All Forum Posts by: Account Closed

@Grant Doyle If I were in your situation, I would base my decision on how good of a deal this is. If you're buying this thing at a significantly above market cap rate (or a discounted price, however you'd like to look at it), then I would absorb those costs. 35k isn't a ton to invest in what seems to be a pretty large multiunit property.

The 2 years on the MLS detail is actually the biggest red flag here. I would probably instantly disqualify a property over this detail alone. Real estate investing has become virtualized, and a property that offers attractive cash flow and value can be offered on by non-local investors who are very eager to jump at an opportunity better than those available nearby.

@Alex Get

Doesn't sound like a good rate at all. 

I recently got a 3.75% interest rate on commercial financing with US Bank at a 250k purchase price. 0 points. 25 year amortization, 5 year balloon, 80% LTV. They also offer commercial financing on 1-4 unit properties we deal with.

You can't use their commercial financing if you don't live in a market where they operate. They don't operate on the eastern seaboard. I'm sure other big banks offer similar products if you keep searching! If not, try local banks over and over until you find a fair one. 

5.70% sounds like the salesperson is trying to get paid extra on generating a higher spread. That money is probably coming to the bank at 1.75 + .25 for the banks operating costs. So 2.00% is their cost, and they're looking to make 3.7 off you, which is ridiculous. Usually I see banks aiming to make about 2% on these kinds of loans.

@Uneeq Khan 
1. I believe realtors in many states are required to disclose that they hold an active real estate license if they are purchasing or selling property. This is a requirement of the real estate commission, but I don't imagine it would be required by law to purchase or sell a property. 

In my very frank opinion, being a realtor or partnering with one bears no advantage in the wholesaling world. 

2. & 3. 

What do you mean by "completing the transaction for assignment"? Would your partner be finding the buyer? How you guys split the deal is really a matter to be negotiated amongst yourselves. This isn't a rule of thumb. 

Being completely objective to either of your best interests- If you're both sharing the cost of marketing, you do all the lead intake, information gathering, and negotiation... then your partner finds the buyer, manages the transaction, and funds escrow.. I would say your partner should take a bit more than 50% of the profits considering that work is being split evenly, but contribution of funds is not. 

I would also consider this option:

You guys form a two member LLC (LLC1) that has 50/50 ownership. Work is split 50/50 as described above. Cost of marketing is split 50/50. Profit is split 50/50. Your partner forms an individual LLC (LLC2) that acts as a transactional funding company, which funds LLC1's transactions for a standard fee- 1%-1.5% of the amount funded for the AB transaction (paid through escrow at the close of the BC transaction, to LLC2). This method isn't too complicated, and it's clean + fair because parties and compensated in a manner commensurate to their contributions.

What do you think?

@Jonathan Trimboli

I don't think it matters too much. All of the software I use is cloud based, with exception of some video editing stuff I plan to pick up (for which there are good options on both PC and Mac).

I have a MacBook Pro. Costco has the current gen model on sale right now for $1400, pretty good deal. I think I bummed a student discount off a friend to get mine last summer. It's got better build quality, and the UI is a lot cleaner- I think the operating system is a lot less bloated than windows 10 and allows the computer to perform better than it's peers with similar processors & memory. 

It's overkill though. A $500 laptop with and i5, 8gb of RAM, and a solid state drive can make you a millionaire too, lol. 

@Grant Doyle what's the surface area of the roof? Or how big is the building and how many stories?

Those can be expensive depending on the extent of the damage underneath. I recently did a big, 3200sqft two story duplex (so about 1600sqft of roof)... full tearoff, water damage underneath, etc... for $10k in the greater chicago area. It was a torch down flat roof, as you and Bjorn are describing. I got a quote on a 3000sqft flat roof (10 unit, 3 story building) back in january for 16k. That was a pretty good price. 

Try and bust that seller back, let them know you've gotten multiple estimates and what the results were, and that any buyer would find that this roof needed replacement in the immediate future. I would try and get them to absorb most of the cost. Not necessarily all of the cost, since you weren't expecting a brand new flat roof with a full lifetime remaining. 

@JC Wu 

“Rigorous certification means you can focus on your investment strategy rather than due diligence." sounds like a pretty bad advertising plan IMO. But who am I compared to roofstock's crew of attorneys, I'm sure they have appropriate language in their contracts that protect their due diligence. And excellent E&O insurance. And contracts with the 3rd parties they work with redistributing liability from them to the third parties.

I've heard in certain situations that roofstock customers have had certain issues post-closing rectified by roofstock, but I won't say much here because my experience is limited. 

I would say a good provider sets the right expectations. A concept I always push to investors is that investing in rental property is not truly passive. Activity level across different types of investments is a spectrum, not an on/off switch. Rental properties may be more passive than some other investments... but remember this: You're running a small business. You have suppliers (roofstock), employees (property manager), and customers (your tenants). If you want your little business to operate well, you've gotta understand your role and execute! 

10k a month is plenty to live a comfortable lifestyle off of, without working. So I would call it my "freedom" number.

My personal goal is $1M/yr in passive income, however, which maths out to a bit over $80k/mo. This is a pretty tough number to get to passively, so I prefer to take the entrepreneurial route where I work to generate the highest non-passive dollar amount as an active investor, and grow revenue & my cash stockpile until it's primetime to buy undervalued assets very aggressively. To get to the $1M/yr passive mark, it may take a few market cycles. So I'll probably sell these undervalued assets when the market re-peaks, engage in more short term projects, and repeat with the next downturn.

At a 10% CAP rate, and a 20% cash on cash return with financing, it looks like $5M of cash would need to be invested in approximately $25M of property (if purchased traditionally) to get to the $1M/yr passive goal. Ambitious, but not unattainable if you make it a point to be in the REI "business"!

@Emmanuel Lopez How many units is the building? What could you sell it for in its current condition?

I'm not sure what your expense ratios look like for this building so I have no idea how much it cash flows, but I would guess it's not a tremendous cash cow. In this market, if you have a substantial equity position and a plan to redeploy it in a profitable fashion, I would sell this property and do that. 

Regarding a refi, you are not subject to any sort of seasoning period if you are simply looking to leverage at $240k, the cash you have into it already. A conventional lender will do delayed financing at 70% of the 240k if the property is 1-4 units. If it's 5 units or above, most commercial lenders will refinance you at 80% of the 240k. Many commercial lenders will also finance 1-4 units as well. 

If you want a refi based on the MARKET VALUE, and not your "all in" value, you will have to season the property, probably for 6 months if it's 1-4 units and you're seeking conventional financing. With commercial financing, big banks probably won't refinance you at market for 1-2 years- they don't want you to have a loan with no skin in the game (ie getting all of your money back). Local banks who offer commercial financing may not have a problem with that, and you might be able to find one that will give you 70-80% of the property's improved market value should it appraise, and they might do this with no seasoning period if you call around enough.

@Will Barnard

What would you do with a 3plex in Santa Clarita, let's say in a B neighborhood, that came into your possession in stable condition and at market rents with a 20% equity position? 

Sure, your goals may be different than mine, or Josh's- but new investors seek out the opinions and strategies of successful investors like yourself (nice flips btw), because they're often still formulating their goals and long term plans with the help of people who have already made it work.

If it were me I would sell it off and reinvest the money in more exit opportunities through the remainder of this high market, until I the market begins to move in the other direction, where I would incrementally begin to rebalance my strategy and keep more inventory through the markets future trough. I'm also a full timer in REI and want to keep working in it for another 20 or so years before "retiring", so maybe my plan is relevant or of interest to few.

@Tyler Sharrett

Not bad on the rents. 

So you're all in for 71k including purchase price? Or is that not including the purchase. Appraisal came in a little low! That happened to me on a BRRR deal on a small house a few years ago too.