All Forum Posts by: Christopher Dunson

Thank you ahead of time for reading as I am excited, but at the same time feel I need to have a solid plan and everything organized ahead of time.

As someone who is newer to real estate, but with high goals and expectations for myself, I am always looking for creative financing and ways to make deals work. My original goal when I started was to do 50 flips in 1 year, but recently I realized that with just my capital, (around $150000), that would be hard to do as I can not do real volume. Hoping to find some options I called what is to me essentially a hard money broker who I have worked with on almost all of my deals and asked her if she knows people who finance real estate businesses. A few days later she came back to me wit these options, #1 has been indicated to me will be no problem to get me approved.

#1: 1 million dollar line we can apply for right now,

80% of Purchase Price (no holdback)

10% interest rate

3 points paid upfront to establish the line plus $2000 in legal fees

1MM minimum line

$1000 flat fees per deal

#2: 5 million dollar line, need to have closed 10 flips in the last 2 years, so we would need to get a couple more closed for you.  Need $25,000.00 in liquid assets, just need to show in your bank balance when we apply. Once we meet this criteria, we can apply with them, the the terms are as follows:

Up to 85% loan to cost on transactions (no hold back)

Interest rates from 8.75- 10% depending on the loan to cost

2.75 each time you pull off the line (so don’t have to pay for whole line up front) for loans over 100k

4% each time for loans under 100k

$499.00 admin fee each time you use

Again can turn as many times as you are bale in 12 month period and both can be renewed annually. Both claim to close fast, 5 days or so and can be used for purchases, or also refinancing if you have a property that you are holding on to that’s free and clear and want to take some cash out of. That’s about it, let me know if you have any other questions and if you want to move forward. Thank you!

I was extremely surprised when she told me I should approve for the Million dollars, because I guess I wasn't expecting that much, and I have to admit the % million was slightly intimidating, but I am someone who takes advantage and makes the most out of opportunities no matter how much I have to step up my goals. So if I did qualify for the 5 million I would just put in that much more effort and be that much more creative.

PROBLEM:

1- Because I only have $150000, and two properties which after refinance would give me about $110000 in equity(which I don't think would matter for the project I would use this money for anyways), I would not have enough capital to fully take advantage of either credit line as far as closing the deal with my 20%, nor rehab costs of at least $25000 per property.

Options I have thought of for solutions:

1- Finding the money by bringing in partners who can either cover the rest of the money needed (I'm figuring around $400,000 total, so 250k  more accounting for down payments rehab, and taking into account 6 mo. of monthly payments with the Million dollars maxed out.

2-Some company's can qualify you for what Ive heard up to $150000 of business card which you can cash out at 0% interest for a year(have contacted some a company to see if I qualify for this).

3-Have my mom join as partner to business and refinance her house to take out approx. $180000. (don't really want to do this because she will try to be the professional even though she doesn't do real estate.

Opportunities:

So far I have done flips, renovation of rental properties, and financed a short term note. With this I can branch out, or stick with the familiar.

1-Flipping properties on a larger scale. If I can flip all properties completely within 3-4 months(which is what I've been doing) I should be able to hit at least 30 per year focusing on properties in the 50-$150000 dollar range. ( I realize I will have to find more contractors which I am in the process of doing.

2-Flip some, and branch out into development, which at the moment I don't know much about, and as far as starting out goes, could take time to break ground, getting everything approved and permitted by the city, finding home plans and such. I do beliewve though if done properly can have a higher return than flipping it seems.

3-Flipping apartment/s 20-40 units, maybe bigger if I can get approved for the 5 million. (possibly the easier transition over development at the moment because I have done 2 4 plex's. There was a 36 unit that sold for 1.7 mil recently that I was looking at focusing on raising money for building below average condition, and rents at market from 3 years ago. Atm here in vegas I believe with those things remedied, it could be worth 3.5-4 million easily. (One of those deals I feel bad about not going for).

4-Starting a DM campaign to get better deals with better margins with some of my own capital.

As far as terms for bringing people in I have a lot on my mind, including charging them the fees related to the hard money lender to take risk off of myself, which I am justifying possibly being fair as the credit line that I probably qualify for leads to much more opportunity for all in the long run. 

Would love some input from people familiar with this type of financing, as well as options for finding money, ways to flip this money, strategy's etc. Looks like I can't put @Jay Hinrichs for some reason. I hope he sees it as I feel he would have some great input. Thank you all.

@Kevin Geary

Even better hopefully you can be a part of a deal.

@Nathan Gesner

Thank you. The learning is endless with real estate. It's always good to get a reminder to keep a close eye on the market. If there are any indicators that I may not be aware of I would appreciate any input. I know a lot of investors have already pulled out to sit back for now until the next cycle.

I recognize though that there are good deals in every market, and one of my goals is to position myself for when the next drop comes. Essentially I am in the process of building my capital for that time, but if I try to wait till then, although unlikely, 5 years could pass me by where I do nothing. So I'm going for it now keeping in mind that I need to be ready to sell any projects I may have pending as quickly as I can if anything significant happens.

I missed the major equity and ROI deals by about a year give or take here in Las Vegas, but for me that doesn't mean I should wait. Gladly, my 4 Plex's will cash flow $100 per door even with 30% rent decreases after mortgage, cap ex, vacancies, and repairs.

@Account Closed

Thank you for the kind words. I am happy with the progress, but at the same time behind on my goals for the year. I'm definitely looking to pick up the pace, even though people tell me to slow down daily.

A year and a half ago, I started listening to the BP podcasts everyday. Those podcasts turned me onto Grant Cardone who is a great motivation for me. Every time I felt limitations, I would hear a BP podcast of somebody who maybe even started at a lower point than me and now is dominating real estate much more than I was and am. I looked at grant and said he owns 5 businesses, I'm starting a business. That was 7 months ago. I sold my house, took every penny I had, and got involved with real estate. Found funding through HML's, wrote plans to present to people, almost quit because I didn't know how, but I kept forcing myself to figure out how to find out who owns the property, how to start a business, what documentation do I need, how the heck do I get it, and of course how do I analyze deals? Lenders saying send me this, send me that, and denying me in the beginning. I am broke every month. Everything goes to my business. I started flipping houses, and I bought one with some money I had and financing through HML's. I got into contract on a another property 2 months later before the other one had sold, and three days before closing I was short 20k unexpectedly not because of illegitimate costs, but because I'm newer to this and I forgot closing costs. I asked myself, how can I get that 20k I'm buying this flip no matter what. So I did, and I closed on time. Sold the first property, and the day I sold the second I closed on two 4 Plex's that I will self manage to learn what to look for when start using a PM. That was March 14th. I am rehabing with tenants(which is complicated), and doing the BRRRR strat. on both of these 4 Plex's, but will still have 40-50k in the deal at the end unless the market really goes up. I'm also raising the rent $100 and the tenants are all staying because they see me inproving the way they'll be living. Closing on another flip on the 28th this month and in between lent a good amount of money to somebody for 1 week for a 3k profit. I don't know EXACTLY what I'm doing going into any of these deals. I learned the basics from reading, and the podcasts. I prepare the numbers make sure they look great, get contractor bids ahead of time, and find more problems then I originally prepared for EVERY SINGLE TIME. The costs have been unexpected, but I either adjusted, or accepted that I'm taking less of a ROI. But I haven't lost money yet. I attribute that to because when it's all on the line, there is no way that I will let myself fail. I am scared every time. But I always try my best to prepare for the worst. I find myself fighting my average, middle class habits trying to talk myself out of deals that make sense, because I did everything I could to make sure they make sense, not because anybody told me they do. I force myself to pay people contractors, accountants, lawyers, even though it feels like it's limiting my potential in a way, and I have to tell myself that it's for the best, even if less goes back into the real estate. I'm scared everyday, but my drive far outweighs my fear, and even though I have not made it yet, not even close, more opportunities open up every day. Even though I may question everything I'm doing here and there I have bigger reasons than just to get rich, and when I do question myself I remind myself of the all of the people who have done so much more than I have, Brandon Turner, Grant Cardone, 10x, and all of the BP books and success stories I have heard on the BP podcasts has helped me to force myself to change my mentality(the mentality of the middle class), so that I can start thinking on a different level. BTW a month before I started my business, I quit my job completely so that I would not have any choice but to go for it, and dominate. I was even offered to work 3 days a week; I said no, so that every part of me not only wants, but NEEDS to dominate and be creative thinking of new ways to do things on a daily basis. "If you want to take the island right?" I have listened to all the advice from everyone and even with doubt and not knowing the perfect way have figured much of it out along the way. I will say, I no longer relate well, or can have a conversation with my friends, because they don't understand where I'm at even though they try. So, at times, I feel I'm the only one I truly know doing this. I mean, I am. My goals are so much bigger than anybody I know, and my business and real estate are the most important thing to me, for my future, and to retire my family who will never retire alone, and who always took care of me. It's funny, most of the time, I feel like I have not really accomplished anything, and that I need to be doing much more. Thanks for reading, and I hope through writing this out, I have helped somebody to not let that fear control the action one takes, or what they think they are capable of. This was just kind of a rant brought over here from me trying to motivate somebody to get started on ANYTHING, and I thought that maybe somebody on BP would enjoy it.

@James Masotti

So basically as long as I have the note and mortgage, I shouldn't worry about that situation too much? I'm comfortable. Mostly anytime one is getting out of their norm I think their is a small sense of fear there. I like to ignore it if everything makes sense. Thank you for your help.

@Vincent M.

The scenario that your describing I feel 50/50 is definitely fair. If you approached him for the money, maybe 60 investor/40 would be fair for a few deals until everybody is secure with the partnership. 

It sounds like you may be unsure about the numbers. When I was looking for my first flip, I had a number of realtors just take out a piece of paper, write down 3 or 4 factors and say that's your profit. I felt it was inaccurate, and if I had listened to them it would have been by about $20k. As long as your specific about the numbers from all of the angles especially the ARV, purchase closing costs, agent fees, as well as selling costs, maybe association fees, prop tax it could turn out great for you both. It doesn't sound like you will be having a monthly payment, and like you may have experience with preparing a Repair estimate. GL on your partnership.

@James Masotti

@Mark Gallagher

So I have the Promissory Note with agreeable terms. (6 mo. loan $45000 at 10% interest with a balloon payment on Dec. 1, 2017 secured by a fully paid off property worth around $200,000). Note is 3 pages going over Payments, Security, 8 reason for default, and a few other things. Also, my company has been put on the deed of trust stating term, payment and obligations and defaults. For me, this seems well done. Only thing that is a bit off is that the lender is not having me wire or deposit funds at the time after the docs have been sign into an escrow account. They are asking me to deposit directly into one of her accounts the $45,000 with one of my business checks. I have confirmed that she has 3 accounts totaling over $60000, and during the conversation between her I and the lender she stated that she would exchange cashiers checks with me to make it easier. The lender was not happy with this, because he did not want any money moving from her account until the closing is complete. I'm looking for some insight as to if having the funds wired through escrow is a necessity, or is the option of depositing into her account perfectly ok?

@Linda S.

Yes, that has been taken care of. I appreciate the input.

@Colleen F.

Exactly, there are modern buildings that use drywall imported from china that contain asbestos. One of the mold remediation companies said they need to test in the area for the asbestos since the building to my knowledge has not been tested.(Maybe I shouldn't have told him, and maybe that's something I need to ask while in the purchase process of rental properties that are older). But the guy who came by is estimating $2500-$3k without asbestos, and $4200 more or less with. Pretty steep price for a project estimated at 20k, and already over 3k.

@Mindy Jensen

@Deanna McCormick
@Mindy Jensen

I appreciate you making me aware of that. I didn't know that not all black is toxic. That makes me wonder about alternatives to the company remediation. The test mentioned by @Lee L. might help point me in the best course of action. I'm between just having it cut out and sprayed down with microfungal agent for a much chearper price, or the other part of me wants to make sure it's done right as I know it can be a hazard.