All Forum Posts by: Chris Marshall

I thought I would share something I kind of did when I was first starting out looking at flips. I sort of took the principles from paper trading stocks and applied it to the flipping model. 

So with a flip that I was looking at what I would do was look for a property that needed to be flipped. Once I found one I would analyze the deal. I would try to figure out what my costs and hold time would be. I would then set all that aside and I would wait for someone to purchase the property and actually flip it and once the property was sold, post-flip, I would look at what I thought I could buy it for, what my costs and hold times would be and then I would look to see if my ARV was the same as the sale price and then I would look to see if I made any money. If something didn't come out right then I know that I messed up in my figuring.

A big problem as you might of already seen is that could take months if not years depending on the extent of repairs and the length of time it sat on the market or it may have been something the owners wanted to live in so it never even was listed for sale.

What I would suggest if you want to do this, is I would find someone who is actively flipping houses. When they find a prospective deal you should ask them if you can analyze the property just for learning experiences. Analyze it separate from them so you can compare it to what they got and see how close you were to their numbers. Then follow that property throughout its renovation, assuming the flipper moves forward with it after analyst. After the project is done compare what your estimated hold time was to their actual, as well as their construction costs. Then again figure out how close you were. Then again when it sells figure out how close you were to the ARV that you estimated in the very beginning.

This can be a fairly long process but if your learning from an investor that does high volume you could do maybe 10 properties like this over the course of 6 months or so. This would be one heck of a semesters worth of schooling. Also not much time invested into this and no money. 

I do realize that leaves you with a task of finding a house flipper that is willing to allow you to learn underneath him and that might mean you work for him wile you are learning or possibly paying him or whatever but there is already enough resources out there on finding mentors. I hope someone finds use with this, or possibly finds a way to improve upon the idea!

@Kaiser J.

What if I know going in that this is more of a long term equity build deal? I know that in the short term there won’t be much equity or forced appreciation but this is a property in my hometown in the downtown portion right next to the court house. We are growing and the city and our community is making huge strides in trying to bring up our downtown area. We are a touristy town because we have a large number of national parks within a nice driving distance and a bunch of wineries in our area.

Also our state (Missouri) also ranked 6th in the nation for tech jobs. Between cape girardue, Farmington (where I live, about an hour south of STL) and st.louis they are trying to grow our tech industries. So although it may not be 2 years down the line where we have appreciated I do believe that our area will grow rapidly in the coming 5-15 years.

Do factors like this need to be accounted for and would you try to structure the debt differently because of it?

@John Corey this is my first attempt at even trying to run the numbers on a syndication.

So even if it’s my friends who’ve I’ve known for years invest with me and the repayment is through equity that is what makes it a syndication? I figured this would be more of just creative financing. I don’t actually know what constitutes a syndication. I haven’t been to a lawyer yet about structuring a deal like this. I figured I’d do that after I found a property that would work and then figure out how it should be structured after I got a sales contract on it.

So is it that there are limited partners who receive equity in the deal is that what makes a syndication regardless whether they are accredited or non accredited? And then I’d have to do the whole filling stuff and whatever goes along with a syndication?

@Taylor L. @Colton Fairchild ok this is starting to make a little more sense now. I’m not actually syndicating the deal just structuring the repayment of my friends investments like one, instead of structuring it like debt. So it sounds like this property just has too high of an asking price. Although it hits all the check boxes the bank wants it still isn’t a good property for an investment?

@Colton Fairchild @Tom S.

So in these types of deals is typically the entire deal amount being raised? In syndications do they not use any bank financing? The entire deal is purchased using raised funds?

I am currently looking at a great property in my local community. It is about 500k and i need a little over 100k for the Down payment but I thought it would be better to raise 150k and have a little less on the mortgage and there are multiple friends I think would like to invest so I was hoping to have 3 of them each put in 50k for the total needed. Now what I'm wondering is the 7% return they see on their money, is that annual return or is that supposed to be monthly? Right now I'm running it 80/20 they will receive 80% of cash flow and me 20%. With that split it will come out to 7% annual return about $3500 a year/each. Assuming the 7% annual return is enough how should I go about getting their initial investment out of the property if there isn't a whole lot of forced appreciation I can do to the property? There is a little, but not enough to justify refinancing that 150k back into the loan 2 years later. not unless rents start to climb in my area which I feel as though that is a bad gamble to bet on just to get this deal done. So do I do some sort of step return of investment? Give them 50% of investment back with a refinance and then adjust the split to 60/40 or something to where they are still getting 7% annually? The whole math of how they make their money back and how I am supposed to account for that in the deal has always kind of baffled me. If there is a good resource for figuring out how to run the numbers on deals like this I would be greatly appreciative for pointing me in its direction.

@Frank Geiger @Michael Le

Well if I bring in investors then instead of having the sellers finance the down payment then the 20-30% of the equity of the property won’t have a loan with a payment on it so I’d have some cash flow. Depending on how much money I brought in. Then the cash flow that would’ve went to pay the seller financed down payment would then be divided 80/20.

@Michael Le Well with the one Commercial Building I am specifically looking at that I mentioned above. Although the seller is willing to finance the down payment between, that payment and the bank financed mortgage I would be a null cashflow after I set aside Cap Ex, Vacancies, Repairs. So in order to make a good deal great I was thinking of trying to bring in investors and give them 80% of the cash flow as their pay back and then I would at least be able to get 20% of what ever cash flow would be there. Which is better than just owning the building and no cash flow right? But then am I supposed to refinance after a while and give them their original investment back along with a reduced percentage of income? I'm still trying to figure out how they would get their original money back and then how to factor that into running the numbers.

I'm looking at purchasing a commercial building and I'm a little confused on how and what ways investors will actually make their money back if they invest with me. The seller is willing to seller finance the down payment and the bank is ok with them doing that so I've already secured the financing. But I have some Investors who want to invest with me but I don't quite understand how I am supposed to pay them back. do I just refinance after a few years and get them their money back? do I just give them some of the cash flow? if I have the financing secure how much of the ownership of the building do I give to investors and then do they just get that much of the cashflow? I'm trying to find good resources for figuring out how to repay investors in the deal. Any help would be amazing! Thank you in advance!

Hello all, currently my wife and I own five small businesses and we are days away from finishing our first flip. I’ve dedicated this year to organizing our pursuits and finding ways to hand off small tasks to others by subbing out the work on the flips and hiring our first employee. My question is, what books have you read that are great for managing and running multiple businesses?