All Forum Posts by: Steven Phillips

Hello,  I am finally getting started.  I have $300,000 in cash to invest.  I am also a real estate agent so my main income is brokerage but I would like to start acquiring property on the side.  I know there is so much info on here you could read for a life-time without ever making a post.  But I've wanted to make a commitment that if this is how I am going to invest the money then I know I need to make an effort to be part of this community. 

So I have to jump in some where! My plan (and I'm sure i'm not the first) is to start and LLC and acquire a property for $250,000, make $50,000 in improvements, and hope between getting a good deal, some improvements and appreciation, that I can do a cash out re-finance for $350,000. I would assume on an investment loan like this the max refi LTV would be around 75%. So I would be able to take $262,500 out for the next project and keep $87,500 in equity.

Over the course of the year, I would try to come up with an additional $37,500 from brokerage to be able to reinvest with the refinanced amount.  So $262,500 + $37,500 = $300,000 where I am back to square one and can try to rinse and repeat.  My goal is to do this every year (I am 35 now), and try to pay them off in 20 years. I know (or will learn) that I will need to factor in other things such as repairs, vacancies, management fees, down markets, insurance etc.  Part of the plan would be to update the place, enough to hopefully last for 20 years, at which point I could start over.

I have partially chose this route over flipping because I think with a longer term outlook, I worry slightly less about the upfront costs, extensive rehabilitation and fees with short term flips.  With a longer term plan I hope instead of needing to make short terms gains I reduce my risk by assuming I might buy for market value, do an average rehab, get average rents, average appreciation or possibly exit 20 years later by flipping one a year or continuing to rent them free and clear and pass them down to the next generation.

Thank you for reading and I appreciate any thoughts or advice you might have!

Thank you for the reply.  I would say most of my business are the average home sellers and fall into the category of it making sense to list the traditional model of 6%.  However I met with a wholesaler who was making more money than I was, off of leads I was getting and throwing away.  So I am trying to come up with a way to legitimately profit off of the wholesale opportunities.  Especially since I work with a cash investor.  I think it's easier to explain to someone I am going to try to get you a cash offer for the amount you want as quickly as possible and as easily as possible, rather than to say I charge 20%.

It also avoids the net listing.  It is sort of complicated, but then again I have friends with graduate degrees that have bought and sold houses that still don't understand how the fee works I get paid, how the fee works, how a procuring agent is used, how it is split, how the broker takes a cut, that I don't work on salary etc. etc.

Wholesaling alone isn't exactly easy for some to understand to go to a seller, say I am going to buy your house in cash, sign a contract, then re-assign that contract and possibly reassign it again.  I may have gone to greater length's detailing the explanation for purposes of evaluating the use of the business method. 

Hi,

I just wanted to start by saying I pride myself in being a realtor and doing things the right way, which is why I am here seeking advice from the community on their feedback. My question is this.

What if I were to advertise that I could provide a cash offer in 24 hours or less, similar to a lot of the i-buying phase we are seeing now. I would then generate a lead and go and visit the lead on an appointment. I would then at DISCLOSE at first contact that I am a licensed realtor, and then provide them with a consumer information statement and answer any questions that they have about the laws of representation.

I would inform them that I work for an investor (which is true) that is looking to purchase properties for cash, and has authorized me to make offers on their behalf (which is true) and I would have an interest in making an offer on their property acting as the principal buyer.

I would then have them give me a tour of the property. Let's say I then made a legitimate offer for $70,000. Then let's say the seller declines but says they would sell for $80,000. I tell them I cannot do $80,000 but if they wanted to sign a listing with me for 6 months, I might be able to get them something closer to what they were asking for. I explain possibly we could try to get them matched with a higher end user, but there is a higher fee involved. If they are happy with 'Netting' $80,000, I would like to have their permission to list the property for $92,000 to help cover this fee. I would then review the cost break down, explaining how closing fees worked (commission fee, transfer fee, title fee, loan, lien and tax payoff etc)

Then I would list the property in the MLS with the normal procuring fee of 3.5% (flat fee $2,870 and keep the rest of the flat fee (with my broker of course), the remaining $6,970.

I don't feel this is unethical (in concept) for several reasons. 1.) I feel they are better represented by a licensed realtor with full disclosure than a wholesaler, who may not be disclosing fully, letting people in and out of the house unlicensed, in addition to a plethora of other things. 2.) Commission rates are negotiable, as stated by the REC. 3.) I'm providing a service by getting them the amount they wanted too or close too it, while fully disclosing what they will actually be netting, which is an advantage over even some agents explaining exactly what they net break down will be after fee distribution, transfer tax, title fees, loan pay off etc.) 4.) If I am working with a property around $36,000, 6% doesn't warrant me doing all this work for $1,000 before split and before taxes. So I would be inclined to provide a service by getting the seller the equity they wanted, that may have never happened if I wasn't able to help.

Hi,

I am working on a residential development of 36 town homes on a 5 acre site with a land acquisition price of $350,000.  I am looking for some general rules of thumb as far as investment returns for subdividing, developing the land, and selling new construction.

For example what rules of thumb could I back into the lot purchase price with, let's say knowing we can sell a townhouse for $280,000.  I know estimates will vary widely with cost of lot development as far as road, city sewer, city water, gas, and electric hook ups.  But we are trying to narrow in on some basic back of the envelope math. 

Hi Everyone,

Looking to get more involved in my community here and I know this is the best place to start.  I look forward to learning from everyone!

I will be turning 30 soon and this summer I hope to have a duplex.  House hack, and then roll out of it into another unit as quickly as possible.

I'm not completely new to real estate, I work for CoStar, Loopnet (and now apartments.com) so I am familiar with much of the terminology.

My first deal I am also looking to rehab the duplex that I would be moving into, so I know it's going to take one more layer of analysis and a little more risk/reward, but I am confident with all the experience on here I will do great.  I have read through many of the starter forums and some duplex reads.  

I think one thing I will have to look at is financing with a HomeStyle loan, I am not sure if I want to do FHA because I hope to be on to the next project in less than a year.