All Forum Posts by: Paul B.

OK, so now the conversation just got extra interesting...

You're thinking that bigger players will come in with their billion-dollar funds and just start buying in bulk? It's an interesting thought. Is there anyone out there who does this now? With small-dollar real estate, specifically...I know there are vulture funds for notes and commercial properties, etc.

I'm not quite sure how this would work unless the deals were SO good that there was tons of room for margin for error. As we all know, a house has many moving parts. It's quite unlike buying a note where you're buying a cash flow and that's it. You've got many subtleties at play here...

Let's noodle this through, though, and assume that the billion-dollar-boys come in and start buying properties en masse. What does that mean for us? Opportunity? Or problems?

Ah, thank goodness -- and good for you! When I saw the word "tired" I took that to mean you were just fed up.

Depending on the size and timeline of the job, I would try to defer any payment to the contractor until the job was done. And obviously the bulk of the money is not coming until the end anyway...

Normally you'd have a draw schedule, but I didn't get the impression that was how this worked. I'll email him and ask.

I'd approach this very cleanly and simply. You set up the LLC and you each get a 50% stake. Say you each put in $1000 as capital.

He then loans the money that is needed to buy the property and make repairs, etc. The LLC pays him a fair rate of interest on the money. You are then paid a fair property management fee. I would try to price all transactions, whether they are for debt or services, at the market rate. This is the only way you know what the "profit" of the LLC is.

And sure, you're doing a little more work than just property management, but you're also getting 50% of the upside without any of the financial downside. I'd say that's a fair trade.

It would have to be understood, though, that your partner is the money man, and if the property needs any major repairs, he'll have to cover those and add those costs to his loan, which will be repaid when the property is eventually sold.

I just spoke with a lender from Fidelity. They do have the NOO/Renovation product.

The one thing I'm not in love with is that they really do prefer you to use one of their "preapproved" contractors. Who knows what kind of pricing these guys offer, especially since they are "preapproved."

In a nutshell, though, you give them the estimate of your repairs, and you can borrow 90% of that amount on top of 90% of the purchase price. There's only one draw at the end of the renovation period, and the check is payable to you and the contractor.

They are more likely to buy into your estimates and scope of work if you use a preapproved contractor.

Seems like a good way to get financing for properties where you could never get purchase-money based on their condition, but you're free to try your own crew. If you tell them you're doing it yourself, you're probably out of luck unless you're also a licensed tradesperson.

Good article. A reminder to everyone that there's no rush to buy property today. I think we've got at least 12-18 months of opportunity ahead of us. Settle in and do only those deals that can't go wrong.

Sounds like you've lost your passion for the business. Once it becomes just about money, it's just another job.

Are there ANY parts of what you do that you still enjoy doing? Agreed that it would be nice to build operating leverage by using other people, but it's hard to find people as smart and driven as you'd like them to be. And if you do find them, be prepared to pay them very well so that they don't just learn at the feet of the master and then move on.

Is there anything about what you do that you could repurpose into a more exciting career? Like coaching, mentoring perhaps?

You gotta get your spark back. You're not supposed to hate what you do. If you need an alarm clock in the morning, or if you begrudge Mondays, you're in the wrong business!

Let's say you have a choice between two $35,000 SFHs in a primarily OO neighborhood or one $70,000 duplex in a primarily rental neighborhood -- assume further they're 100% comparable in terms of location, quality of tenants, etc.

For some reason, I've always liked the idea of small MFs. I like that you can take care of two, three, or four doors in one visit. I also like that you need to get only one loan to finance all those doors.

However, I'm thinking I may need to shift my thinking, because I think there's probably more upside on the asset value with a collection of SFHs. There's certainly a bigger buyer universe, should I ever want to sell.

I am seeing a lot of nice little houses in stable neighborhoods going for $35K that should rent for $650 to $675 a month -- and I'm intrigued.

What say you, BP Community?

Why not just ask the listing agent for a referral?

I might be making an application for financing through HomePath soon. The lender (Regions) said that the down-payment requirement is 10% for the first four investor loans, then it goes up to 25%.