All Forum Posts by: Caleb Smith

Hey Brady, I am a real estate investor in Kansas City that focuses on the BRRRR strategy with single family homes.

I recently launched a program to help new investors get started using the BRRRR strategy.

I'll provide you with a roadmap and help you avoid beginner mistakes.

Let me know if you would like to hop on a call to discuss further.

My business plan includes partnering with capital partners on BRRRR properties.

I will be finding the properties, managing rehabs with contractors and handing it off to a property manager after that.

If we split the ownership 50/50 and sell the property in 5 years, how does the profit split work?

1) Would we pay back the capital contribution from the capital partner first and then split the profits from there?

2) Or would we split the equity amount 50/50 in general since my contribution was the labor/sweat equity?

For some reason, I am struggling to figure out the proper way to do this and just need some clarification.

In the equity waterfall, I recently learned that the preferred return is distributed based on the amount of capital invested in the deal.

Then, as the capital is paid back, the preferred return is adjusted to the amount still invested in the deal. Same percentage, but different amount to base it off of.

Does this sound accurate?

Going off of that, is capital returned done by profit splits or only during the refinance and sale?

I appreciate any help you can give me on this particular scenario.

In the past year I have set up 4 different LLCs using LegalZoom.

I found it to be fairly easy to set up and it has worked out so far.

However, I recently read a book that mentioned LegalZoom has had instances where some entities were deemed invalid in court since they weren't set up properly.

What do they mean by this and how can this be avoided and/or corrected if already set up?

On the last step of the BRRRR process, I am wanting to use a loan to refinance the property and pay back the hard money lender.

However, the lender I spoke with said it would be hard for me to qualify based on my past 2 tax returns.

Isn't the DSCR loan based on the projected rent and debt service, not personal tax returns and income?

Any help on this would be greatly appreciated.

I'm looking to move into multifamily syndication and wanted to see what type of business structure I would need in order to raise money for deals.

I know there is a lot that goes into that and I have been speaking to a securities attorney about how to proceed with legal documents for investors.

But basically, I wanted to see if this can be started as an LLC or if it needs to be some sort of corporation.

I appreciate any advice and feedback!

Need advice for a current situation.

A resident told me today that they can no longer live in the house they are renting from me because the main floor of the house is too cold.

We have had a professional look at the furnace and say everything is fine. I also had an insulation company add insulation to the attic of the home to help.

In the resident's defense, this house is old and my not have the best air circulation. I don't have much background with the house since we just purchased it in December and he was our first resident.

I told the resident he can buy out of the lease by giving me a 30 day notice and paying a termination fee worth one month's rent.

He then told me that I owe him money since I did not fulfill my part of the lease agreement by keeping the house warm.

Any tips or ways to navigate this situation would be appreciated.

My business partners and I recently formed an LLC to own properties. Right now, we have one property that we own together. We created the LLC for asset protection, but really want to make sure we are doing things right.

Just curious, what type of insurance do we need as an LLC?

Should we also have our own umbrella policies?

Just looking to get a better idea on what should be in place to protect ourselves.

Thank you everybody for taking the time to answer my questions. I really appreciate it!

I am currently working on my first BRRRR deal and recently received an estimate from a general contractor I plan to work with.

For payment, he stated he needs approximately 25% of the overall estimate upfront as a down payment to order materials and said that should last for the 1st two weeks.

Is that normally how this works, or am I only supposed to pay each week for the work that was done that specific week?

I'm sure there are many different ways payments are handled between investors and contractors, but just wanted to see how other people handle the situation.