All Forum Posts by: Christian Beyer

The bank asked my brother and I to consign the loan to back the LLC and that made it work. We continue to do this even after 4 properties because we get better terms because we both have steady day jobs with income. Of course the bank should understand what you are doing and that you are just using the LLC to purchase the property but you are the primary loan holder as an individual. Ask them if you think this will help you close.

Does the cash flow calculation include a down payment? If a larger down payment on a higher sales price leads to the same cash flow (if that's what you are looking for) then I would offer that with a 5 year balloon payment. This way the seller gets some cash up front, feels better about the price, will agree to the sale, and you get the rental. Just make sure you have the 5 year plan to pay the guy back with either private money or a bank loan.

Those are all good points, and I appreciate the contrarian view. I got the idea because our renovations went over on time, although the quality was excellent. They had to take on other jobs to supplement the job we had them on because the bank backed financing required progress reports and receipts that took time. They mentioned that if they knew that they were splitting profits that the job likely could have been completed in half the time. As angry as I originally was, it made sense. I think that the best plan may be for my LLC to take ownership solely, and incur the cost of down payment and carrying costs (my investment). Then have the contractors tear in and put in the time and labor and materials for the flip (their investment). If they are trustworthy and share openly their costs we should be able to display our total costs at the end and distribute profits accordingly for an even split. Does this make sense to you guys?

Eric I think this could potentially be a relatively low cost first lesson in real estate for you. I get the feeling that you have definitely done enough homework and learned what estimations can be made from a distance. However there is no teacher like experience and at some point you have to get a few offers out there and maybe land a deal. Even if you throw out low ball offers who cares? What's the worst thing they can say.... No? If you live in the Michigan area and can visit and tend to this property yourself and speak to tenants face to face then you may want to just start by tackling this one. You will learn so much more by doing than you do in the forums. As vast as the knowledge is in here, the only way to learn is to do. Good luck! C. Beyer

Thanks Brian, that's helpful. We are already organized as an LLC, and I had not thought about joint tenancy as an option for ownership. I'll consider that!

Had the idea of purchasing a property that fits the bill for a flip, working with a reliable (previously used) contractor, letting them handle the renovation and then splitting the profits. The idea being that we can focus on the purchase and they can focus on the reno and everyone works on their specialties. Anyone have a history of working a deal like this, and how did you structure the deal? Thanks! CB

Hey Marc,

Good for you going out and doing something! Not many people have the courage to jump right in, and there is no better teacher than experience, even if you don't get the killer first deal. Where is your duplex located? My brother and I own three duplexes in Phoenixville and have been looking to meet with other people around town to discuss. Where are you based?

Best of luck,

Christian

Hi Katy, This probably comes down to your tolerance for risk, because anyone here will likely say there is not a ton of meat on that bone. If you guys are looking for comfort with low risk and low returns this may fit the bill. If you see a chance for appreciation in the area based on home prices over the last few years (or some insider information like a new hospital opening in the area) and you can stomach breaking even on the month to month for the shot at a higher price in 5 years this could work. Otherwise I would probably try and hold out- there is probably a sexier deal somewhere in town with similar benefits and a lower price tag. Good luck!

In keeping with the PA themed thread here I would put in my own two cents and say that my brother and I have partnered up to do the SFR and duplex deals while we are both still working full time. The tenants are manageable and we are currently fully occupied. Once we get to the point of growing beyond multi families to apartment buildings and larger projects- hopefully that will be the jumping off point for quitting those 9-5s.

I would like to hear more about the opportunities for those larger apartment buildings you guys have seen locally. I'm located in Phoenixville about 20 miles northwest of Philly.

Our first deal as official real estate investors- this one has potential to be one of our best for a long time.

After scouring the local market for a few months my brother stumbled upon a small 'For Sale' sign in the window of a Bonsai shop. We had been in talks with another duplex owner in downtown Phoenixville but his $320K asking price and our $20K in private startup cash weren't a good match. This new duplex was owned outright by the widow of the shop owner, and she agreed to seller finance the property for $95K. We offered 20% down with a 10 year balloon payment. We inherited an upstairs tenant paying $600 in rent which covered the mortgage and expenses. 

With the bonsai shop owner leaving, we decided to do a full renovation of the downstairs shop. We had an additional $17.5K in private lending come to us after we made the deal, and we budgeted that for the reno. 9 months and $30K later (as the story always goes) we had a tenant moved in and ready to pay rent. The tenant came to us after seeing the space (and a sign in the window) and she wanted a build to suit salon put in. She turned out to be an amazing tenant. One year after purchase the place was renting for a total of $1,675!

Better news yet- the owner who still held the mortgage asked us to pay early in exchange for a discount on the remaining balance of the mortgage. We negotiated 12% off the remaining balance, took out a refi on the property after it appraised for $200K (!), paid her back in full AND got to use the remaining equity pull to purchase an additional 2 properties- a duplex and single family in town.