brock Salgado

 Thank you, Bill!

 Chris, thank you much for the recommendations!

 wise guy lol

Not sure if this is a strange question or not but it certainly is not one I've seen or heard answered. My buddies and I have a contractor that is outstanding. He's honest, willing to teach us a great deal about what he does, and actively searches for ways to achieve our vision with our flips and also to save us money. This is both because of his character and because it is pragmatic: we both intend to do plenty of business with one another over the next few years. I see some things in his business structure, however, that lead me to believe he could be doing better in terms of the general business admin and strategic planning that my partners and I have begun to learn about as we build and grow our own business. I've seen many books about agents, investors, syndicators, etc. but not so much about how to succeed as a contractor, specifically. All this to ask the question: What books or resources have y'all given to your contractors to build their businesses? Any thoughts or advice on growing with your contractor and developing one another would be of great value. 

@Nathan Harden Thank you Nathan! I greatly appreciate it.

@William Harvey Honestly, this one just stemmed out of our inexperience in the game and not doing our due diligence. The wholesaler assured us we'd only be paying our share of closing costs, but had agreed with the seller to pay their closing costs, overdue utilities, and excise tax! so you can imagine that this more than doubled our expected closing costs on the front end, and while it was not a deal-breaker, it certainly was a terrible surprise to see it on our closing balance sheet for the first time a couple hours before closing. Needless to say, not a mistake that we'll be making again.

@Marcela Hoag We're looking for SFR within 30 minutes or so of JBLM and a total loan principal (100% of rehab + purchase) under $450,000. Trying to close 1/month in 2024, and currently building the capacity to do so!

Could some sort of guaranteed return for investors eliminate the second pillar (common enterprise) of this test? Would this still be the case if we decided to share a portion of profits after a certain threshold?

BiggerPockets Community, I'd like to ask advice on how to structure our business:

As we finish up our first flip, my partners and I plan to flip many more houses in 2023. Many of our financially aggressive friends have reached out wanting to be involved passively with our future deals as they learn and grow their own real estate investments. With about $70,000 in tentative contributions, we intend to use this money for holding/loan costs and rehab reserve using 100% LTV loans, so as to maximize the number of flips we can do at any given time.

To do so, we were planning on pooling funds in one LLC that gives our passive partners equity in the company. This fund would invest in flip projects (funding construction reserve and holding/loan costs) and would receive a percentage of the profit from each. While this structure sounds ideal to us, I have concerns with it being classified as an investment company under SEC regulations or with it needing a registered investment advisor to manage it. While I know most cannot provide legal counsel, I'm looking to hear from those that have ever structured something similar to this or have advice/recommendations on structuring private capital for a similar business plan.

Back in October my partner @Keenan Cromshaw and I closed on our first flip property in Spanaway, WA. We purchased this 1978 manufactured home (2/2, 1,389 SF) for $200,000, planned a rehab budget of $80,000 with an ARV of $370,000. With a couple budget overruns and other unexpected expenses our margin changed from about $40,000 to around $25,000 pre-tax. As finishing touches are being completed on the rehab (we intend to list it for sale in about a month) the lessons we have learned are priceless. Among many others, we plan to keep a larger construction reserve outside the rehab budget, more conservatively estimate our numbers in these deals, and more closely inspect wholesaling contracts. Overall we are satisfied with the progress of the flip and with great teammates and partners we have (realtor/contractor), and we are ready to find our next deal and build a business serially flipping houses in the area!