All Forum Posts by: Daniel Raposo

Hey @Jay Hinrichs  I completely agree, my 50/50 equity partners are great!

@Matthew Rembish Right now I am working with 3 private investors on a 50/50 split. One was a client that I did maintenance work on his property, the other two were people I met through friends/family. Each one took some time to develop our relationships, talk to about real estate and eventually figuring out what kind of deals would be a good fit for us. I go to a lot of networking/REI groups but I don't you're likely to find these kind of people there. I don't know what everyone else's experience is, but I think you'll mostly find hard money or maybe some higher interest private lenders at those kind of events. Private partners or private lenders are most likely going to come about by talking to people about real estate, what you're doing/want to do, and asking people if they would be interested or know someone who might be interested in investing. It's kinda funny, but my mom was actually my biggest salesperson when it came to this last year. She was calling me every week with someone she thought I should talk to about investing. My advice is to get out there and talk to people.

Hey BP!!

2014 has been a great year. I've been in construction since I was 2 (at least that's what my dad tells me) and have owned a 6 unit rental building since 2007 (I know that is true) but last year I decided I need to refocus on real estate investing. Thankfully I found BP, started reading the blogs, forums, listening to @Brandon Turner and @Joshua Dorkin on the podcasts and got myself motivated to get back into investing.

All of that led to me finding my first private investor and then my first flip. I found an MLS property that had been on the market for a long time and had gone through many price reductions; after a few months of negotiation we closed on December 17th last year. The house had been gutted to the studs, the garage torn down and the basement slab removed, but most importantly it was on a non-conforming lot. About nine months later we had variances approved, the house completely rehabbed and sold it for a profit of $115,000 which I split 50/50 with my private investor who put up all the money. Here are the basic numbers and some before and after photos.

Sale Price - $489,000

Purchase - $154,900

Carrying/Closing (both sides) - $64,100

Rehab Costs - $155,000

Total Profit - $115,000

Before

After

Since then I have purchased another building with 12 apartments and 3 retail spaces, again using a 50% equity partner that put up all the money. Our plan is to gut renovate the 12 apartments, then refinance and hold the property long term. If my numbers are accurate the property will net about $56k per year after all expenses and financing costs. 

I've gotta say, this past year really has me excited for 2015. I'm just getting started on a direct mail marketing program and planning to do at least 2-3 more flips, double my rental portfolio again and wholesale or list anything else that comes my way this year.

Happy New Year Everybody!!

Dan

Thanks Dawn Brenengen and James Wise for your responses. I didn't mention it before, the site I'm talking about is Appfolio. I know I can use multiple accounts with the program but was confused about the advice to use two management accounts for all of the different properties (one for rents/expenses and the other for security deposits) versus doing two accounts for each property/ownership entity. Any thoughts on this?

Hi BP,

I've looked through a bunch of the forums and haven't really been able to address my question, so I was hoping someone here could help me out. I'm also going to double check with my attorney on this, but was hoping for some of your advice.

I currently own a 6 unit property that I have managed for 7 years for myself and partners. I always had a checking account and savings account for security deposits in the LLC name, with myself and one other partner as signatory authority for paying bills, etc. and I took a fixed rate monthly management fee that was paid to me personally. KISS principle, right??

However my portfolio is rapidly growing, I am working with various investors on different properties and I am in the process of setting up property management software that will make things easier to scale as it grows. The implementation team from the software company is telling me the simplest way to chart the accounts from an accounting standpoint is to set up one management company for all the properties with a trustee account for rents and a trustee account for security deposits, and all the money from the various properties would go into those two accounts. Meaning all the rents from the various properties would be paid to my management company (not the owner entity) and deposited into one account, the bills from the various properties would then be paid from that account and tracked in the software to the appropriate property, tenant, unit, etc. and then the balance for each property could then be transferred to an owner account each month. Security deposits (no matter from which property) would be deposited and held by the management company separately from the operating account and tracked to each property through the software. Management fees would then also be transferred to a separate account.

With my current property we just put the money in the bank, paid the bills, and left the rest in there until the end of the year when we paid ourselves a nice little bonus and left a reserve. But as the person managing the different properties I could see the value of not having to balance and reconcile various checkbooks by using one account with various charts in the software. The obvious concern in my view is whether or not this would be illegal commingling of funds or not since the management company would have a separate account from the "owner" account.

Does anyone have experience managing properties for other people or with this type of setup? I have never worked with a property manager or done it for someone else, so I'm not sure what the standard is for handling the money of multiple ownership entities. 

Thank you in advance for your help!

Welcome to BP @Jack Mejia 

As you've already discovered it really is the best source of information for anything real estate!! 

Bad news is that they probably only qualified you for the purchase price, definitely check with them for how they qualified you and for what type of loan. 

I don't really subscribe to the 1 or 2% rule because they tend not to work as well in higher price ranges (like our area) I mainly look at Income vs. Expenses and make sure I am conservative on both fronts, with enough for vacancy, capex, a healthy maintenance budget, etc. 

Hi @Seshu Yaramala 

Would you be funding the rehab out of pocket, or building it into your financing through a 203k type program? In my experience most banks are going to have an issue financing a property if it is uninhabitable, vacant or needs a lot of work unless it is through a renovation loan product. If you already have financing lined up for this, I would love to know who you are working with...

In any case, I think the numbers on the property are pretty tight. This property definitely won't work if you were planning to live there and have the other three units carry the load as is discussed in a lot of "house hacking" scenarios in the forums and podcasts. 

I hope this helps, good luck!

Dan

Brandon Sturgill If I am understanding your numbers correctly you are looking at a roughly $26,300 profit (25k + 1,300 you put at the end) which is a great return if you're putting in roughly $56k of your own money. I'm not familiar with your market, but If you are and you're confident in your numbers and ability to get it done go for it because at a 62k purchase it's a great deal. If you can get it for less even better. Good luck! Dan

@Kim Handelman 

Also another note since nobody else touched upon it, take the returned items off your mailing list but don't toss them. Take those properties and dig in a little deeper. Sometimes the owner address may have changed or there might be a small problem with the way the records were listed. Look up the owner information yourself through the tax records, land records, white pages, or whatever you can take. If you think about it, everyone else mailing to that address got returned too so actually finding that owner will give you a leg up on your competition....

Also, if you're looking to meet more investors there is an investor meet up in Fairfield, CT next week that would be worth checking out. Southern CT REIA Meetup

Keep at it and good luck!!

Dan

Rob Kulp I'm not sure about your specific area, as I live and work in CT and every town, let alone area, have a different process for permits. As a contractor I have performed work with permits and without, however my opinion is that it is always better to err on the side of caution. Any time I am flipping or renovating a property that requires anything more than patch and paint cosmetic type work I go in and meet with the building inspector or someone from their department before I start the job or even purchase the property. Explain to them what you want to do, they will most likely ask you to pull permits, but then at least you've started the relationship off on the right foot and they are more likely to work with you in the future. I have rarely had inspectors make me replace existing items that I had nothing to do with unless they were legitimate safety concerns or reasonable upgrades. In my opinion, having the permit and inspections in place is worth the time, money and effort when you go to sell the property and can show the buyer that everything done was legit. Just my two cents.