All Forum Posts by: John Casmon

@Kyle N. I'll be interested in the feedback you receive. You could have your partner purchase it, then do a quit-claim deed into the trust or LLC. Technically, your loan could be called, but I'm told this is unlikely by people with a lot more experience.

Also, what's the structure of the partnership since you're essentially trusting this partner to transfer ownership after purchase? Is this a buy and hold?

As @Crystal Smith and @Brie Schmidt mentioned, you should be careful on the HML and ensure your exit strategy is solid.

As far as the numbers, doesn't look like you accounted for all of the buying and holding costs (appraisal, inspection, closing costs, utilities, taxes) during the rehab and refi so make sure you account for those costs.

Given all the work you're putting in here, would you be satisfied with a 6.72% cap rate and $3k in cash flow? Can you buy something with equivalent returns in the area that won't need a full rehab? A flip profit of $59k is great (especially on a personal investment of 50k), but not sure if you can't find solid deals that mimic the buy & hold returns without needing as much rehab.

Interesting thread. If you invest in Chicago, you should certainly keep this in mind (especially for buy and hold deals), but having Chicago turn into Detroit is unlikely. There were MANY factors that led to the issues in Detroit. For starters, many of the jobs in Detroit were eliminated or moved. This helped drive the population declines and ultimately the dependency on the auto industry.  

I'll be curious to see the impact tax hikes have on employers as this may be the most telling sign of potential impact on the city and investors. If the jobs stay, then I imagine these tax hikes will ultimately be passed on to buyers and renters. 

@Debbie Lee I just spent the last hour reading this entire thread. Glad you got most of your money back. What happened to the other $11k?

Good to see how supportive the BP community was with this situation, but I'd like to serve up another POV. Most of the comments talked about the "snakes" and how they "brainwash" and take advantage of people. While these tactics are certainly unethical, there needs to be some personal accountability as well, especially as you look forward. There will ALWAYS be snakes, scammers and people looking to take advantage of someone or a situation. Hopefully, you learned something about yourself and how to approach these situations and execute your due diligence going forward. 

On a related note, I went to the $197 3-day session from Than Merrill last year, and though the upsell was annoying, I thought there was a lot of value. Yes, a lot of the teachings are available on BP, but I wasn't using BP as a resource to its full capacity back then and just used it when I had a question. It made me take a full inventory of all of my contacts, resources and funding/financing options. For starters, I immediately called my credit card companies and freed up an extra $20k. I also got an equity line of credit for another $100k! We skipped on the third day and went to the library for 8-hours and wrote out our business plan and crystalized our vision. I don't think this would have happened without taking the seminar. We actually thought about signing up for the Master course, but not because we had grandeurs of getting rich quick, we just knew if we dropped that kind of money, we'd have no choice but to grind it out and make RE investing successful. We also liked their systems, which would take a massive amount of time to replicate. However, their price was out of whack and the pressure to sign up by the end of the seminar was ridiculous. 

Point is, it's up to the individual to determine value. What may seem like a rip-off or scam to some may be a cheap investment for others. But not getting what you paid for is unacceptable and I'm glad you were able to get most of your funds back for them not delivering on that expectation.

Not sure of your goals with real estate investing, but I have a 14-month old (who's currently destroying pots and pans from the sound of things) and if you can house hack, I would highly recommend it. Find a neighborhood you want to live in and search for properties that make sense based on your personal needs that also work as an investment. 

Starting out we purchased a 2-flat in North Center, living in one unit, renting out the other. Our plan was to fix up our unit (the bigger unit) and then duplex down for the first floor. We haven't duplexed down yet, but rents in North Center are very strong as the schools are some of the best in the city. Don't treat this as a normal investment where you're strictly looking at numbers and you may face negative cash flow, but keep in mind most investors pay a mortgage on their personal residence and you will have someone helping pay down the mortgage. Also, screen tenants as your neighbors and not just tenants. It's one thing to get someone who can pay rent on time, something else to get a neighbor who won't drive you batty. Note that you can be a bit more discerning for owner-occupied units, but fair housing rules are still in play. 

Finally, you can always convert a duplex to a SFR down the road after you get help paying down the mortgage.

Get an FHA loan. You'll only have to put down as little as 3%. There are loan limits on FHA, but for a 3-flat at the max price/limit you would only be required to put as little down as $16,977.

FHA Limits for Cook County: Single: $365,700, Duplex: $468,150, Triplex: $565,900, Fourplex: $703,250

https://entp.hud.gov/idapp/html/hicost1.cfm

Would echo @Jacob Vincent and suggest you house hack with a 2-4 unit property. Look into an FHA loan as an owner occupied building has strong financing options. Not sure of any investing strategy where it makes sense to own property while you pay rent to someone else.

can you close quickly? If not, can you handle PM duties on the property so you address the seller's concerns? Play up the work that needs to happen with the tenants to setup the accounts, notify them of contact for repair, etc and that you would be willing to handle those items if the seller considers those "costs" in the price. Solve the problem. 

Listen to @Ben Leybovich and then figure out your cash flow target from there. 

As far as pure negotiation tactics, gather as much info as you can about why the seller is selling and see how you can help the seller. Research purchase history, neighborhood trends, and even google the seller if you can. He's selling for a reason (burnt out/bad tenants, needs the $$, wants to exchange for bigger building), make it your mission to find out the reason and use this knowledge to make a more compelling offer to solve the problem for the seller. Find out what's driving the urgency on the offer timing.