All Forum Posts by: Daniel Torres

Quote from @Matthew Paul:

Doors , windows , kitchen , and baths plus holes in the walls , entire paint job , holding costs all for $40K .  I think you are WAY low . Thats not including things that you dont anticipate . 

Hello Matthew, 

Feel free to read my reply to @Dan H. the rehab cost was set at 40k due to the significant discounted price of materials. However, I’m still unsure if I should keep the initial estimate from the contractor even though we are minimizing labor and cost of materials. 

Also, you mentioned coming into problems we don’t anticipate. From your experience, what were something’s you didn’t foresee happening and how did you manage overcome it. In addition, what percentage would you recommend that we include in the rehab to avoid these obstacles. That is something we didn’t really think about and I’m glad you mentioned it. 
Again, we are new to the game and really appreciate your feedback. 

Thank you

Quote from @Dan H.:

Did a contractor provide the $40k rehab estimate?  It seems low per your description.  

Would this be a flip, brrrr, traditional Rental, owner occupied?   There is a lot of info missing from being able to provide an educated opinion.  Note if the plan is to Owner occupy, it does not need to be an optimal Investment.  

You do not state ARV but my own belief is rehabs provide best return in high cost RE markets. I suspect the value added will not justify the effort. My criteria for doing a value add is that it adds at least 2 times the value add costs with minimum increase value of $80k. This is because value adds have risk and take effort. My last rehab was my most over budget ever. I never expected to bust budget as bad as we did. I also worked it harder than possibly any other value add. Do you believe your $40k rehab will add at least $80k of value?

Good luck

Hello Dan,
I appreciate your reply! 
So we did have a contractor provide an estimate for the total cost of renovations amounting to 58k. We are located in The Rio Grande Valley, Deep South in Texas. Given the extensive work needed I will be using sweat equity to complete the job minus the installation of windows and doors. Also, it is worth mentioning that we are near the Mexican border, which we have been importing materials from for other projects. For instance, a full kitchen cabinet setup costs us 800, the front main door with glass siding will cost us 400 and the windows are costing us 30 a piece. Doing the project ourselves has deem more cost effective, therefore minimizing our rehab cost. I have experience with dry way and paint as well as kitchen remodeling which seemed to be the priciest when talking to the contractor.

That being said, would the Arv be affected due to minimizing labor and material cost? Or should I also include my own personal labor into the rehab cost? This would be our first investment and like many starting out, I want to properly educate myself by learning and doing as I go on with this project. 

The intention for this investment is to use the Brrrr method. And add an Adu down the road.
We estimate the Arv to be 220k. With a rental potential estimating to be around 1800-2000 based on other comps in the area. We do see some other comps ranging from 250k- 290k however they have additional baths and about 500 - 700 sq more. 

Again I appreciate your feedback. 

Good Afternoon, 

We might have found a deal, but we are debating whether the Rehab might be too much. We went to go see a house that is below market value however, the house needs quite some work. 

Within our market the single family home has been evaluated at around 189k at 1554 living Sq with a 4 bed 2 baths and sits on half an acre. The home has potential to bring in a monthly rental of $1800 - $2000. The home sits at the front of the land, so there is potential to add an ADU later in the future.

When we saw the inside, it was a nightmare. House was never maintained or serviced and has holes all around the house as if they had punched the walls through out the years. All the doors and windows need to be replaced. Thankfully the floor is in great condition. We did notice some water damage in the front of the house but was told the roof is in good condition. We would also need to gut out the kitchen and both baths and have them completely redone. Total Rehab would be about 40k.

Due to the extensive work needed to be done, our first investor who is a family member is not willing to go through with it. We still need to send the business plan to one of the private lenders who we have been talking to and who has been giving us pointers helping us along the way as we are new Real Estate Investors. 

The home owner has listed the house at 140k, as they do owe 2 years worth of taxes and are eager to sell. Due to the extensive work needing to be done the seller is willing to negotiate the price from 110k - 125k once we have properly explained the work that needs to go into it. 

I’m confident this is a great deal but would like to get some pointers/tips from seasoned investors. I’m happy to provide additional information if required. Also it would be amazing for any investors that would like to partner up with us on our first deal as well as any private lenders would give us additional information or pointers as well. 

Thank you in advance!

Quote from @Chris Seveney:

@Daniel Torres

When you mention “investors” that plural means in most instances you would need to file for a sec exemption unless it’s one investor for one deal (or in CA can do trust deeds).

It’s up to you whether you offer debt or equity.

If you offered debt then are they in first position or second position? The return for this type of investor will vary depending on the risk involved. This could be anywhere from 8% to 15%. In these instances, the investor does not get any upside

If you do the deal as equity, the Investor will typically get a preferred return, and the majority of the upside. This is more risk for the Investor, which is why they can get a greater return

 Hello Chris, 

I greatly appreciate your support. It has been very informative and given me some valuable insight. 
We are offering debt for the first deal, however the first and second position you mentioned is news to me and will have to get educated in that soon. I can’t thank you enough for the information you provided me! 

Hopefully all goes well with my first deal! 

Hello everyone,

My name is Daniel, and I recently left my job as a fraud analyst at a financial institution in March to pursue a real estate investment journey with my wife. In my previous role, I encountered numerous instances of real estate fraud, which opened my eyes to the importance of legitimacy and trust in this industry.

After months of studying the markets and educating ourselves on the BRRRR method, we are thrilled to have potentially found our first deal, along with other promising prospects. We are now at the stage where we are looking to partner with private investors and would greatly appreciate your insights.

We have several questions about what private investors typically expect when they partner with a new real estate venture:

1. Return on Investment (ROI):

• What do private investors generally receive in return for their investment?

• Are they typically given a percentage of the cash flow along with interest on their initial contribution? If so, what is a common percentage range?

• Is the cash flow percentage indefinite, or does it have a defined period?

2. Equity and Ownership:

• I have read that private investors can be added to the deed. How does this process work, and what does it entail?

• What are the pros and cons of adding an investor to the deed?

• How does equity sharing typically work in these partnerships?

We are still relatively new to this journey but have already gained a wealth of knowledge from other real estate investors. The community has been incredibly supportive, and we are excited to continue learning and growing.

I recently joined BP, and I am hopeful this will be the beginning of something great. Thank you in advance for your guidance and support.