All Forum Posts by: Matt H

Are you saying that you have $200k in equity in your home? You know if you unlock those funds you could buy a 2m dollar apartment building don't you? An apartment of that size will make about $35k gross per month. And after everything you'd be left with about $10,000 net spendable cash each month. Plus if it goes up by 5% per year you're making another $8500 per month in appreciation. Plus your mortgage paydown will start at about $3000 per month going up from there. So when you add those numbers up you're actually making about $21,500 per month. That's what you're $200k invested right can actually do for you, as you only need 10% down to start making pretty solid offers on apartments. The deal would look something like this:

Purchase Price: $2m
1st mortgage: $1.5m (75%)
2nd mortgage (vendor take back at 10% interest only payments for five years) $300k
Your downpayment: $200k

There's lots of apartment owners who'd sell on those terms.

I have a question... What do you do after you got enough property?

I'm just curious as to what your biggest problem(s) is as someone who's just starting out in REI?

My friend did a deal that looked similar to this.... I don't know the exact numbers but here's what it looked like:

10 unit apartment building, purchase price: $500,000

First mortgage 75%: $375,000
Second 35%: (Vendor take back at 10% interest only for 5 years): $175,000
Downpayment: $0

Cash back at the time of closing: $50,000, after closing cost he got back slightly less, but you get the picture.

You can actually buy property like this and get cash back at the time of closing.

Yes by all means put tile instead of Lino. All Im saying is don't start ripping down walls. I think we all watched enough episodes of "flip this house" to see what kinds of worms that can open up.

Here's what I'd do:

- Find a house in a "nice" neighborhood which is undervalued.
- Buy it.
- Relist with a realtor back for sale the very same day I take possession, at the higher price. Try to make at least $50k net after everything.
-Be ready to start renovating the very moment you get the keys, and have everything pre-booked, hired, bought and ready to go which you'd start preparing after you remove conditions during the purchase.
- Then do all this and try to have it done in 1 week.
-I'd take off all the baseboard and paint them perhaps white.
-I'd remove the carpet. Keeping the underpad if it was still decent. (you don't necessarily have to replace it on a flip).
-I'd paint the walls, some neutral color like a darker beige that seems to be so popular these days.
-I'd paint the ceiling white.
-I'd carefully paint the door frames white.
-Let it all dry and then replace the carpet and tile or lino
-Replace all the switches, plugs and vents to matching white.
-The put back all the baseboards.
-Go to the scratch n dent appliance store, and find some new discounted stainless steel appliances.
-Also at the beginning of the game you'd have to assess the kitchen. If the coubards are absolutely dreadful (and I mean they must be literially all scratched up and wrecked), then you might have get the front of the coubards redone. "not new coubards". Just new doors and or resurfacing the fronts. It's the cheaper and easier route. It only makes the front of the coubards look new.
-Then in the end you hire a cleaning crew to clean the whole house. Or do it yourself if you think you still have the energy. Anything stainless has to shine. And the house has to smell clean, like cleaning products were just recently used.

At that point you'd have covered like 95% of a house. When buyers come in they'd get this impression that "everything is new". And when they see it's got new appliances etc... people will be impressed. But they don't have to know you only spent a week doing all of that.

Hire it all out if you have to. Because your time is the most valuable commodity in the flip. You're job should be just to coordinate everything. And trust me when I say "hire it out". Because say you decide to do it yourself thinking your saving some money. Say in doing some work you hurt yourself. Like say you get electrocuted replacing a plug face, or fall off a ladder and break something. Then how are you going to continue to get the rest of the stuff done? You'll have enough to do in just coordinating each crew. And also in time as you do more and more projects and bigger and bigger projects you simply will not be able to manage doing the work on your own.

Also always relist the very same day you take possession. Super important. People might come as the work is being done. Who cares!!!! They might be more than happy to deal with you knowing that they're buying a house that's going through renos rather than buying some old dump that has nothing happening on it. So it's perfectly okay for a seller to come along as your doing the renos. And if they have any issues with it, just tell them that when its' all done they could come back, but tell them that by that time it might be sold already so they'd better make an offer now.

Anyway flipping was fun. I did so many of them over the last 5 years. But now I'm done with that. It's a lot of work, but you can make good money. My last flip I made $140k net in 3 months, and I didn't do anything to the house other than buy appliances for it, and spend $5k buying some materials for the new owner to use in completing the basement. Anyway good luck.

Buying something that's built is safer. I wouldn't ever buy pre construction. Because you're buying a promise. To that promise I say "bullsh@@".

See, you learn something new everyday!!! Thanks Man!

She should now sue the homeinspector. They will then tap their insurance to cover the damages.

That's one good thing about getting a home inspector in that if the home inspector screws up, they can be sued for damages.

So tell her to go after the home inspector right away. They'll pay for the damages out of their insurance. This happens all the time.

severett3594.....Yes there is money to be made, especially in a market like your saying with lots of property being built. However, you absolutely must do your research on a builder. Find out "everything" about them before you sign anything. Because it can be very risky too. Companies go bankrupt all the time, and if you hand over your money, and they they go bankrupt and have "no money" then what exactly is your recourse?

So be sure you're doing business with a very reputable builder who's done lots of projects.

Another issue is the financing. Some require you to just put down a small amount which holds your unit until the property is built. At which time you have to get a mortgage. Some builders have their own inhouse financing which makes buying usually a lot more easy than getting your own mortgage. Be sure to compare that to other lenders and see if you're allowed to use other lenders. Some builders use what's known as a "draw mortgage" where they are allowed to draw more funds from the bank depending on what stage their at in the process. So you slowly start financing more and more of the mortgage until it's all been lent to the builder and you're now paying your full mortgage payment. Those aren't as good but it all depends on the project. Also watch out for those escalation clauses in the contract which either allow the builder to reevalute the price at the date in which you the project is done. Those are the worst. And do not under any circumstances sign any contract without having your own lawyer look it over. This is huge! Because they could have all kinds of clauses in the contract with screw you if they go bankrupt or if they prices in the area increase so does their price etc... But ya there is money to be made.

My friend put down 6k on a condo which was sold to him for $111k. He just took possession this spring, which is only a few years later. Now that condo is worth $400k. So he made about 45 times his money. He's sitting on like $300k equity. And the guys like 25. Like winning the lotto.

Greg,

You have a lot of ambition as I can see. But you're off track. First, and trust me on this. Never ever go into business with friends. And when it comes to relatives, especially parents, don't give them advice, and definitely don't ever go into business with them. They're not REI's, and your likelihood of convincing them to somehow become REI's is a waste of your breath. Dont' even bother. All they know how to do is work or whatever they do. You're the one who wants to become a REI, not them. So let them sell it.

Lease optioning is not a good idea anyway. You only lease option if the market is so utterly bad that you can't sell, so you have to resort to finding people who don't have money. I would never ever ever consider lease optioning anything. And who ever told you lease optioning is good, is crazy. Either rent it, and keep the equity, or, sell it, get all the money now and use it for the next investment. But why finance the purchase of someone elses house. That's the worst situation you could be in. Which is why you never want to even go there.

However, that being said here's what I'd suggest. Tell them that you want to become a REI, and that you want to start by flipping a house. So ask them that after they sell off the house, if they can give you a small loan and help you to buy a house which you can flip. (now this would be a 1 time thing, and if you have any other way then use that first), but at least this might be a way for you to get a downpayment to buy a house. Then once you flip it, you'll pay them back and you'll use the rest to do your own flips, never going into business with them again, because it is risky to involve family. But it sounds like in this case they're about to come into a great deal of money, and you might only need like $10k of that money to get your first flip off the ground.

But my friend, please do not advise them to lease option. Who on earth got this lease optioning stuff into your mind? Lease optioning is a form of financing someone else's purchase. That's crazy. It's as bad or worse than carrying a VTB. You only go there if there's absolutely no other way. What you should do is get a month to month renter in there to cover the mortgage. Meanwhile continue trying to sell it using the MLS only so that thousands of realtors will have access to it. I would never ever lease option anything. Also don't give any friends or family advice on financial matters. Trust me on this....if you want to lose friends, lose family members, and or damage those relationships, then by all means give them advice on financial matters and go into business with them. Because once something goes wrong, and it always will, and their's a disagreement, then this priceless relationship becomes tarnished and damaged. Never ever go there. You can put an ad in the paper or do some networking at a REI's club to find partners or investors, which if the business plans fail and they get hurt, and never want to talk to you again, is no big deal. But if you're own parents and or friends don't want to have anything to do with you, well that's got to be the worst. And people make those kinds of mistakes all the time in life. So learn from others. Just watch those Judge Joe Brown episodes where two relatives never want to talk to each other and are now suing each other over a small loan. Never do business with friends or family. Why risk a priceless relationship over a few hundred or thousand dollars? That's insanity. Also don't even give friends or family financial or business advice. Because if they take your advice and for some odd reason it doesn't work for them and they end up losing their shirt, then they'll blame you for it, at least partially. Friends and family should be there for fun times, good laughs, holidays, get togethers. And when it comes time to do business there's plenty of very knowledgable people in the industry, or else people with deep pockets that you can find out there who you can start building business relationships with. But keep them separate. Anyway enough said.