Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: J Scott

J Scott has started 161 posts and replied 16457 times.

Post: How to split profit: First time flipper

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192

I would never give a percentage of the profits to someone for doing the contracting work.

What happens if he gets sick and you have to find another contractor?  What happens if his quality isn't up to par and you want to replace him?

He's a contractor -- pay him like a contractor.  If he's willing to push off collecting his payment, perhaps offer him a bonus or a higher markup.

But, don't offer a percentage of the equity, as you will find yourself in a bad situation should you have to bring in another contractor for any reason.

Post: Some questions on starting house flipping

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192

My thoughts:

1) I was told to get a real estate agent to help, I have been trying to get an agent to help me, but most of them never get back to me and the ones that do, and I tell them what I am interested in doing, they never follow up with me and it is hard to keep chasing them, any advice as to what I should do about this?

There are agents that are accustomed to working with investors, but most aren't.  And those who aren't likely won't be very helpful/responsive. If you want to work with an agent, find one that is accustomed to working with investors.  The best way to do this is to attend local REIAs or meetups and network with other investors -- they'll know the agents who understand investing.

2) I would try to do deals myself but I don't know how to do that, I have no contracts and I have no clue how to make and write an offer to even start anything off, the only way I can think of making any offers is with an agent, but that will cost the seller an agent fee and will minimize my chances of getting any deals, what should I do about this?

If you want to represent yourself, I would suggest taking a real estate course and getting your license (or at least taking the course). You'll learn how transactions are done, you'll get access to the contracts that are used locally, and you'll get an understanding of how to navigate a deal/closing without another agent involved.

I'm a big proponent of getting your license, but not to save money.  Having your license will give you the opportunity to maintain much more control over your deals -- you'll be able to talk to the other party's agent, lender, appraiser, inspector, title company, etc. -- without having to go through your own agent.  When you're licensed, you have a lot more ability to insert yourself into the process and stay informed on the true status of the deal.

If you don't want to get licensed, there are a couple options for contracts:

*  You can download a generic contract off the web (this is risky, as it may not be suitable for your area);

*  You can find a local realtor who will give you a copy of the template used by local agents (legally, you're not supposed to use these if you're not licensed, but I won't tell);

*  You can hire a local real estate contracts attorney to provide you a custom contract you can use.

3) Is it best to try to get a partner, someone who is already experienced? I have tried that as well but no one is really interested, how do I go about this?

I'm a huge fan of a partnering on early deals.  Is there a reason nobody is interested? 

What are you offering?  What feedback are you getting specifically? 

4) Even the distressed houses are only offering to be sold for a max $100,000 lower then regular asking price, which can't turn any profit, is it due to the market today? Is it even worth it to try to do flipping in todays market?

It's a tough market to be starting out, simply due to the fact that nobody knows where values are headed short-term.  If you do a deal that has a 15% profit margin, and values fall 10% in the next few months, that doesn't leave you a lot of room for error (or much profit).

That said, now is a great time to get prepared -- get your license (if you want to go that route), figure out your financing plan, get intimately familiar with your farm area, find partners, find contractors, etc.  There is likely to be a great opportunity for flippers in the next 6-24 months (depending on how quickly the economy turns), and using this time to prepare is the best thing you can do.  That way, when the time is right, you can hit the ground running...

Post: Path to financial freedom

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192

Remember, 1% of a very large portfolio is worth more than 100% of a very small portfolio.

For many of us, the key to scaling was to figure out how to leverage other people and other people's money in order to do much larger deals.

In other words, focus on partnerships and syndications.  And focus on much larger deals.

Post: I'm trying to buy an apartment complex without having millions

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192

For a larger deal ($5m+), this can be accomplished through syndication.  Basically, you are bringing in other people to help cover all aspects of the deal that you can't or don't want to do yourself.

This includes bringing money for the down payment, capital expenses, and other costs associated with acquiring the property.  It may also include bringing in somebody who has the ability to sign on/guarantee the commercial loan.

These people come in in exchange for part of the equity in the deal.  At the end of the day, you might give away 20%, 30% or even 60% or more of the deal to other people to bring the things that you don't have yourself, but you will ultimately get the deal done and retain some percentage of the ownership yourself.

When done correctly, you don't need to put in a penny of your own money, assuming you Can find investors who are willing to cover the cost in exchange for part ownership in the deal.

Post: Stepping Stone into Syndications?

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192
Quote from @Jim Pfeifer:

There are quite a few Communities out there.  It is important to find one where the culture fits your personality.  Ideally, you want to find a comfortable place to interact and network with other like-minded people.  I don't want to cross the line into self-promotion, so if you have questions about our Community please DM me!


Jim isn't allowed to self-promote, but I can promote a bit for him...  :)

As a recent member of his group (I do a lot of LP investing outside of my active investing), I've found the forum discussions to be more sophisticated and detailed than any other LP group I've ever been part of.  Some great folks in that group and I highly recommend it!

Post: Do I have people who likes Multifamily Investments?

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192

Good question...  And here's the answer...

First, there is always an end. You even said so yourself: 10-15-20 years.

But even without an end, there's a metric called Internal Rate of Return (IRR) that can tell you the estimated compounded rate of return over the life of the deal, even if the deal goes on forever.

This is because there's something called Time Value of Money, where money earned later is worth less.  Money earned 15, 20 or 100 years in the future is great, but factors much less (and eventually not at all) on the returns than money earned in the short term.  

And here's a cool little secret for you...  You talk about getting your principal back sooner and future money being "infinite profits," but from a math standpoint, that's irrelevant.

Here's an example:

Let's say you put $100,000 into a deal, and after 2 years you get $100,000 back. Then you get $10,000 a year for the next 10 years.

Overall, you invested $100,000 and you get $200,000 back.  Does it matter if the first $100,000 that you got back after 2 years was the return your original investment or whether the $100,000 you got back over the next 10 years was the return of your original investment?

It doesn't matter. Saying you're getting your original investment back first results in the exact same mathematical returns as saying you're getting your profits first and your investment back later.

In the example above, all that matters is that you received $100,000 after 2 years and $10,000 a year after that. Doesn't matter which was the profit and which was the return on capital. The return metrics are all the same.

If you want to better understanding of any of that, check out the latest book I published with BiggerPockets.  It digs into all of this and a whole lot more...

https://store.biggerpockets.co...

Post: Do I have people who likes Multifamily Investments?

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192
Quote from @Anaim Murcia:
By the way, Endless return is just a definition of when you are no longer invested in a deal because you got your investment back and you still produce passive income for x amount of years... 
Thats infinite, you cant calculate that. 

Incorrect. You certainly can calculate it.

Getting back more money than what you put in is not an infinite return.  It's called a positive return.  And it happens with most investments.  And there are plenty of metrics you can use to calculate it.

It's only an infinite return when looked at from one very specific calculation (CoC in the years following the payback). Which isn't a useful metric in the first place.

If you don't understand these basics concepts, you're probably not yet ready to be pitching deals to investors.

Post: MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192
Quote from @Bill F.:
@J Scott their WAM as of 31 Dec 22 in their HTM book was something like 6.2yrs with $3b/month coming from interest and roll off. Hindsight being 20/20 yes, they should have held t-bills, but they didn't have a portfolio stacked with bonds. Being an honest broker the portfolio was medium term at best. 

I imagine that would be a reasonable assessment of risk for a typical bank, but SVB wasn't typical. 

Their depositors were mostly tech startups who had raised large equity investments.  The runway on these equity investments is typically 12-24 months -- in other words, the company expects that whatever money they raise will be gone in 1-2 years.

That means that SVB could expect at least 4-8% of their deposits going away on monthly basis -- more than half of their total deposits in any given year.  That meant that if deposits slowed, the bank would need much more short-term liquidity than a typical institution.

Knowing that in a worst case the bulk of your deposit base of $200B could go away in 1-2 years, putting all your eggs in even a mid-term HTM bucket doesn't make sense to me.

That said, I'm not pretending to be an expert here.  Maybe they had some risk-management strategy that makes perfect sense to someone with more knowledge than I have, but it certainly doesn't make sense to me.

Additionally, it makes no sense that when the Fed started screaming at the top of their lungs that they planned to raise rates higher and faster than anyone expected, that SVB didn't realize this was a risk to both their future deposits and to their bond portfolio is crazy.  They should have taken the smaller loss a year ago, as opposed to kicking the can down the obvious road to ruin...

Post: MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192
Quote from @Michael Wooldridge:

Well there is no doubt mortgages would have helped their books. That’s been an on-going discussion because it’s consistent income stream. ultimately their approach to treasuries and not backing off on some of them was the other end of it.
 


They received about $100B in deposits in 24 months -- there was absolutely no way they could have deployed even a fraction of that money into mortgages (or even venture debt) that quickly.

That's why they went with bonds.  No idea why they went with long-term bonds, though.  That remains a mystery...

Post: What is a good size population to invest in for multifamily?

J Scott
Pro Member
ModeratorPosted
  • Investor
  • Sarasota, FL
  • Posts 17,995
  • Votes 17,192
Quote from @Korey Harmon:
Quote from @J Scott:

How big?  And where in FL?  As someone who lives in Florida and buys large multis, I won't buy in Florida these days...


 I haven't started yet, so I will start small with residential multifamily. I'm in the middle of analyzing different markets so I don't have a particular area in mind right now. Can I ask why you wouldn't buy in Florida right now?


I see too big of a catastrophic insurance risk for many parts of the state right now.  If some area where do you get hit by a couple big storms over the next couple years, it's possible that insurers will refuse to insure in those locations, effectively dropping the value of property to near zero.

From a more short-term perspective, the increase in insurance premiums year after year has been staggering. It's very possible that properties that cash flow today may not a year or two from now.