All Forum Posts by: Kate Johnston

Hey @Westyn! I actually didn't mean to post this to the forums, just to my profile, but oh well! I'd be glad to chat about opportunities. I'll message you. 

Investment Info:

Single-family residence fix & flip investment in Indianapolis.

Purchase price: $50,000
Cash invested: $72,000
Sale price: $285,000

30.24% ROI

Hi Nicole - There are clearly a lot of details to be worked out. With partnering, I've found it best to take things one step at a time. I articulating what everyone's goals are is a really important place to start, because if your goals aren't compatible then all the other questions are mute. I'd focus on just goals for the first meeting, then go home and create a few possible deal structures that meet everyone's goals, and schedule a second meeting to share them with the PP and see which one looks best. 

Building on what Lucas said:

1. Start with figuring out your expenses (taxes, maintenance, insurance, any utilities or landscaping, any loan payments, etc.) 

2. Scope out the going rent rates in your area (Zillow, Craigslist, and Trulia will give you a good idea)

3. Subtract your expense from your projected rent income to get your cash flow.

Then: 
- If the cash flow is negative this isn't a good move and it would be better to sell the property and invest in something else, unless appreciation is shooting up in the area. 

- If the cash flow is positive, calculate your annual ROI by dividing the net annual income by the amount of money you have in the property. Use this number to compare it to other investment options and decide if you want to keep the property or if something else is better.

Yes to what Aaron said. Using a personal account isn't a problem if the property is in your name or an LLC treated as a passthrough entity, but if you do make sure you keep accurate accounts of the incomes and expenditures associated with your property.

I'd put a portion into a high yield savings account, and a portion into a few syndicated fix and flips to optimize returns while spreading risk. 

The exact mix depends on your bigger investment picture, but if I was you I'd start by calculating returns for putting $40k into the savings account, breaking the remaining $60k into three $20k chunks, and looking to put each one in a different deal. Based on the deals available at the time and my overall asset balance, I'd adjust from there. 

Without details on the expenses we can't give you a complete analysis, but estimating that expenses will be at least $500/m and adding that to the mortgage, this property doesn't cash flow.  Unless you can raise rents to put yourself in the black or add value and resell, there are better deals out there. 

Hi Clayton - I syndicate these types of deals, partnering with the contractor and a few passive investors on each one. My minimum bar to set up the deal is 20% ROI. Hope that helps!

Hi Bishwash - At a quick look, for putting $50,000 in you can expect about a 15% cash on cash return (insurance + tax + P&I + maintenance / investment amount), not counting the value growth as it the property pays off it's own mortgage. That's okay in my opinion. Personally I shoot for 20%+, but if this deal is otherwise aligned to your investing goals it could be a good move. The two things I don't like about it are 1) how high the property taxes are, because that's going to be a significant expense as long as you own the property and probably only go up. And 2) if you buy the property for $140k and put in $15k of work you're in for $155k, but the property is only valued at $150k. It's not the end of the world, but the numbers are going the wrong way. I'd try to negotiate the seller down to $135k. 

As I mentioned, I looked this over only briefly. For deciding whether or not to invest, I always advise first being clear on what goals you're trying to achieve, then run best and worst case scenarios on this deal, and double check all your facts :) 

The question that comes up for me is, protect your assets from what? Random people can't go after your property based on a five min coffee chat. If you get into legal trouble and get put on the stand and questioned about your assets it's literally a crime to lie so you can't keep them secret anyway. Good legal structures are the best and only protection, in my experience. I think that just sounds weird. 

So many opportunities come from talking shop and sharing stories and asking questions. Most of my deals come through networking. My thought on this is he either got some bad advice from someone or he's embarrassed for some reason and making up reasons not to talk about RE. But if that's the case then why would he even mention it to you in the first place? Not saying anything at all would be the best "protection." It seems very strange and illogical.