All Forum Posts by: Jake Silcott

Hi everyone, I have a question about a simple deal structure for a fix n flip. A family member has agreed to fund a flip for myself and another partner. We will split the profits equally 3 ways. We will use my LLC as the business entity and the funds will come from a HELOC. I am the only member of the LLC.

How should a deal like this be structured and how should the profits be distributed? Should I have the LLC borrow the funds from the family member and secure it with a promissory note and deed? The LLC could then pay the loan back with a profit share after we sell.

Or...do I need to have a JV agreement between the 3 of us? Or both?

What about my other partner? Do I need to 1099 him when I pay him his share of the profit? I will of course consult my tax advisor and attorney, but I'd like to hear all your thoughts as well.

Any insight on how to best work this is much appreciated. This is my first deal. We close on it in a couple weeks and I'm fired up!!

Thanks a bunch!!

Julie- I believe the March meet up is scheduled for tomorrow, March 24th. Anson?

@ Elias Gutierrez, did you end up mailing this list and if so how did it go? I too am looking to build up a rental portfolio through sub 2 purchases. Have you done any other marketing for sub 2s? Any insight is much appreciated.

Thanks in advance!

Yes, great point, Penny. Thanks for that!

Great points, Karen! Thanks for the insight and reply. The property is on the outter edge of a very desirable residential neighborhood, but because of the gas station, the zoning, and the location on the busy thoroughfare I believe it would work best as offices. The 2 story garage could be converted to office space as well.

I'll have to do some more research. Should be interesting.

Thanks again, Karen.

Good morning all!

I have a possible wholesale opportunity on a home that is located on a busy street next to a gas station. The properties on the other side of the home are houses, of which some have been converted to offices. The area is zoned for mixed commercial and residential use with the allowance of accessory dwellings. I'll have to do more research, but I believe the accessory dwelling designation allows for the two story brick garage on this property to be converted and used for residential or office purpose if desired. I pulled four comps on properties that are also located on a nearby busy street, but the zoning for those properties does not allow for commercial use and are obviously not located next to commercial property.

My questions are...

How would I determine the ARV considering the zoning and the fact that it's located next to a gas station?

I'm sure the gas station next door reduces the value, but by how much?

Does the mixed commercial/residential zoning and/or the accessory dwelling designation add or subtract value from the home?

Will the zoning, the busy street, and/or the gas station cause financing issues for an end buyer?

Any other insights are welcome as well.

Thanks in advance, everyone!!

Listened to your podcast this weekend. Great info! Especially good to hear how you are making things work in the Denver market. Look forward to talking with you soon. Take care. Jake

Hi everyone,

Just want to introduce myself. My name is Jake and I'm new to REI. Looking forward to attending the Sept 23rd meeting and getting to know some of you.

Thanks!

Jake

Thanks Anson! Yes, the 2nd example makes more sense to me. Glad to hear you agree. I'd of course rather not pay on money that's not in use also. Wasn't sure how that type of situation was typically handled. Glad I asked. I'd love to get those templates from you. Thank you for offering! I'm fairly new to BP, so not sure if we can do it here or if you need my email. Thanks again!

Hi everyone!

I have a couple of questions about how to best structure a privately financed fix-n-flip deal and how the mechanics of the deal should work. I am just getting started in real estate investing and am excited about this opportunity however I'm not quite sure how to structure things so that it is both legal but beneficial to everyone involved. I will of course speak with a lawyer before we do everything, but I figured I would pick the brains of my fellow investors before I start spending money on legal fees.

First, a little info about the opportunity. I have a family member who has agreed to invest $50k towards a fix-n-flip project at 6% annually. I will be joining a friend of mine who has been doing fix-n-flips successfully for the last couple years. He has a private investor that he's been working with, but he does not have favorable terms and is looking for other opportunities. In addition to the $50k we also have access to an additional $30k, bringing our total budget to $80k. We'd like to keep the $50k in play after our first little project to be used on successive projects.

My questions are;

1) Based on what I've read here on BP and learned through some classes I've taken at a local REI organization here in Denver, it is my understanding that typically a private investor will wire the money directly to the title company to purchase a property on the behalf of a fix-n-flipper. The private investor then get's the property as collateral while the work is being done and then are paid back in full plus interest after the property sells. My questions is why would any private investor do things this way when the amount of time the money is invested is probably not more than a few months for a small project? Additionally, if the flipper wants to use the funds for consecutive projects the purchase prices will most likely always be different leaving the private investor without a set amount they know they will earn interest on. They would have extra funds sitting somewhere that would need to be available but not guaranteed to be used and there would be time between projects when the money is not earning interest. Is this how this usually works? If not, how?

2) My line of thinking is to have our investor loan our LLC the $50k, which we can use to purchase and rehab as we see fit. We can then make interest only payments and provide our investor with the property we are working on as collateral and in between projects we can provide a note for the cash that is in the bank as collateral. We will of course have to minimize the time between projects as much as possible so that we are not paying interest on cash that is not being used. This would make it more appealing to our investor because they would have a set amount of money invested that is consistently earning interest. Make sense? I guess my question is, for those of you who have experience with using private investors for fix-n-flips, does this make sense? Why or why not?

3) Can anyone explain how they would structure the mechanics of my deal?

4) Can anyone recommend a good article, blog, book, etc on this topic?

Thanks in advance for any insight and advice!! It is MUCH appreciated!