All Forum Posts by: Account Closed

Here is enough to get you started. First get information on the properties. Then find comps (rehabbed properties that have sold in the last 6 months within 1/2 mile ) and look for how much they sold for. Multiply that by 90% and that is your max investment you can put into the project. (You need to make some money to make all the hard work worth doing.) So, if houses sold for $200,000 you don't want to put a $300,000 on the lot.

Then look for the price of the lot as if it didn't have a house on it. You will of course have to pay the seller something, if they are willing to sell.

The next step is a little tedious. You have to call the city planning department and ask if you need permits for demolition, construction, plumbing, electrical, landscaping, etc. Ask how long each permit takes in your jurisdiction. Find out if the lot has sewer or septic. Find out if each lot is big enough to build a house. Sounds like you you may need a survey. Usually there are "set backs" and access requirements. Find out how long it takes to get approval to "break dirt" and the max size structure you can have on the parcel. 

Then you need to talk to a builder or an architect and ask how much to draw up plans.

Ask a contractor how much to demolish and remove the existing structures.

And ask the builder or architect how much per sq ft to build it. That will depend on finishes. A low end build will be $00.0 per sq ft, a nice neighborhood type house will be $00.0 per sq ft and a really nice build will be $00.0 per sq ft.I'd add 10% for work order changes, delays and "oops, forgot about that" surprises.

Then you have to consider carrying costs. Are you using your money, a bank loan or hard money? Factor in a year's costs just to service the loan.

Add it up and see if 10% is left over for your time and effort.

That's not everything of course but as I said, it will get you started.

These are Turnkeys. I find "off market" properties, I take over the loan using Subject To, give the seller cash for their equity and prepare the property for Tenant Buyers. I make the property safe, clean, and livable. These are in decent neighborhoods where it is safe to take a walk in the evening. I do not rehab the property. These are not Fix & Flips, though they could be if someone wanted to but that isn't the objective. 

Then, if there is little equity, I keep the property, put in a Tenant Buyer who gives me $20k to $25k on an Option fee. And I cash flow it for $500 a month or more. If there is a lot of equity I sell it as a Turnkey for usually $60k to an investor. The numbers have to work for an investor or I just keep it in personal inventory. The investor takes over the loan (no bank financing needed), the Title is transferred into the investor's name, we put a Tenant Buyer into the property on a Lease Option who gives the investor $20K to $25k for an Option fee, the Tenant Buyer does all maintenance and repairs, so there is no CapEx to the investor and the investor gets the cash flow of $500 a month or more, the investor gets the tax write offs and the principal paydown, etc.

These are usually lease optioned to the Tenant buyer on a 3 yer to 5 year LO. If the Tenant Buyer exercises their Option, the investors gets the rest of the equity and usually reinvests into more of these, but doesn't have to. Many tenant buyers stay in the properties for years and years and years and don't exercise their option. It's their choice. That means ongoing cash flow for the investor along with principal pay down and tax write offs. I don't calculate appreciation into the mix because markets go up and markets go down.

This is NOT zero down. There is no such thing. An Investor needs the initial investment plus money for title, escrow and closing costs. The investor needs cash available to cover the underlying mortgage payment, electricity, water etc for the time that it takes to find an acceptable Tenant Buyer. It takes 30 days to find a Tenant Buyer willing to put $10k down and 60 days to 90 days to find one who has $20k to $25k to put down. I choose the larger amounts because it means the T.B. is more stable and plans for the future. Any investor should have a reserve of $5,000 for a property to cover expenses. Remember, you are taking over someone's loan and that loan has to be paid whether you have a Tenant Buyer in there or not.

The typical mortgage payment is around $900 - $1200 a month PITI. The typical rent from the Tenant Buyer is $1650 to $1950 a month. There are no "rehab fees, management fees, gotcha when you weren't looking fees" that you typically see in the Turnkeys in the midwest. These Turnkeys have built in equity in nice neighborhoods and because they have equity they are Safe and Secure Long Term investments meant for passive investors. Some investors have me train them to do these on their own and there is a program for that as well.

These Turnkeys are also a little harder to find than the typically Turnkey so patience is a virtue.

Pitfalls: These are the things you need to know

1. It requires money, not as much money as trying to buy a rental and get $100 cash flow, but it still requires money.

2. There is a Due on Sale clause on the mortgage. That means the bank can (but rarely does) call the note due. I've done these for 25 years and I had one called in 2008. I paid off the loan and everything was fine. Other solutions include "assuming the loan" formally, using Hard Money to refinance, working with the seller to make the bank happy, selling the property and several other solutions. When a bank calls a loan due it is a 90 day to 120 day process which gives you time to resolve the issue.

3. These require expertise to do correctly. Naturally, I provide the expertise.

4. Some people who buy Subject To try to hide it in a Land Trust or not record the Deed. In my opinion that is a big mistake for reasons I won't go into now because it gets pretty technical.

5. Some people who buy using Subject To don't use title and escrow, again, In my opinion that is a big mistake for reasons I won't go into now because it gets pretty technical.

6. Some people who buy using Subject To don't fully disclose to the seller and the buyer what is transpiring, again, In my opinion that is a big mistake for reasons I won't go into now because it gets pretty technical. Everything needs to be fully disclosed in writing so that all parties are aware. It's the only ethical thing to do.

Your comment: "Do you have any strategies for turning 500K into $1million in 5 years?"
Turning $500k into $1M within 5 years is very doable. I could work out the math on how that would look, but that isn't particularly aggressive.

A Partnership says each party has equal liability. Generally, a Partnership is used when there will be many ongoing transactions with the same people. There is case law where one partner has been sued and lost because the other partner lent his car to his own son who then got into an auto accident with heavy monetary damages. Both were sued as a result of the partner's actions. There are many examples of this type of lawsuit. An attorney looks to see where the money is before filing a lawsuit and will often include anybody and everybody remotely involved and a Partnership opens you up to this liability.

A properly written Joint Venture agreement limits each party to their specific role in the Joint Venture. A Joint Venture is best used for a single property with a new Joint Venture agreement for each ensuing property. It is more like each is an individual "investing" in the project and buffered from the personal liabilities of the others.

For instance, all of my Joint Ventures are

1. One of the two investors provides the Capital.

2. The other investor provides the expertise and does the work.

3. I own 51% of the Venture so decisions can be made.

4. We split the profits 50/50.

So, if my Joint Venture partner has a problem in his life, it affects only his side of the profits. If I have a problem in my life, my Joint Venture partner is entitled to his entire profits and is not affected by my liabilities. Because of it's structure a judge is more likely to dismiss a suit against both if only one was involved and the other was not involved.

If the Joint Venture is sued, then yes, both are affected to the extent of their involvement in the Joint Venture.

Talk to your attorney for greater detail and clarification.

 Haven't been that far north yet, only to Kamloops and Kelowna I must say, but here is the deal, don't limit your investing to what you have previously read. There is much, much more, like the following example (by the way, my wife (from Vancouver) and I got lost in Banff back country hiking for a few days, it was awesome): And yes look at the link, it works in P.G.

3 Ways to Wealth in Real Estate – Fix & Flip, Buy & Hold, Turnkey (Cash flow) – Here’s How

https://www.biggerpockets.com/forums/311/topics/780022-3-ways-to-wealth-in-real-estate-cashflow-flip-hold-here-s-how

No, no, no. Not a partnership. Use a Joint Venture Agreement. Within an LLC or outside an LLC but keep in mind that an LLC requires meetings, records, compliance,etc, etc. Each of you can have your own LLC and be in a Joint Venture or one of you can be an LLC in a Joint Venture or none of you can have an LLC and be in a Joint Venture. Just find a property, buy it, have an exit strategy, make some money and do it again.

 Sure. I can email you the paperwork and the checks of actual deals. It works in most markets but not so much in CA or WA. Here's one I did in AZ. I'll even tell you the pros and cons,. How many turnkey providers will do THAT for you? ;-) I even teach people how to do what I do, imagine that! (and how to Avoid the Mistakes I made getting to where I am) It's for Safe, Secure, Long Term, Cash Flow, Investing, enough said.

3 Ways to Wealth in Real Estate – Fix & Flip, Buy & Hold, Turnkey (Cash flow) – Here’s How

https://www.biggerpockets.com/forums/311/topics/780022-3-ways-to-wealth-in-real-estate-cashflow-flip-hold-here-s-how

Negating protections, Probably. It's called "co-mingling of funds". It also could affect taxes depending on the type of LLC and the tax election. Will it be a problem for providing "protection", not likely. Are you planning on being sued for some reason? Will it be a problem for tax purposes, I'm not sure. It depends on a variety of things and a CPA or EA can answer that for you.

 I'm selling my properties that have substantial equity, (height of the market is best time), keeping the properties that have little equity but cash flow well, and using the proceeds to buy more cash flowing properties when the downturn hits. I'll have plenty of cash to buy, buy, buy. Of course, I am still in the game currently because the thrill is in the chase of finding great "off market" deals.