All Forum Posts by: Diane Menke

I would keep an eye on it and if in 2-4 weeks or even 3 months you see it sink at all, have them come back.

Make sure you log somewhere that you already voiced a concern about it.

Worst case sounds like if it cracks, they owe you a new concrete pad.

Its so cold here you can't shovel much this week.

Good luck
Diane

Hassan,

I hear what you are saying.

So where in your method are you compensated?

You make money on the sale since you are an agent? How about the lending side which it seems you are doing? Is it a one time pay out to you or more than that?

Please explain.

Yes we are trying to set our LLC up and stay on the right side of the SEC.

Since I am a terrible committee person, I would rather deal with the accounting issues, via a sturdy contract.

Keep us posted and let us know how you are compensated. I will get a description of how we want to structure this out in the next couple of days. We only just locked up our domain name.

Diane

Hassan,

You are more creative than I am with the purchase structures. I am confused perhaps.

I may be wrong but that sounds like a lot of work? Obviously you love it.

How do you get paid?

Would it be easier to form an LLC and have your lenders become partners who pool money so as to collateralize the venture?

Say everyone puts in 10K each and you have 10 partners like this so 100K cash in the LLC. You would be the sole active partner, making all decisions and securing the loans for the LLC. The passive partners (your lenders) would sit back and wait for the venture to make money at sale. You would give them Qly reports on financial activity, equity growth etc.

This way you never have to "get permission" to move on a property.

This would be my prefered approach and something we are trying to set up now. I hate committees myself.

Best
Diane

Have you discussed these properties and the tax implications with your CPA?

In our area we are seeing renters becoming first time home buyers. I expect a little uptick after the innaguration. Have you been watching the economies in the areas where you own these props?

Good luck
D

Hassan I don't know anything about the area you are shopping in but it seems you are looking at a lot of property in a few neighborhoods?

Have you considered the "tipping point" for prop value to jump as it relates to a % of the total housing stock in that area?

For example it 100 houses are in one neighborhood and 30% of these are in rough shape or boarded up, but the rest are fine simple working class homes, if you can create a wave of flipping to affect a high % of the 30%, you will get a quicker up tick in total property equity because the whole neighborhood will be so much nicer.

Ditto if you can get some amenities into the area like a coffee shop, day care or similar that might attract good neighbors with disposable income.

So neighborhood building instead of SFH scattered all about? Its the same thing as flipping but on a larger scale. You seem to have private lenders enough so why not tackle 10 houses in one area, instead of 10 houses all over?

Not sure if this applies to your area but this is how we make money in our area. We look for neighborhoods on the up tick not single homes.

Best
Diane

I must tell you that I still consider electricity magic and so my response is colored with this point of view.

I just don't "get" electricity.

I can wire a dimmer and a fixture, not a problem. I will do that.

I understand how knob and tube works as well as mid century and up to date modern. But its still all magic to me.

When I buy a building I ask my electrician to do a safety check. he charges me a service call fee to come out +/- $85.

Lord knows the previous owner who was probably a DYI weekend hero or worse yet a FLIPPER cut corners. Expect the worst.

In every single house we have bought there have been electrical issues. They scare me. I don't want to have a fire or see anyone hurt.

I've bought houses with overloaded panels or 60 amp ancient fuse boxes with pennies in them. EVERY house I buy has some open junction box.I have seen plastic sleeved wired shredded on steel studs or nailed. I see overloaded daisy chained outlets in kitchens overloading circuits. I have seen generations of abandoned wires that end up in cut ends still live. I have even seen a bathroom light switch IN THE SHOWER.

Last house I bought the flipper had some shmoo install the service and panel box and the guy never plugged the opening of the conduit outside. Rainy day of my safety check the panel was raining water like a fountain. Good thing we were there in the rain to catch it. Extra cost to install a new panel etc was about $1800.

Electricity scares me because I know only enough to make a mistake, not make it perfect. Thats why I call in a pro.

Please keep in mind that if as the owner or a property you cause a fire or some damage from inferior workmanship, you will not be able to collect a claim from insurance. And your tenant can come after you if you hurt them.

Isn't it cheeper to hire a professional, licensed electrician to do the work? I have worked with FT pros and guys who did jobs for me in the eves and weekends who were also licensed. Typically my sparkies will send a mechanic and a helper for $190 per hr and they get a whole lot done in a day. I get to rest easy.

To me its worth it.

Good luck.
Diane

I know my CPA asks to know where the refi or cash out moneys go. Do they go into other RE, expenses etc. Or are they "pay". There are differing tax issues for each.

I can not follow your movements at all.

I always consult my CPA BEFORE I do a refi, cash out, sale...so he can advise me on tax hits.

Good luck
D

Hi Mike,

Thanks for this thread! I agree a clearly articulated biz model is a must.

We used to do fixes and flips for cash - about 4-5 years ago.

After we hit our cash needs with flips, we started buying and holding, renting the props out. We shopped for cash flow and equity growth. We have managed to get all our "in money" out to date with refis, and we still have decent cash flow and equity growth with our rental props.

Currently, we are looking to cash out so as to form an LLC which will buy for short holds (1-5 years) and do flips. I personally want to be invisible to tenants for example. I want to be be able to hire my remodeling company to do all maintenance, repairs and renos. Spec GREEN in fill new construction is a consideration.

Our current planning targets are 20-30% ROI for active partners/members. Returns to passve members still TBD but sounds like 10-12% would attract them.

Our target housing market is artsy yuppy and NY transplants.

Thanks
Diane Menke

I am a tired of all the gloom and doom reports. After all aren't these the same 'reporters' who said there was no bubble?

RE is local. In our area the bubble was not so hi nor did it pop so loudly. In the past few weeks renters have started buying their first homes.

This being said there are many unsold homes on the market now flooding the rental market so rental prices have come down a bit. I'm hoping that is corrected this year with the buyers coming out of renting. We have had to drop rental price on one house $50.

You have to know your area and how to shop there for deals.

We do cash on cash returns as well as expected equity growth predicting. Right now the latter is a 1-5 year perspective.

For cash on cash we look for 20-30% on a rental prop purchase AFTER paying out mortgage. We have to cherry pick but we find them.

I have one low producer right now I have to get a tenant into.

Keep shopping guys.

D

Gabrielle,

Some of your questions suggest you have not done this before? Am I right?

Permitting and process by the city and the time it takes are all local issues. In our area we can get a 'quick permit" for small projects same day. Larger residential projects about 4-6 weeks. BIG commercial projects much longer.

Impacting all of that are variances and other zoning issues that might apply.

It does sound like that architect was negligent. But maybe I only have half the story. Many clients are slow to pay, slow to decide, want to control costs and fees. They can jamb up the works too.

You can recommend the client hire a real estate attorney or similar to pursue the matter. I suggest you stay out of that. Its not your business to find out what happened. Don't go to the architects office. It not your deal to handle.

Your client will need a completely new set of docs for this project.
Again, thats not your problem.

Why he waited 4 years is beyond me and its a red flag for me. This person is not in ANY rush to get something built.

When a client calls our office saying they had to fire their contractor or architect, I try to understand what the problem was so I can avoid a problem client. In other words its a red flag.

If they seem OK after I hear the story, I tell them send a letter firing the previous pro, then call me back and we will get into the project with them.

Please e mail me and I will give you contact info for a great professional contractor in your area I know. They are members of my remodelers peer group and really nice guys.

All the best to you.

Diane Menke