All Forum Posts by: David Ricketts

My Dad and I are teaming up to start a fix flip journey together. I have a friend who is further along on the path (has done 5-6 of her own) who has offered to help as a consultant of sorts. I have also been introduced recently to a woman who is looking to be a financial partner. So hard money loan in my name, down payment and carrying costs covered by her but we still need to meet to hash out the details. Here's my question: What is a fair way for them to be compensated? Interest paid on their loan or a percentage of the profit? How is this typically handled?

Thanks in advance for any insight!

Hi Andrea. Welcome to the community!

The journey with your dad and peer sound amazing! The person lending you money to pay back hard money sounds like a predatory lender. The fairest way to compensate them is with smile and moving on.

Wishing you the best of luck on this exciting journey!

0 Votes

Quote from @Evan Polaski:

@Jonathan Greene, great list. There is a lot of nuance in number 5. One such thing is: not knowing the target buyer.

The only flip my wife and I lost money on was one in our own neighborhood and it was the first one that we did that was beyond our own price point, at the time. Knowing how cheap (or expensive) in finishes you have to go is huge. Knowing that someone who can afford a $500k house, can often also afford a $600k or even $700k, house, and will want more of everything (better location, bigger house, better finishes, etc).

As for number 1, not even just paying it all up front, but working with any contractor that wants "percentage" draws. 1/3 up front, 1/3 half way done, 1/3 at completion. Well, demo and drywall feels like a lot of progress, but finish carpentry takes the most time. Always, always use contractors that have draws at set benchmarks: rough-in plumbing passed, drywall complete, all doors installed, etc.

@Evan Polaski- Structure an agreement with a contractor to consider effort and details is smart. Thank you and great tips!

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Quote from @Patrick Roane:

Hey folks,
Quick questions for you. I have enough cash in the bank to purchase a small 2bd, 1ba SFR (already cash flowing/w tenant) outright. My question is, should I make a cash purchase so I can own it free and clear? Or, should I just take a fraction of money and put that towards a down payment and finance the rest with a 30 yr mortgage?

Thanks.
Pat

Hi Patrick,

Congratulations on saving up to purchase a house outright! That’s an incredible accomplishment, and you deserve a lot of kudos for reaching this milestone.

This might be a simple question, so thanks in advance for humoring me—does the property still cash flow if it were financed with a mortgage? One mistake I’ve made in the past is relying too heavily on numbers provided by various real estate websites, so I’m curious how you’re verifying the property’s financials.

Looking forward to hearing back!

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Dayton, Ohio

Thank you for posting. Would you be able to give for information.

Some question I might ask: Can you get access to the land or is it surrounded by other people property? Is there clear title? Maybe someone else could chime in, but for my area, 2.15 acres might be a very small park?

Best,

David

0 Votes

Quote from @Bruce Woodruff:

@Jonathan Greene Thanks for including me! You have complied a pretty good list of what not to do...I would add the following:

1) Do not even pay 25%. And I'm speaking as a Contractor.... I always make sure that the draws are commensurate with the amount of work (and specifically the trade) performed to date. For example - you're starting a $100,000 remodel on a propoerty that you have acquired, the Scope Of Work includes basic lipstick stuff like a kitchen remodel, a bath remodel, and new flooring and paint.

I would start with a draw of no more than $10k, that is more than enough to get anyone going and it shows your good faith. To be honest, any Contractor that asks for larger amounts of money is showing that they do not have any reserves and/or they are 'robbing Peter to pay Paul'.

After the initial draw, I would advise paying as the project proceeds - after demo is completely done (and you know that for sure if you are out-of-town), then pay for demo....only. Then, give the GC or (Tile Contractor), enough to buy the tile only...after they are completely finished, then pay them the balance due on the tile ....only. If any inspections are requirted, make sure that they are done and signed off before paying. Ask to see the permit card.

2) SOW - Make sure that you have an ironclad and bulletproof Scope Of Work! This is where most projects go south....If you and your Contractor are not on the same exact page regarding what you are expecting to receive and they are expected to provide, then you are doomed to fail. I include every single thing, however small it may seem...

3) Do not try and save by buying materials yourself. This is not how it works...well not with good Contractors anyway. You will not actually save money, and you will irritate the Contractor by penny-pinching and micro management. Any decent Contractor can generally buy products for much less than you anyway, and even if you find a special deal on, let's say, Doors and Windows...who is going to take charge of delivery, unloading, storage, security, warranty and all that? They will and they will need to be paid for it.

That's all for now, Mr Greene.....Good topic!

Thank you for share your experience! I thought that conventional wisdom was to buy materials, but I think your points 1&3 would be a great combo

TO ANY ONE - @Bruce Woodruff brings up a great point about defining scope. One bit of advise I read was to put in target dates for levels of completion and penalties for delays. The question is, what measure would you advise putting in your contract to help omit any ambiguity within the investor contractor relationship?

3 Votes

Quote from @Devin James:

1) Don't fall into analysis paralysis, theres a ton of ways to invest in Real Estate, pick one and go.

2) Take action. You will fail, you are supposed to fail, that's how you learn.

3) Systems! Create systems that make the business repeatable.

Taking actions can be a big hurtle. I like to use AI when communicating with sellers/agents to keep an up beat tone to the conversation.

-Thank you for the post!

1 Vote

Hey everyone!

I’m a bit of a nerd with an analytical streak, attempting to break out of my shell and be more social—so if you see me in real life, get ready for a nerd trying to be outgoing! I've been diving into real estate for about 10 years now, starting with reading all the books I could get my hands on. My first attempts to get a loan ended in some pretty humbling experiences (getting laughed out of a couple of banks due to zero credit history).

Fast forward to today, and after building up some credit, a stronger W-2, and a solid professional background, I’m finally back in West Palm Beach, Florida, looking to make my first deal happen. I’m especially interested in doing a house hack as my entry point into real estate.

Excited to learn from everyone here, and hopefully bring some value to the community. Looking forward to connecting!

0 Votes

@Jonathan Greene

Great post- I appreciate you calling out what happens on posts and the offline. I have bumped into these tactics when I used to attend a REI group. When I was starting out, articulating what was happening was tough... I'm new here, so the advise is still sound.

Best,

David

1 Vote

@Timothy Blackman

Congratulations on starting the process! 🎉 Thank you for sharing your journey here!

I’ve been wanting to start investing for a long time and am just getting started myself. I thought I’d share a few pieces of advice from my experience:

Preapproval Process: Getting preapproved felt intimidating at first, and I felt a bit out of place. But don’t let anyone discourage you during the process—stay focused on your goals.
Loan Summary Shock: Be prepared for a big number on the loan summary from your lender. I had to take a few deep breaths (and even screamed a bit when I was alone) before I could process it. A long walk helped too!
Unexpected Costs: Real estate has a lot of additional costs that aren’t always obvious. A few examples:
- PMI if you put down less than 20%
- HOA fees or budgeting for your own maintenance costs
- Zillow Estimates: I found Zillow can underestimate costs, so I add a bit more to their numbers to get a realistic idea.

Hope the process is going smoothly for you! If you can find a partner invested in your success—whether it’s a significant other, a parent, or even the BiggerPockets community—it can make all the difference. Take breaks when needed and keep going when you’re ready. Good luck!

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@Andrew Syrios

+200+Thank you for the insight! I appreciate the clarification on loan assumptions and the limitations around HELOCs. I’ll look further into the “subject to” approach and review the article you shared to better understand the potential risks and strategies.

Gaining a seller’s confidence is definitely something I’ll keep in mind if I pursue this route. Thanks again for pointing me in the right direction!

Best,

David

0 Votes

Fort Lauderdale, Florida

All Forum Posts by: David Ricketts

David Ricketts has started 2 posts and replied 18 times.

Post: Newbie over here!

Post: The Top 5 Ways I See New Investors Lose Money On Their First Flip or BRRRR

Post: Getting ready to purchase an SFR rental

Post: what to do with 2.15 acres of land?

Post: The Top 5 Ways I See New Investors Lose Money On Their First Flip or BRRRR

Post: 3 Tips for Starting out

Post: FLORIDA MAN has entered the chat

Post: How To Know Who To Take Advice From When You Are Just Starting Out

Post: First time home buyer loan advice.

Post: **First Deal: Exploring Mortgage Assumption and Negotiation on a Competitive Property