All Forum Posts by: Patrick T.

Hello BP nation, it's been awhile since I last posted.

Does anyone have any experience or input on using funds from a "testamentary trust" to invest in rental property.  It's not a large trust, so one question would be is there a maximum % that could be used in one investment (property). 

@Albert Martinez There is a lot more to think about than splitting equity.  There there are some experienced folks on BP with lots of good direction on this - do some searching through the threads.  Also, you should have a team: attorney, accountant, contractor(s), realtors.  Get some professional support.  You will avoid a lot of headaches.

Hey Albert, It sounds like you'll need to form a legal entity (i.e., LLC), provide and execute an operating agreement, set up banking accounts, arrange insurance, etc. You would be acting as managing partner for the partnership. You would also be locating, negotiating and purchasing the property; responsible for the projects budget (more specific than just calculating profits for the partnership - and much more critical; enforcing project time-lines; as well as overseeing the staging, marketing, and important transaction details for the sale. That's what project managers do - different from a managing partner. And then yes, you would act as a construction supervisor - in some ways easier than the first two roles. All three roles that have to be performed successfully in order for your associate (or you) to make any money.

So you might look more thoroughly into how you will approach those things and what they are worth monetarily.

There are many ways to go about it.  But you need to get a good handle on your responsibilities, have specific plans for the potential problems, and be clear between each other about exactly how you will operate.  Your operating agreement is critical.

@Michael Hunter Building a home to buyer specs and dealing with their expectations is a whole different business than rehabbing. You should be an experienced building contractor to do that. It could really go south.

Your idea of setting a current value and selling is good. They may feel some attachment to the property that would draw them in to that.

But while @Mike M. has a point, you know the numbers and own the project. If you are confident in those numbers the market isn't going to change in the short term...hang in with your original plan. That's a sweet little take.

I apologize @Stan Butler . I rambled on. I didn't mean to offend you.

@Sylvia B. if you want to finance that property and be on the hook, and your'e left holding the basket, when it turns out that the rehab wasn't done correctly (oh, and by the way the county inspector is wanting to know where your permits and approvals are) that's your option.

The only thing that matters in Real Estate transactions is "can you prove it". An appraisal is an opinion. Comps are only as valuable as the factual basis. Those facts in this case: Are the improvements in place (documentation, pictures, appraisal); Materials cost (receipts and serial #'s), these licensed contractors completed their jobs and have been paid (License numbers, and lien releases). The bank then knows there are no clouds on the title or claims about the product.

If the seller of a rehabbed property did all of the work himself, without permits, without an inkling of building standards, and with the sole motivation of making a profit...would you buy that property just because it looked like other properties? Would you really argue that he should be able to represent his property as being the same quality as one that provided certifications, receipts and appraisals that had factual, documented history. Comps don't mean a thing if they are not based on facts. And that is why you have to document your work and justify your price.

Stan may be a very good rehabber, but you still have to play by the rules.

You said "good for him for making a profit". He doesn't make a profit unless he sells the property. As he moves through this world of REI, he'll sell more properties by playing the game well than by objecting to the rules. If he doesn't like the rules, then like I said: see if you can find a way to make a living off of fear and loathing.

@Stan Butler

If my son wants to buy a Ford truck I'll finance a Ford truck. If some fellow tells him he built a truck that's just as good as a Ford but he can't tell him why because he has "secrets"...well I would tell the guy to forget about cerebral pursuits like REI investing and start your own political party.

If you want to learn this industry leave that crap behind. If you are interested in learning about real estate deals you might do well to understand what makes this industry tick, learn some of the principles, learn what is normal, see how successful investors interact with lenders.

Do you really think that contractors don't exist unless you deal with them, or that people don't know what pricing structures exist? Get a grip Stan. Do you think that huge nationwide lending firms really care about who you use? Your next door neighbor is a bigger threat.

Just learn the principles. It's about creating a future for yourself. It’s not a cause. Join the people on BP and become as great as so many of them are. You won't have time to worry about secrets. Just where your next check is coming from.

And you may find yourself trusting (or at least having a powerful knowledge of) people who you feared in that previous life. Go for it Stan!

Hey @Stan Butler it may seem like a lot, but those are all records that you should have fairly easily accessible. The lender is asking for them to insure that the materials bought actually went to the job, that the work was done by pro's, etc. It's not that uncommon. I'm surprised they haven't asked for lien releases, to be sure you paid everybody.

Also, it's a good idea to keep all of that (along with before and after pics) in an organized way to to counter/motivate potential buyers or their realtors who balk at your price.

Hey @Robert Taylor you inspired me! I've been thinking about this thread since yesterday, and the fact that the website I put together for REI didn't address Buyers...just distressed sellers and investors. The problem you brought up may be more prevalent than a lot of us realize. And your idea to create a solid brand and counter those buyer's reservations is a good one.

So I re-worked my site a little and created a "Buyers" page. Let me know what you think when you have time: www.nwequity.co . I'm still tweaking the site. The original idea came from @Brandon Turner's tutorial on websites and from his site (Thank's Brandon!)

@Robert Taylor This looks like one of those cases where everyone is right, even though they differ.

If you are building a long term enterprise, then you can certainly benefit from consistently doing certifiable quality improvements and exercising good will in your transactions. You can create a reputation.

There are always going to be those who judge and resent. Forget about rookie realtors and cheapskate lookers. Keep your eye on the ball. The real performers, the people who actually will buy your property, were already identified when you did your research and determined what reasonable price that property will sell for ARV. As an investor you obviously determined that before you bought it (right?).

I'm like you though. I really believe that people will relate to a quality product. I think that includes a professional looking website, a well structured presentation of the "improvements" and "benefits" that you brought to the project, and a statement of your commitment to work with buyers (who you should call clients) in an exemplary fashion. Printed material placed in the home at critical points that highlights improvements will catch a buyers attention nicely.

I think it might also include very professional signage on the property that identifies it as your work product. People will always, and I mean always gravitate to the best presentation.

Don't create a new career (you are an investor), but follow your instincts about this and put a reasonable amount of time into building a web presence. But more important the that is build a really impressive identity that people will gravitate to.

All of that being said...don't get so caught up in the website/marketing syndrome that you forget about your day job. None of it means anything if you don't have the properties to sell.