All Forum Posts by: Chris Coleman

@Jared Coffman one thing to consider is do you want to own and build a portfolio of income generating assets? Or do you just want to make cash and move on to the next one?

Buy and hold rental property, both single family and commercial multifamily, will not only generate annual cash, but you are also building up assets that can grow equity value over the long term.

While wholesaling and flipping will put money in your pocket, you are not growing a portfolio of long term assets.

There’s not necessarily a right or wrong answer. It’s based on your goals.

@Charles Day getting funding in place first will tell you how much of a deal you should be looking for.

Plus, if you’re using a realtor, then they will be more amenable to talking and helping you find properties if they know you have funding in place.

@Pete Abilla it sounds like he’s saying that once the Boomers start selling their homes in the markets, there will essentially not be many younger “home buyer” aged people there waiting to purchase them. Therefore leading to oversupply in these areas.

That could be good for rental investors if it causes housing prices to be low. However, as real estate investors we generally want to invest in markets where people are moving in, not away. It will be interesting.

@Donny Long most RE investors here invest primarily for cash flow. Cash flow is real money in your bank account. Hoping for market appreciation is a risky game.

With that said, going to low on the value of properties and your also taking on risk in the cash flow, because lower end properties will have more maintenance issues, less reliable tenants, and higher turnover. So while your cash flow may be $200-$300 per month on paper, in reality all the issues are costing you money such that your actually only netting $150-$200 per month.

So finding a middle ground, where you can achieve healthy cash flow of at least $200 per month, with a property that is at mid-level value for its market is a good income generating, lower risk approach.

That's why you get an inspection before closing the deal.  You start with an appraised value based on comps, but then negotiate a final price based on inspection report if possible.

@Ben Gabin you can form a partnership, most likely an LLC would be the easiest.

Ask him if he already has an LLC through which he owns the property. If so, then he can make you a 5% owner/member in the LLC (as long as this property is the only thing owned by the LLC).

If not, then form an LLC to hold the property, where he is 95% owner and you are 5% owner.

The LLC Operating Agreement will describe how distributions are paid.

Note, giving you 5% of the existing asset could be a taxable event for you. I don’t exactly know the answer to that question, but it’s something you should ask a knowledgeable CPA about.

Also, have you done that math to make sure that 5% of the value of the property is at least equal to what your being paid now as PM?

@A Taylor are saying that you’re considering buy for appreciation only? If so, it is risky. It’s always better if you can cash flow, and allow appreciation to be icing on the cake.

I fully understand your scenario, as I live in Northern Virginia here Amazon HQ2 has already been sending housing prices skyrocketing, and it hasn’t even started building yet. It can be tempting yes.

But you should really weigh the risk, the amount of money you’ll have to offset from your appreciation by losing cash flow every month, the delays that can occur in corporate moves, a general downturn in the market, etc. Numerous factors that cause speculation on appreciation to be a very risky game.

@Ben McFarland if you are partnering with someone, especially a family member, then it's a good idea to formalize the partnership with an entity such as an LLC or LLP.

But you will also find quite a few articles and posts that actually recommend S-Corp status for flips. I recommend doing some research in this.

@Bryce Herrera identify what value each of you will bring to the deal. For example, if your partner is already a successful real estate investor, then maybe they will bring due diligence experience, mentorship for you, qualifications for a loan, relationships with realtors, contractors, lenders, title companies, insurance agents, etc.

Then your value, for example, will be to search for the right property, manage the rehab, screen, quality, and lease to tenants, and property management.

And you each bring whatever monetary capital you have for the deal.

@Cherie Durand the value of single family real estate is generally based on comparables in the area. That is, what are similar type, size, age, class, properties selling for within a 3 miles radius? It helps if you can get a price per square foot for houses in the area. A realtor can give you this number. If it has nicer amenities or upgrades, then you can add for that. If it’s has lessor or is somewhat distressed then you discount.