All Forum Posts by: Craig Clinton

If I understand correctly, you're just asking if it's wise to purchase a commercial property (> 4 units) as a first time investor, as opposed to a 1-4 unit.  Assuming your numbers are correct, yes you should do it!  Many investors start off with 1-4 units and then get into commercial and wish they started out in commercial.  You're skipping to the next step.

Keep networking and keep learning.  Good luck.

Hi Janell

I would find the market that you want to invest in and then study it until you know it like the back of your hand. Start going to REI meetups because you'll learn little nuggets about investing that you wouldn't learn elsewhere and you'll meet all sorts of people that you'll need in your investing journey like lenders, realtors, contractors, insurance people, etc. You'll also meet people that have deals, which is the hardest & most important thing in REI.

Once you find a deal and the numbers make sense, jump in. I personally, would not use all of your 150-200k on one deal because now that your going to meetups and networking, you never know if a screaming deal comes your way. You want to have some liquidity if it does. I would use a hard money lender (HML). They'll typically pay 85-90% of the purchase price. You can use a portion of your 150-200k to cover the 10-15% difference. Also, with the rehab, hard money lenders don't reimburse you until a particular portion of the total job is done. For instance, if you have 10k in your budget for kitchen cabinet installation, the HML won't pay you the 10k until they physically come see that the cabinets are installed. You can use a portion of your 150-200k to cover that too.

 You have the construction knowledge so that is a huge plus.  Keep networking and keep educating yourself.  Hope this helps.  Good luck!

hi Nick

There's so many different ways you can structure the partnership as far as %'s of profit.  I'm just going to keep my reply general and hope it helps. 

No matter what split you end up deciding on, get it all in writing in an operating agreement.  You don't want any misunderstandings as far as who handles which responsibilities......especially with family.  

Also, in my humble opinion, I don't think it should be 50/50 split if you're finding all the deals and bringing the funding.  Those are the two most important aspects in investing.  Maybe the split can be:  he get's paid at cost (he breaks even on the reno work he does) and then he gets 35% of the profits and you get 65% or 40/60.

Good luck!

You should look for properties that need work so you can force appreciation.  For example, you purchase for 200k, you put 50k in reno into the property, and now it's worth 300k.  Borrow the start up capital from family and friends, buy a house, renovate it to increase the value, and then refinance.  Once you refinance, you can pay back the start-up capital that you borrowed plus the interest.  I'm over-simplifying it but that's the gist   Just make sure you know your numbers like the back of your hand.  You make your money on the purchase, so don't over-pay.   Good luck!

I'm not sure if you already did this, but educate him on what you are doing and why.  He works for you.  If he is still uncomfortable after that, find a new agent.  I'm not suggesting you get your RE license but that's one of the reasons that I have mine.  Most agents cannot do accurate comps and do not understand investors.  good luck!  

Contractor is always the toughest.  You have to find one that does good work AND is trustworthy.  It's not easy

What is the interest rate they are offering?

I would try to add a laundry area.  You don't need a lot of space for it and it will make your airbnb more desirable.

Cleaning people are SO important for your airbnb.  Besides cleaning, they're your eyes in the time between when guests leave and new guests arrive.  I would make a detailed list of everything that you want your cleaners to do so there are no misunderstandings.  There's so many little things I didn't think of to have my cleaners do at first and learned the hard way,  Like checking to make sure all tv remotes are where they should be, making sure everything is plugged in like lamps (s0metimes guests will unplug for whatever reason), making sure welcome book is where you want it to be for next guests, etc.

I would have several cleaners you can use just in case your regular cleaner backs out last minute.  Also, check up on each one the first time you use them.  Just to make sure they are cleaning up to your standards.

Good luck!

You can still calculate an ARV whether it's a flip or not. First off, I ALWAYS factor in the square feet of the house because you can have a 3 bedroom, 2 bath house that is 1,200 SF and a 3/2 that is 2,200SF. I probably spend too much time calculating ARV but it's the accountant in me. I find recent sales in the same neighborhood as my subject property because in NJ, prices can fluctuate a block or 2 over. Just make sure your comps are no longer than 1 mile from your subject property. I then find properties that have sold preferably in the last 6 months but no more than 12 months ago. Whether I come up with 10 homes from that quick search or 20 homes, I then calculate an average $$ per square foot just to know that figure.

Now try to find as many similarities in the subject property as in the 10-20 homes.  I have a spreadsheet that has columns for everything.....BRs, baths, Finished basement, finished attic, granite or formica countertops, hardwood or laminate, vinyl siding or aluminum siding, two-car wide driveway vs single wide, etc, etc.  Compare those columns and whittle down your houses to 3 or 4.  

Obviously some things are subjective like quality of finishes but the more you do it, the better you will get at it. I like to compare the $ per SF of those 3 or 4 versus the average I came up with for the 10 or 20 homes.  The average on the 3 or 4 should be higher because you're looking for remodeled homes but you just want to make sure the difference in averages is not drastic.  You now have a fairly accurate $/SF for a remodeled home.

Hope I explained that ok.  Reach out with any questions.  

You're doing the right thing by walking away from those realtors.  It's going to be tough to find a good one for a number of reasons.  I'm an investor but I do have my RE license in NJ because I knew I wouldn't trust realtors to run comps for me.  The RE test in NJ is too easy in my humble opinion, and that's why I'd say (in NJ at least) 20% of realtors are very good, 20% are average or ok and 60% suck.  The barrier for entry is too easy.  I'm not sure about other states but my guess is it's the same everywhere.

The other issue you're faced with is any realtors that are very good, probably already have a list of investors they work with.  So it's going to be tough for you.  I would try doing comps yourself using zillow data to learn your market.  Know it like the back of your hand and when a deal comes along, you'll know quickly if it's good.  Once a realtor sees you close on one (and you give them a bonus), they'll be more inclined to add you to their short list of investors for their off-market/pocket listings.  

Have you tried finding wholesalers in your target market on BP?  Those deals will be better than properties on the market. Also, keep utilizing the people on BP like you've been doing.

You'll break through and get one soon.  Good luck!