All Forum Posts by: Wayne Igo

We all know the typical investor model for flipping: buy at a discounted price, remodel/renovate and sell ASAP.  Thousands of investors are making money, good money, every day using this model.  Simple in concept, but harder, trickier and more involved than you might think to make it work.

Recently, I was reviewing data for the Renovation Cost vs Value question that every investor has to deal with on every project.  The most credible data came from Craig Webb and can be seen at www.remodeling.hw.net . The database is rather large and takes Geographic location, labor costs variations, material costs, contractor overhead, etc. The Cost is based on having a Pro perform the work (i.e. not DIY). As you can see from the data, for every dollar you spend on a rehab/renovation project you get anywhere from $.50 to $.90 back when you sell the home. Interesting! In other words you never get all your money back. For example, the bathroom remodel that cost you $76,429, will increase the market value of the house by only $32,385 ( or a -40.2% ROI). Based on the data, you never, never get all your investment back on the rehab cost. So, why would anyone spend money to update a property?

What does that mean for the investor?  I have my on take on what this data means and how it should be used.  But, I really would like to see another discussion on this topic because purchase price, renovation costs and market value are at the heart of the investor's profit model.

I look forward to your comments.

Wayne

Sugar Land Texas home for sale in Sugar Creek.  This is an edit of the original post.   I have had several interested parties in this home and of course they all would like pictures.  So, for anyone interested in this unique property in a great neighborhood, pictures are available at the following website:

http://sup7548.wix.com/fairway-drive

Information on the property and contact email and phone numbers are given on the website.

Thanks,

Wayne

281-723-6619

I am selling my single family residence located in Sugar Land, TX and is part of the prestigious Sugar Creek Addn.  Before I list with a Realtor I thought I would offer on several forums first to see if anyone is interested.

This property is one story, 2.5 bath plus Hot tub, and has 2950 s.f. This is an older home (1970's) and needs the kitchen and baths updated.  The property after updating is valued at $350k.  I am selling at $295k to allow for updates.  Most homes in the neighborhood start at $600k.  The house has a charming Mediterranean look and feel. 

Sugar Creek properties are in very high demand because of the home quality, and neighborhood security with guarded access.  All properties are unique with different floor plans and architectural styles. 

If anyone is interested and want more information they can contact me on my cell 281-723-6619 (leave msg if I don't answer) or email me at [email protected].  No agents please.

Hi Kevin,

Definitely try several title companies first.  They may or may not charge but it won't cost to ask.  I also found a service at www.lienlist.com.  For about $65 dollars they will do a search in about 24 hours and send results to you via email as a pdf doc.  I think they are pretty good.  However,  there is no warranty like you get from a title company.

Good luck and if you try lienlist let me know what you think.

Wayne

I want to thank everyone for their contribution to this topic. We have not yet formed any legal entity but I'm pretty sure it will be an ordinary LLC with a master Operating agreement. We will use the Series LLC as sub-LLCs so that each property can be transferred to it's own Series LLC and live as long as the asset is owned. As soon as the asset is sold the Series LLC will be dissolved. We also see the need for a "Subscription Agreement" provided to each investor that is invited to passively invest for a specific property.

When we get the whole thing put together I will post here.  Thanks again for your input.

Wayne

Thanks James for your input. It's helping me to fill in the picture. It's looking more like we will set up a Shell LLC charged with the administrative, buy, sell and rehab functions. The properties each will be deeded to a Series LLC. Once the property has been sold the Series LLC for that property will dissolve. We'll need an operating agreement and other agreements to tie it all together. I like the Series LLC because of the asset protection.

Wayne

It would depend on my personal circumstances but mathematically this is a no brainer.   "Expected Value" is defined as the product of the probability that something will happen times the value received if it does happen.  Probability is a number from 0 to 1 corresponding to 0% to 100% chance of occurring.  This metric is used in Game Theory, market analysis, etc and I use it to make everyday decisions if I have confidence in the numbers.

In this example, the probability of getting a  1 million if I choose the green button is 1 ( or 100%).  So the Expected Value (EV) is 1.0 x 1 million or 1 million.  On the other hand, if I choose the red button the probability is 0.5 (50%) of getting 100 million. So the expected value in this case is EV = 0.5 x 100 million or 50 million.  So clearly choosing the red button is the best choice mathematically because the expected value is 50 times greater. 

For me personally, if I were down and out and cash poor I would probably do a worst case /best case analysis.  You simply list the worst and best thing that could happen if you choose the green button and the worst and best thing that could happen if you choose the red button.  If the consequences of getting nothing were severe and I would be "OK" with taking the 1 million I would choose the green.

One last note.  Expected value works on average.  If you can quantify and get a descent probability and value, using expected value over time will make you more profitable.

The risk/reward is not equitable in a deal like this unless the partner providing the cash just wants to help someone get started.  Clearly, you are trying to generate cash.  I would either save until you have the cash to do a deal your self or drop the split to something like 80/20 which is getting pretty close to just wholesaling.  I know first hand the difficulty in generating cash to invest but hang in there you 'll make it.  Good luck.

I have an opportunity to work in a partnership arrangement with some other investors.  We have been discussing the various ways we can combine our resources and strengths that will be fair and equitable and increase the likelihood of success.  Single and multi-tenant properties will be considered.   I would like to start a good discussion here as partnering in real estate is a common practice.  Please comment on any experiences you have had with partnership arrangements.  Some obvious questions are:

1) Would an LLC be the way to go?

2) With unequal time, capital and skills,  how can the profits be shared?

3) Division of labor?  Sweat equity?

4) What happens when one partner wants to sell a property and other one wants to hold?

5) How should property ownership be handled?  Multiple investors on the deed

There must be some smart way for multiple investors with varying resources and skill sets to come together in a equitable and profitable manner.   Any thoughts, personal experiences, advice or references would be appreciated.

Thanks,

Wayne

Just wondering what the options are for finding all liens or any encumbrance on the Title before bidding at auction.  The county records may be available and you can of course shell out the fee to have a title company do a search.  Are there any other services or resources for researching a title.  If you have recommended service or title company that would be great.

Thanks,

Wayne