All Forum Posts by: Jeff V.

Hello Everyone, 

I hope everyone is having a Merry Christmas! 

I'll give a bit of back story before posing my question in order to get the best response to my situation. 

I have been doing all of our bookkeeping for our real estate business. We have been doing BRRR deals and I have been able to handle all of the bookkeeping so far.

We are looking looking at a few areas to expand our current operations. I have been talking with a few non performing note investors as well as some flippers. We are entertaining the concept of doing a JV in the near future. In both cases it will be equity deals.

I can see either path will most likely be just beyond my bookkeeping abilities.  I'm looking to hear what others have done to get over this hurdle without breaking the bank.

I currently have a CPA, but he is only involved at year end and takes forever to get back to me on any bookkeeping questions I have. I'm not sure if this is normal or if it's not really his lane.

So what sort of bookkeeping / accounting systems or arrangements do you have with your financial advisors? National firm or Local? Bookkeeper or Accountant? Frequency of contact: weekly, monthly or quarterly?  What should one expect to pay for a relatively small amount of bookkeeping for a new operation? 

If you have one that is taking clients and has affordable rates I would be interested in their contact info or company name as well.

Currently looking for a solution that is scalable. I currently only spent about 1 - 2 hrs a month doing the books. Time isn't the issue though, it's the complicated JV accounting that I'm just not sure how to properly account for.

I may be over complicating things but I'm interested in hearing what others have done.

Thanks,

Jeff V

@Kurt Yordy

What is your strategy here?  If you buy the second and the first is currently foreclosing, what are you hoping to gain from putting yourself in a weak position?

If you are hoping to own the property...  maybe you could work a deal to take title subject to the liens and then catch up the late payments and arrears....  You could pre negotiate with the second lien holder to take a discounted early payoff prior to closing as a contingency.

I'm no expert, but the only safe strategy that I can see is to get in front of the foreclosure by catching up the payments.  I doubt you will ever be able to go after this through the second and win that game.

Jeff V

@Taft Love

I don't have all of your information as far as what you have to work with, so I'll just explain what we have done and are looking to do in the future.

My partner and I had some cash to start and decided to partner on a single deal and see how that worked out.

Our First Deal

We purchased a 2/1 on a double lot in town for 20k using his cash and I put up the 20k required for renovation.  We had no idea what we were getting into at the time.  On day 1 of renovation (Demo) our contractor called us to inform us that there was significant termite damage on the rear of the property where one corner was touching the ground.

Lesson number 1 - Termite inspection went on the checklist for future purchases.

So we agreed to have the property treated and complete demo to see the extent of the damage.  Upon completion of demo our contractor calls again...  He threw a bombshell in our lap that 90% of the structure was ate up with termites and basically the only thing holding the place together was the termites holding hands.  The renovation was going to cost around 40k instead of the estimated 20k.

Neither of us had 20k liquid to  tap into, so we started talking to banks to see what we could find.  We ended up finding a loan at a local portfolio lender that was a construction loan.  They would lend the 40k required on a draw type setup and roll into a permanent mortgage once the project was complete.  The numbers seemed to work out so we proceeded.

We ended up having to build temporary walls to hold up the roof structure, being that it was the only thing left that hadn't been reached by the termites...  and then re-building the entire house under neath.

Lesson number 2 - in hindsight we should have dozed the house and started fresh with a larger new house.

However we learned alot about the process, construction, changing direction when things go wrong, being flexible and rolling with the punches.

We ended up with a nice place that we paid almost 100% of the appraisal price for, but we only owe 40k and it cash flows well.  We didn't really make money but the education we got was priceless.

Before we rolled the construction loan into a permanent one we contacted a few more banks using referrals from some of the guys at the local REIA. One of them gave us a contact of their Loan officer which happens to be another investor. The loan officer asked us if we had any other collateral to put up and if so he could get us a Secured Commercial Line of Credit, which is what we really needed. Luckily my partner had a free and clear property and we ended up using that to secure the line of credit.

We have since used that Line of Credit to Buy, Renovate, Rent and Refinance 2 other properties that ended up being no money out of pocket and they are both cash flowing nicely.

You see, you will need to network with your peers in your area and find out how they are doing it, and emulate the same.  They may even share their contacts.

One issue we have been having is the hold time... Our LOC is only large enough to do 1 Purchase and Rehab per year and then we hold the property until we can refinance using the appraisal price instead of the Purchase/Renovation cost. This ties up our funds and doesn't allow for quicker growth.

We have been looking into using private funds for the purchase / rehab phase to allow for multiple deals a year.   We ran across a Lending Tree like site for private lenders where they evaluate your deal and bid for your business.  I have yet to use them but, it looks like it would be a good fit.  Here is the link.  http://cix.connectedinvestors.com/

I'm in no way affiliated with them other than being a member on their site for networking.

Going forward, we will be looking at doing 2 deals a year for a slow and steady growth rate until we get to 10 or 15 deals.  Then our first deal will be completely paid off and each consecutive one will start paying off each year thereafter.

Lots of information here, but mainly you will need to network and be flexible and see if what is being offered can be used to complete your goal.  Sometimes it's not exactly what your looking for or its what you need but just don't know it, as it was in our case.

Hope this helps,

Jeff V

Before Obamacare, I had Aetna and I found the plan through www.ehealthinsurance.com and it was cheaper than insurance through work.

After Obamacare I have to use the work insurance if available.  

If you are full time REI then you may be able to benefit from ehealthinsurance they work to find you the best plans for your circumstances. They were really helpful to get the list narrowed down.

Hope this helps.

Jeff V

To the mods... I'm in no way affiliated with any of the company's listed.  Just honest advice.

@Michael Erdman

Funds come from Yourself, then family then friends ect... Once you have a track record the private money will come from your extended circle and people you meet at your local REIA meetings.

Once you have a track record, you could also reach out to hard money lenders for funding.

Note about auctions...  beware the auction fees, read the fine print on the site before bidding.  Some require you to put down money just to even bid and then get re-imbursed later if you didn't win.  There are also fees for if you win called buyers premium... just account for those when you  make the bid and don't get blind sided.

On a side note, I purchased one last year that was on an auction site... I think it was auction.com can't remember for sure but I just waited for it to come off the auction site to be listed on the MLS. I snatched it up a year after it first appeared on the auction site. It kept going on and off of the auction site saying under contract and I didn't want to play with them so I just waited to see if it would sell. It never did so when they listed on MLS I bought it. I didn't have to pay all of those "Auction Fees" either. In a hot market, this wouldn't work probably but I'm in a rural market small town.

Also once it goes on the MLS, you can then view the property just like any other MLS listing prior to buying.

I second what @Braden Smith says...  There are no 5 - 10 k rehabs... there will be things that are found once you open walls ect.  Also if this is your first deal and you estimate 15k in rehab, I would have double that on hand before starting the project.  Like I said, you will hit some snags...  hopefully it will be better than my first deal! (I hate Termites!)  No matter what the situation is you have to make it to the finish line...  nothing kills a deal like running out of money and ending up with an unfinished rehab.

Tip - People will be more inclined to help if you had a profile picture.

Hope this helps.

Jeff V

Ditto for Evernote, you can tag each note, organize by notebook and makes all of your notes searchable!  You can then share them with people if you need to, or grant people access to certain notebooks.  It makes your notes accessible from phone, tablet computer or other mobile devices.  This is by far the best way that I have found to take notes and reference them later quickly.  As @Chris Seveney states also works well for GTD setup!

Hope this helps.

Jeff V

Mark,

Can you provide numbers for the 1st 2nd and BPO?

It may be more helpful to get the answers your looking for and help others in the same boat.

Jeff V

@John C.

I'm no expert, in the note space, but have been studying on it for quite some time.

If your investor buying the note wants to yield 12% he would work backward to figure his purchase price.

For Example: Term is 7.83 yrs, PMT 1021.75, Yield Desired 12%...  we solve for Purchase price using a financial calculator and we get $62,059.85.

This means his/her all in price would be $62,059.85 to yield the required 12%.

Lets say closing costs and boarding fees to take over the loan are $1k for numbers sake.  The investor would discount his offer price accordingly and put in an offer at roughly $61k so this the net yield would be the required 12%

So I would say for an investor that wanted a 12% yield your note would be worth 61k.

Hope this helps.

Jeff V

Personally I like to set closing 45 days out but if title and due diligence comes back good and allet parties are rdy to proceed you can move up the date.  If you hit snags in due diligence or title blemishes need to be remedied you will have some flexibility. 

Jeff V

@Mark Matos

Take my advice with a grain of salt, I'm no expert but here is what I would do.

If its a good deal even with paying off the lien why not take title subject to the lien...  in the event they wake up and decide to foreclose you could then pay off the loan or re-finance.

It's a risk that at least you know about going in and can decide if its worth the risk.

There is always the possibility that they will not foreclose and then you will have to deal with this lien again when/if you decide to sell the property in the future.

You may try skip trace or something to exhaust all possibilities of contacting the lender...  

Jeff V