All Forum Posts by: Taylar Caraway

Interested to hear ideas regarding how to structure a partnership correctly so it is win/win for both sides.

We are young and able to act as the "boots on the ground" to handle all the day to day operations of the property, including management/tenant issues/repairs/etc but we lack the necessary capital to get into some of the deals we want. We feel we can offer a more "passive investor" a great opportunity if they chose to work with us but we don't know the best way to structure this so it is beneficial for both parties...

Split cash flow? 

Split equity? 

Hoping to hear what you have done and what has/has not worked out for you!

Thank you in advance!

Regarding the property management with your sister, I still don't think analyzing with only 5% is a good idea because as I said before, the second your sister decides she doesn't want to manage the property anymore then your cash flow looks a whole lot different. Plus paying her only $100/month to manage 4 units... yikes! Could make more working at McDonalds!

Typically you will require more than a 20% down payment for an investment property, unless you are planning to do owner occupied. I'd run the analysis using anywhere from 20-30% down.

Also, your vacancy is quite low. Only $88/month is only 4%, that is not realistic. Typically you'll want to set aside anywhere from 10-12%. Even if you plan to self manage, you should ALWAYS include the management fees in your analysis so your deals aren't dependent on self managing in order for the deal to work.

I see you've also set aside $260/mo for utilities. Are you sure these won't be included in the rent? Seems high to me.

You can't really make an accurate analysis until you know your total rehab costs and ARV. How do you plan to finance the rehab? If you've only seen 1 unit and estimate 10k worth in rehab costs, this could become 40k+ by the time you've seen everything and that could change the entire deal and will effect your cash on cash return drastically.

$2000/mo income on a 4 plex so rents are only $500? Either this is a pretty rough area or this property is in bad shape. Have you checked the median for the area? I recommend plugging the address into Rentomenter.com and seeing what the median is. If you plan to upgrade the units and can increase the rent a couple hundred dollars per unit it would make everything look a whole lot better.

Last piece of advice is plug these numbers in the Bigger Pockets rental property calculator so you can better manipulate the numbers and find out where it will work and where it wont.

From what I see here currently though, not a good deal.

 
Well I can't say anything about the IL market because I honestly have no idea, but based on what you just said with people leaving the state it doesn't seem promising. Maybe there's a silver lining though... if people are trying to get out then there may be some motivated sellers out there. If you can hustle and find yourself one of these people then you could have a smokin deal. 

You'll find 10-12% cash on cash return eventually if you analyze enough properties... the deals are out there! Don't be afraid to manipulate the asking price in your analysis to make the deal work for YOU. Every property has a perfect number, you just have to find it.

I would recommend always including your property management fees in your analysis even if you do plan to self manage. Someday you might make the choice to stop and you don't want your deals to be dependent on you managing to make them work. If it were me, I'd prefer to have these numbers already factored in and then just "pay myself" each month.

I'd put 8-10% in for management and see how your cash flow looks.

So you'll be paying 170k cash for the property? Why not use the 170k cash as down payments on 3+ properties??? This deal only cash flows $300/mo and your cash on cash ROI is only 2%! That's not a good deal! Wait for the right deal(s) that will cash flow and give you 10-12% cash on cash ROI, then you'll be looking good!

What would your solution be to finding a good GC? I believe that recommendations and word of mouth are fantastic methods of marketing and have rarely known of a GC supporting only a single investor.

@Wayne Brooks Fantastic info! We did not know about the 10% contingency factor or that a 203k loan is typically 0.5% higher in the interest rate. Thank you for your time!

@Elvis Vasquez @Wayne Brooks . Thank you for the reply. We are looking for local GC's and plan to have a short list in the next couple of weeks. We're now interested in the dirty details that people have gone through using the 203k loan. As for the question about recommended cash reserves, I'm not sure I quite understand. Cash reserves in case of what for example? My first thoughts would be what if the rehab costs more to which I would think the risk there is limited by the 203k loan process, i.e., the lender won't lend if there is a gaping hole in the rehab plan/budget. If something did come up we have other methods to come up with the cash if necessary as our other cash on hand is for personal emergencies if necessary. The other methods being personal loans and credit cards. What other reasons do you think cash reserves are necessary for?

@Derrick Gordon. My fiance and I are in the same boat. There have been a few posts on this specific subject, if you haven't searched through historical posts I would recommend that as there are a few leads. So far none of our leads have been fruitful. When we get a GC connection we will pass along the info!

--Daniel