All Forum Posts by: Colton Hamilton

Looking for advice on how to structure a current deal.

Currently my partner and I are closing in a deal and we are trying to figure out how to structure our parties deal.

DETAILS

Purchase price = $69,900

House is acquired through owner financing.

55k is financed through owner. Interest only payments of $350 a month.

$14,900 for a down payment will be through a personal private money lender (who doesn’t care much about a return) he is just helping out.

I have the established Line of Credit where all the rehab money will come from. We are looking at 35k rehab cost. I will also be paying the $350 a month out of pocket (to avoid interest of line of credit/or should I put it on line of credit)

My partner will be doing most of the rehab himself. I will only be able to help for 3-4 weeks.

House has already been gutted but it’s pretty much a full rehab with an addition of a garage.

My partner found the deal and did all the negotiations with realtor.

How does the bigger pockets community recommend splitting this deal?

Any help/advice is greatly appreciated.

Thanks in advance.

@Riley Hancock

Thanks for the reply!

I am located in Cedar Falls, IA but will be doing house flips mainly in Baldwin County as that is where my partner is.

The wonderful thing about my situation is my father-in-law is looking to make a killing or save for retirement as they are already setup. This is just an extra side thing he wants to do so I was thinking of a 5% return maybe even 3% depending on his thoughts about which one. The goal is to eventually build enough to go out on our own but I'd like to keep my father-in-laws money in my back pocket if I ever had extra costs that needed covering hence why I'd like to be able to have him setup some kind of IRA or account that earns him interest on his money if he isn't using but where I still have access to it.

BP,

Hello All!

I getting into flipping houses and I am stuck on what path to take financially. I have my father-in-law willing to invest in me and my partner but I don't know how to go about it for it to be the most beneficial to the both of us. 

A) He is willing to take on the bank loan in his name for the the first couple properties. 

B) He has 10k cash that he is willing to invest right away

C) He also is willing to invest 1k a month 

I want to be able to set up something that is hands on for me and "hands off" for him. 

I want to set it up in a way where he can still earn interest on his money that he is investing while it is sitting there not being used although that obviously isn't that ideal situation. 

I am curious as if I would need to create an LLC or if I can do it privately. What kind of tax implications could that cause? How would the profits work/be taxed?

Who should I be reaching out to as far as an expert? 

My head is exploding trying to move on this fast as I want to do this full time and I want to get a strong foundation in place before I move on from my W2 job. 

Thanks in advance for any and all replies

@Jeffrey Spiegler

I haven’t heard of it. I’ve been starting to research outside my local area for investing but I haven’t pulled the trigger on anything yet.

What’d it take to get your contractors license?

@Aldo Chandra

Aldosius thanks for the reply! 

The reason I want to find financing first is to see what I am working with so I can find a deal that best fits my financial means.

My question with a HELOC is if I can use that money to be considered in the down payment of a purchase or if that would work against me? I don't really want to do a cash-out refinance because that would increase my monthly payment on that house, but I could pay down the loan with what I would use for the deal so I would still owe the same amount. I want to work into having little to no debt.

I have been working the 0% interest for 'x' number of months through Home Depot and even some other debt with 0% balance transfer and paying that off before the end date. 

Again thanks for the reply!

Colton

@Nathan Olds

I looked up other rent prices and compared them to my property. Rent in the area was hard by and there were more apartments than houses but the little houses I did find I compared the interior and location to my place and determined if mine was worth more a month or less. I might have went a little lower than what I could've got but I wanted to get a renter sooner than later. 

@Nathan Olds

I am up in the air right now. I am floating between doing the cash out of trying to acquire a line of credit on the investment property (if I can find someone to do it).

Hello BP!

I am currently struggling to figure out my financing path to my first real fix and flip. A little background on where I stand currently.

My personal bank account is nothing to brag about and but I would be able to come up with 10k-20k cash.

I am living in my primary residence that I just bought in July with barely any equity to it. The plan is to move in July and turn it into a rental property. Wanted to keep it under a primary mortgage so I can benefit from having the lower interest rate. 

I am working full time as a welder making 600-700 a week. 

I own one rental with $1150 rent income with a cashflow of $490. I only owe 71k on it and if I was to get it reappraised it would appraise between 130k-160k. New term for me but I finally get to use it in the correct context. The property was a BRRR.

I am actively seeking to possibly put a HELOC on my investment property in which I would use the funds for the rehab costs or if I could use those funds for a down-payment and closing cost on a property (I don't know if I can). Having a hard time finding a lender willing to do that (hard it was pretty scarce). Everyone I have reached out to wants to do a cash-out refinance (COR). A couple of them said 75% COR and one said 80% COR with a 5 year fixed amortized and a 15-20 year term with a 4-5% rate.

I am currently in talks with Lima One Capital but after reading some reviews I am pretty skeptical of them. I am wondering if searching out HMLs worth it more than traditional banks. I don't know anyone for Private Money Lenders although I have my father-in-law interested but he told me he doesn't have a lot of cash on hand as he invests most of his income else where. I am looking to get more details on what exactly he invest in and whether we could use that to leverage. 

A question off topic. For flipping houses do you need to hire a GC even if we know how to do most all the work ourselves? Or just have a GC sign off on the work that was done?

Thanks!

Colton

@Marlen Weber

The other thing the kind of goes hand in hand with that is that it’s not always best to buy the “cheapest” options for supplies. Thanks! Staying humble and learning is how we keep driving toward!

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $48,500
Cash invested: $40,000

I bought this investment home as a primary house for loan purposes and lived in it while renovating it. I originally bought it for a fix and flip but after studying the rental rates in Waverly I decided to keep it and rent it out.

What made you interested in investing in this type of deal?

I was interested in doing fix and flips which is what originally bought the property for. I changed my mind while renovating it after understanding what my long term goals are.

How did you find this deal and how did you negotiate it?

I was looking for houses on Zillow around all the areas I wanted to live. I was studying what houses were selling for per a square foot and looking for houses that were drastically lower than what I was seeing. I saw this house for sale around $37 per a sqft. I contacted the listing agent and looked at it and a few hours later I put an offer in for 5k under the listing price and no home inspection. They accepted it without a counter offer.

How did you finance this deal?

A primary mortgage loan through a local bank.

How did you add value to the deal?

We completely gutted the house and refinished it. We tore out 3 walls and a ceiling that was the floor for a little attic space on the main level. Upstairs we joined the 2nd and 3rd bedroom into a Master Suite with a walk in closet and a full master bath. We moved the wall back (increasing the bedroom sqft.) in the 1st bedroom and added a closet. We updated all the wiring and added central air to the house as well. We had the exterior resided as well.

What was the outcome?

After 2 years of doing most of the work myself and with some help from my dad I finally moved to another property and got this one rented out in September of 2020. We posted it on a Monday and had a renter agreement signed by that Saturday.

Lessons learned? Challenges?

It was a bigger project than I should have had for my first investment. It was a lot to take on while having a full time job and being recently married. Another challenge I ran into was figuring out what I really wanted to do with the property and my long term goals.
I learned the hard way it is best to take your time and do something the way it is supposed to be done because if you don't more than likely you'll be fixing it later.
Renovating a house while living in it is extra difficult!!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

N/A