All Forum Posts by: Nhi Nguyen

anh @Account Closed last night.  So my last post on that thread was to clarify that: if the broker somehow obtains 50% loan using his own collateral other than the land itself using his own credentials, then of course that would just be his share of "cash".  Then he would get 50% of his profit split.  BUT, if he, on behalf of the partnership, get a construction loan on the partnership and the lot, then the whole partnership would benefit from it.  My second scenario described it.

Sorry I've been busy with lots of meetings and framing a man-cave for my client the last couple of days.

I had a meeting with them yesterday.  It went great but we didn't come to any decision.  It was like an interview kinda meeting :), both ways.  One of the partners leaves town till next Thursday.  When she comes back, we would meet again with their proposal on the partnership structure with all the details, splits, and what not.

@J. Martin: Those are great questions.  I've actually been grinding myself over those and some more to make sure I make the right decision.  I really appreciate your wise insights, as always.

This office gets lots of deals, good deals.  They also have a couple of very cool streams of unique incomes.  And being a partner, I would have my share in those as well.  So far, these are the pluses and minuses I can see:

Pluses: 

- Potential to grow: instant access to lots of work

- Very low risks: no money needed.  Fully funded by investors.  worst would be loss of sweat equity, but on case to case only.

- Access to marketing and established system (they've been successfully done it for quite some time)

- Bottom line: income from my construction company would be greatly improved

- IF, and I say IF, I'm good enough, I can still pick up flips and have one of my crews take care of it for me, while managing their projects.  My teams are well trained for complete flips and new construction so they can be on their own easily.  My brothers in law are in construction too (1 works for me - who can run materials, 1 owes his own company which I helped set up).

Minuses:

- I could get tied up with so much work that I wouldn't have time to find/do any flips myself

- Exhausted and won't be able to smartly manage well on neither sides

- I wanted to spend more time with my family.  With this new role, it could be very time consuming and more responsibility if I don't have a good managing system in place.

There maybe some other concerns in the back of my mind.  In any case, I plan to attend the next meeting to see what's they have to offer.  If anyone has anything to add/advice, please do so.  I really appreciate a forum like this that I can openly bring up matters such as this to share and get lots of valuable feedbacks.  Loving it!!!

Good day!

Hey Marianne, I'm not sure if I saw you last night at the meet-up?!

:)

Thanks @Johnson H. & @J. Martin for the tips.  I do value the networking power, and see people do deals all over BP.

Specially thanks to J for raising the question about the basic partnership structure last night @ Johnson's meet-up.

I'd like to clarify it one more time:

1) First of all, I'm not the owner of the project, the broker firm which my cousin (also a broker) is a partner of is.  So what I presented here so far is just the progress of my due diligence to find out (by asking questions here, do some research on my own, ask the firm questions, etc...) if the investment is worth my time, effort, & hard earned capital.  :)

2) Having said that, here's what I think the 2 scenarios which I still have to find out next week in term of how they plan to operate:

a) Total cost of the project: $4.6M to $4.85M with all cash from partners, no construction loan to the partnership at all: sale price $7.2M, closing cost $850k, ROI = $7.2 - $850k - ($4.6M to $4.85M) = $1.5M to $1.75M, so % of ROI: ~30.1% to 38%.

b) Same basic cost of project.  But all partners can only come up with X% of the total cost, let say 50%, the rest would be on a construction loan of say ... 12%.  And project takes 1 year.  Number would be something like: 

- sale price: $7.2M 

- closing cost: $850k

- holding cost (loan fee): $276k to $291k (50% of $4.6M to $4.85M)

- Land acquisition, soft cost, & construction cost: $4.6M to $4.85M

- ROI = $7.2M - $850k - ($276k to $291k) - ($4.6M to $4.85M) = $1.474M to $1.209M

- % of ROI ==> If total cost of build is $4.6M: $1.474M/($2.3M+$276k) = 57%

- % of ROI ==> If total cost of build is $4.85M: $1.209M/($2.425M+$291k) = 44.5%

So, if the partnership can get a construction loan then the number is very good actually.  It's my rough calculation layman way.  If anyone sees it otherwise, please advice.  But wow, I hope it's correct!!! :)

So far my HML verbally agreed to put $500K in. I'm still no where near that yet, haha. So I'll have another meeting with the firm to ask more questions about how much money they plan to put in themselves, how many more spot are open, and how they go about construction loan.

Question: How easy it is to get construction loan on partnership nowadays? What's the LTV & rate?

If they say they gonna get construction loan (based on my calculation above, it seems to be a much better choice), how do we make sure the partnership gets the loan, vs just got stuck with a piece of land and deadlock investment money in the partnership?

Thanks in advance and hope everyone has a good plan for the week ahead. 

Harold, welcome to BP. 

Contractors can bid either ways, and it's usually up to you. What do you plan to use it for?

In a nutshell, you should:

- Get a scope of work as detail as you can. 

- When contractors come, don't tell them you're new in the game. Just hand out the list and walk the property with them. 

- Have them all come out at the same time.  They all know they'd be bidding against a couple of others already so it'll be in your advantage. 

- If possible, ask them to give you 2 separate bids, one for labor only, other with materials. For the one with materials, ask them to give you details as what it is, or allowances. 

Sample quote with materials: 

- bathroom: gut all existing hall bath fixtures, install 36"x21" vanity cabinet in ginger maple wood at ABC cabinet, Americast bathtub, 1/4" frameless shower door, 8x10 tile up to ceiling height on tub surround ($1.5-$2/sqft), budget toilet from $100-$120, etc...

Next, find out how to:

- pick out the best quote (not necessary the lowest)

- pick the best/good contractor

- handle contractor during the process (payment schedule, lien waver, quality checking, etc ...)

Isn't it fun already? :). Not to worry. Read up the forums, or get the books from J Scott and/or ask up!  

Good luck. 

@Johnson H. : I definitely am. Pretty pumped up right now. 

My head is spinning around on how to get my funding lined up. Just talked to my HML and she might let me access some $$$ at much lower rate in trade of getting her in one spot. I'll see how's that played out.

On the other hand, I need to push the broker into getting things straight out in term of game plan, partnership structure paperwork, getting enough partners on board, getting loans etc..., so things can move forward quickly. Also for me to have a good complete document package for my friend circle to look at. 

It seems like a busy weekends/week ahead. :)

speaking of which, @J. Martin , we haven't had a plan for this year vacation yet. Been busy with all these houses after houses. 

BTW, anyone into boating?  I'm into cruise boat. 

Sorry we get side tracked into fun stuffs. But that's what RE investment is all about right?  To have the mean to enjoy life & family better! :)

yeah me neither. I love traveling, just not on business trips. :)

Hello PBers.  Hope you all have great results on your RE endeavour this first half of the week.  I personally didn't gain anything financially, but got some exciting things to think about.

Besides the multi-division lot I was talking about the last couple of days, I ran into a broker I used to remodel his flips with a couple of years back.

He has lots of deals for sure, and more than 130 agents in his 2 offices spanning the South of the Bay Area here.

He used to get 2-3 bids from a small group of contractors for each flips.  None of those contractors have experience in new construction and commercial.  Now his company plans to add an in house construction arm specializing in his flips, specifically new developments.

So his idea is to partner up with me.  My roles would be to head the construction side, hiring new crew members.  He would be responsible for getting all the deals.  All funding is from his existing group of investors who have been with him for all these years making a lot of $$$!

Roughly speaking, I would manage the crew to either fix or build at cost, with the help of his existing project manager (who would report to me).  I would receive basic pay, plus a percentage of the profit for each project.

Seem to me he also has one more partner, who's been with him all these years.

Questions are:

- How does it sound in general?  Notice that I still have my current crew working my flips/builds for me separately.  They need very minimal supervision, since all the guys been with me from start (8-12 years).  My brother-in-law is helping with running materials from time to time (who is also one of my full time guys).

- How should I get paid (basic)?

- What percentage should the profit be for me?

- How the partnership should be structured?

Tomorrow, I'll be looking at 2 houses, then pick one to try out the model.  After checking the houses, I'll meet with both of them to discuss in details, maybe right around noon time - PST.  So any input is greatly appreciated.  

Thanks in advance.

Hi Matthew.  Are you a GC or just doing some work to cut back costs? 

Looks like a fun project.   2-3 months seems a stretch.  :)  But might work in your favor to have it listed in Feb-March instead of Dec/early Jan.

Good luck.