All Forum Posts by: Joshua McMillion

@Regina Sloan

You can mitigate risk by finding contractors that run their business like a business and not a hobby. An excellent way to determine this is a list of questions during the initial discussion. Start by asking what their top three KPI they track in their business are and the average time per job. From my experience, a contractor should provide metrics off the top of their head without hesitation. If they don't, you know it's only a hobby for them.

Second, in business, you have to perform based on cost, schedule, and performance. Usually, with contractors, it's rare to find all three. Starting with the contract, use an incentive-based contract. It will hold the contractor to a time frame in the contract; avoid a contractor that will not modify a contract. All the contract is just negotiation and should be altered for each job. 

Third, the cost is hard to determine, but from my experience, you will always go over budget. Your contractor should be able to provide cost-effective options. I also like to have the contractor walk the property during closing and give them an idea of what we plan to remodel. This will allow you to have a better ballpark figure, but I like to go into remodels with a cushion to cover the cost over runs. For example, our last investment property needed a new roof, which was not planned. 

Fourth, performance should be based on dispursements and quality control inspections. Each step should have clearly defined milestones in the contract during the remodel with someone you trust doing a walk-through. If the performance has met the standard, you then release disbursements to the contractor. Never pay upfront. I only cover material costs upfront. The final payment is removed during the final walk-through. 

Sincerely, 

Josh
 

@John Philip Eugenio

An excellent starting point, and we share a similar goal. I would take it a little deeper and determine your vision for the future. A great book to get you thinking more long-term with strategic objectives in Vivid Vision. 

Sincerely,

Josh 

@John Philip Eugenio

@Doug Spence and others have already given excellent feedback. My advice is to think about your long-term strategic goals. For example, what is the level of cash flow you are trying to obtain, and when do you want to achieve it? Once you determine your strategic goal, small tactical decisions like this will become more evident. 

RLTW, 

Josh 

@Ian Murray

Way to pivot and find another solution. I never thought of an MTR, but that is another excellent idea. I wish you continued success in your journey to financial freedom! 

Sincerely,

Josh 

@Ian Murray

Great job on that portfolio purchase at Key West. Taking down deals with partners is a powerful tool that I hope to leverage one day! Are those homes in Key West going to be converted to short-term rentals? I'm assuming that the potential for much higher cash flow is based on the area's demand. 

Sincerely, 

Josh

@James Melby

If it were me and I had that burning desire to get into REI, I would use the strategy called house hacking. Essentially you can live for free if done correctly, save for other acquisitions, and get hands-on experience with REI. It all comes down to your risk appetite and long-term goals. If you are concerned about the PMI fee, you can always make extra payments and REFI once you move out to lower your mortgage. 

Sincerely, 

Josh 

@Mora Clark

I focus on a different area code but would increase the rent to market value. Does the property need any improvement? If your property manager is not willing to increase your rents willingly, that tells me they are lazy. I would find another property management company with all three interests (tenant, owner, company). 

Bottom line, if I could not increase rents, I would sell for a profit and turn over into another investment. Just my opinion...

Sincerely,

@Zach Carner

The decision is based on where you see yourself in the next five years? Do you want to get into REI with low risk? I was in your shoes in 2019 when we moved from our location in LA. I decided to rent because it aligned with my long-term goals of being financially free. 

What you need to do, you're already doing it. Reach out to several property management companies to see what incentives they charge and fees. A good property management company should have an investor portal for you so that information is streamlined. Also, do you plan to purchase more properties in that area? If so, will they lower their PM fee if you have several properties? Industry-standard rates are 10% and 8% with five or more investments.

Bottom line, if it were me and the property would cash flow, I would hold the investment and let someone else pay down my mortgage and use the cash flow for more REI deals. 

Sincerely, 

Josh

@Brendan M Brown

Your heart is in the right place, and I would try to look at creative financing direct to sellers. Not the bandit signs or letters that say you pay for homes in cash, but a more thoughtful approach centered around seller financing. Seller financing will allow you to get into a property with little to no money down, and you get to negotiate the terms. 

I understand your pain, and several years ago, I was in your shoes. If it weren't for the military and the VA Loan program, I would not have been able to purchase a home. Keep pushing; real estate investing is hard, and do not compare yourself to others. Set down and come up with SMART long-term goals and take daily action to achieve them. 

Sincerely, 

Josh 

Shaun, 

If you live there and house hack the investment, would it be any cheaper than renting another property? Unless I know more numbers, like your down payment, insurance cost, est, it would be hard for me to give you a definitive answer. On paper, this deal would not be something I would take on. But, I am not in the Houston market. 

What is your strategy with this home? Refinances to a lower payment or rehab to increase rents? My general rule of thumb is $300 in cash flow at a minimum for SFH's. I would sit down and come with your crystal clear criteria and use that as your guide. 

Sincerely, 

Josh