All Forum Posts by: Jon Burns

My guess is if you asked 2 CPA's and 2 attorneys how you should set up your different business strategies, you would receive 4 completely different answers.  

That being said, it really comes down to your comfort level based on the information you have been given, and the volume of transactions you are involved in.  To me, the more transactions you do, the more advantageous it would be to have an operating company for that strategy.  

1 or 2 flips a year probably doesn't warrant an LLC, but doing 10 a year might. Additionally, there are certain vendor pricing discounts that are only available to businesses that you may want to take advantage of. And your CPA can go over how best to reduce tax liability, but you need to have the consistent income to make it worth the cost first.

I use Rentec Direct for our rentals.  They offer a "Pro" and a "PM" (property manager) package that varies in pricing based on the number of units.  They also offer add on packages for things like tenant screening and online payments.  We looked at Buildium and Appfolio as well, but felt Rentec fit us best.  

Good luck in your search.

Hey John - check out this thread.

https://www.biggerpockets.com/forums/311/topics/28...

Congrats Scott.

My advise is to focus on one.  Who cares about what your five year goal is in real estate if you don't get that first one done.  The first is always the hardest.  Best of luck.  

Brian - it depends on the lender and their programs. If you can find a HML or private lender that will do 100% LOAN TO COST so long as it does not exceed their Loan To Value maximum (based on the as repaired value), then you have a good shot at achieving a no money down transaction. However, just because it is no or little money out of pocket, does not mean it is a done deal. You will need to have cash in the bank for holding costs, taxes, and construction overruns. Additionally, if you are a newbie, be prepared for the lender to require you to use a general contractor and have a construction schedule or plan in place prior to funding.

Mark - thanks for the clarification.  I would definitely direct your tax questions to a professional.  There are other areas in life to take on more risk, I do not think taxes and the IRS is one of those.  Don't get me wrong, I am all for deductions, but am also for staying out of trouble. 

As to your lender - did you ask them what they would like to make.  It may be that they are okay with far less than 10%.  There are not many places where you can invest and earn anything close to that in today's market.  I assume you want to create a win win situation for both of you, however, if your starting point is 10%, the more business you do, it may become difficult to talk them down.  Another approach that might work is to pay the 10%, but ask that they defer monthly interest payments, and collect when the property sells.

Best of luck.  And if you need help dispersing the millions, let me know. :)

Houston is so diverse, it really depends on the submarket.  Areas that have been more effected by the fall in oil prices are Katy and The Woodlands (especially higher end homes).  On the other hand, areas like Sugar Land and Pearland have been less affected due to their accessibility to the medical center.  East Houston has been a strong rental market, but will be interesting to see how it holds up as a lot of the construction jobs from the expansion of the refineries starts to fade.  

If you decide to enter the Houston market, please keep in mind that the north and west suburbs do have cheaper insurance rates due to their distance from the coast.  However, some of those saving ma be lost with increased taxes with the better ISD's.  

HML for flipping - 12%, 6 months, interest only is common in TX. I would charge points, and pass through all third party fees. If you are operating out of an IRA account, I would pass all of those fees on as well.

Sorry, I have no experience in private lending for long term financing as a lender or a borrower.  

Not sure who the "they" is in your question about taxes, but interest is income for the lender, and deductible as an expense for the borrower.  The only implications I am aware of are those for not reporting, or reporting the wrong thing.  No matter what side of the transaction you are on I would make sure you have your paper trail in the event you are ever audited.  You can't control the other party, but best to protect yourself.

Not sure if this will work in Atlanta, but I have a client here in Texas that always writes his offers up as cash, then adds a line under special provisions that buyer reserves the right to use financing.  He has never had a problem with it, as it is disclosed in the contract.

Years ago I was a bond trader at the Chicago Board of Trade.  People would often tell me they were going to open a trading account  and start day trading to make some extra money, so they would ask for some advise.  My answer was always the same.  I would ask them how much seed capital they had, then once they told me, I would ask them to cut me a check for half that amount and call it a victory, because they would lose it all.

While I won't ask you for a check in this case, I will tell you the best way to cover your ***..ets is to pass on this deal.  In my experience, most flippers usually need the money in a rather quick time frame.  Last thing you really want to do is learn on the fly with a time crunch, you are bound to miss something.  

Take the advice in this thread and use it for another great opportunity, it will present itself again.  Take the time to create a program, speak with some attorneys, or partner with another lender who has experience.  

If you decide to move forward please consider the following in addition to your paperwork:           title insurance; hazard insurance; rehab estimates; rehab escrows and draw schedules; loan servicing; surveys; appraisals; inspections; lien waivers; releases