All Forum Posts by: Dave Kush

 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?

This is tough. How long is the lease? Is she month-to-month?

If you can swing it, I would tell her that you are going to have to adjust the rents to the market level, and give her as much time as you are reasonably able, maybe 3 to 6 months to vacate, provided she's paying. It's not required, but it would be good on you to try to help her find a new place if you can. It would help solve your problem faster, and she may struggle to locate a place at that income.

I have found myself in this situation before. Above is what I find to be the best compromise. If I have to move forward and adjust the rent upward or end a lease, I try to help that tenant as much as I possibly can whether it's to locate a new place or whatever.  (Just don't get taken advantage of). 

You are going to get people who will respond to this thread saying you definitely need the LLC and other people who will say it's a waste of time. Both sides have merit.

You will want to think about your goals. If you plan on really scaling up, you'll probably want to go with an llc. If you're just going to hold a couple of properties, the cost benefit analysis may not pan out, and you will definitely get sued personally if your LLC gets sued. You have to have the personal protection either way, at which point the LLC is less important.

An accountant once warned me to be careful about using the LLC to manage the properties if they are not owned by the LLC because it could potentially trigger taxable events.

Okay, I assume you are talking about selling your position in the contract for $4,000. Am I correct?

if so, do you have a cash buyers list already? If not, an easy way to find one would be to look up people who recently bought houses in cash, or search for those firms online if there are any locally.