All Forum Posts by: Dave Kush

This is worth asking an accountant about. The specifics of your and their tax situation would make general advice difficult.

There are definitely cash flow positive deals. I find that the one percent rule is merely a way to scan (mostly on market) properties to see how close they are to cash flow. I have never used it as an ironclad rule. To be honest, I've never used it at all.

I operate in the Chicagoland suburbs. There are deals to be had. You have to be diligent and consistent to find them. Most houses cannot be bought at a price sufficient to cash flow. It's a process to locate the ones that do.

Well done sir. I've heard that South bend is a great short-term market.

 Winner! Best response. Thank you. Going to come in handy!

Isn't that how it always works! You should usually just assume it will work in the opposite way it is intended.

I appreciate all of comments. The theme that I find across the board is that people will be fleeced to their level of ignorance. Regardless of which method you choose, you better have your stuff together and understand what and who you're dealing with. 

If we each put up half of the cash, we would split the profit. He would own 50% of a $500,000 house. The equity on that house would be $300,000, $200,000 of which is profit. If we flipped it, he would get his $50,000 back plus $100,000 of the profit.

The proportion of their share of the cost = their proportion of the arv

Congrats Steven. Good question!

For private money (friend, family, etc)

In the end, it's whatever the partner will agree to. Some might want equity, but others may be happy to just make a loan. You can negotiate anything. 

For non real estate investor partners, consider their alternative options, and be in range. If they can make 7% in the market, you need to do better than that otherwise they should just start in stocks. I usually shoot for loans. Make sure everybody is winning or there will be no takers. If somebody wants equity, I give them the corresponding ownership. If they put in 5% of the ARV, they get 5% ownership. It doesn't have to be that way--you can give whatever equity you want for the money you receive, sweetening the deal for you or the investor. Just be sure to stay cash flow positive and not to give up so much it's no longer worth it for you!

For more formal partners, hard money:

They will want to see the deal and all the numbers that go with it.  Usually you want to try and get a relationship with one of these first so you know what they are looking for.  Hml are shrewd... Be careful especially if you're new to that. 

Let me know what happens! Looking forward to hearing other people's thoughts as well!

I've done this. It was well received. The tenant stayed and absorbed the increases. 

Tons of good advice here. My only addition comes from Warren buffett, and I think this is even on the signs that Jimmy John's: if you are not willing to own it for 10 years, don't own it for 10 minutes." Especially in real estate, there are situations where you might own something for a short period of time, but I think the main point of this statement is to make sure that you buy right in a way that is consistent with your end goal. Don't budge. Go off market. There's always a deal to be had somewhere.

The point above about house hacking when you're highly leveraged being a more long-run game makes sense to me.  Given the recent inflation in real estate prices, a 5-year window for the house hack might be more reasonable, if you can stay that long.

What's the ARV?