All Forum Posts by: Ray Johnson

@Taylor Pelzel Why do you consider it a Nightmare and waste of time? 

@Troy Hebert You don't need to cut a broker in for $100k, hire a consultant or someone on an consulting contract agreement for what you feel the value is, If you think a consultant on the deal is worth $20k, 30k, or 40k, then that's the rate you're offering, If everyone says the rate you're offering is too low, then you'll know, maybe that 100k quote had some value to it. There are many people out there with the knowledge and experience interested in making more money and will take on a consulting project. Just make sure whoever you pic knows what they are doing and not just the cheapest quote.

In a deal of this size there is usually some soft cost built into the deal to cover consultant cost like this. 

@Kate J. You don't have to find an insurance company in a particular state, most insurance companies have licenses to insure in many other states. I recently just did an insurance consolidation with a few properties in various states.

I have USAA as my main insurance company, I cancelled a Travelers policy, and a State Farm policy both out of state and in different states and moved them into my USAA insurance portfolio.

Online pricing can give you a ballpark but it's best to get an agent on the phone so you can ask questions and ask for different scenarios that are not a part of the typical online quote system. The important thing is to compare quoted policies and make an informed decision.

@Liz Boer If you're going to be living in LA during the week and going home on Fridays, AirBNB your LA property if it's close to any of the tourist destinations, depending on the property you can do Friday, Saturday, and Sundays at $200 per day and get you to over $31K to chip into that $50k target.

You leave for work Friday morning, go to SD after work, and return to your LA property after work on Monday.

@Michael Zuber I don't see where you may have mentioned earn as high of an income as you can, The formula isn't to just spend as little disposable income as you can, As a Generation X kid, we were taught earn as much as you can and spend as little as possible. My best friend a former NYC Wall Street banker retired at 42 last year, another Gen X-er who lived by this philosophy, Getting to "financial freedom" happens a lot faster when you make significantly more money.

It also depends on what part of the US you live in, Some parts of the US, getting a Six-figure job is the standard, and other parts of the US, there are very few if any jobs where 100K and up is the norm. I just hired a 25 years old at $85k a year, as a Millennial she's now shopping for a home in her 20's, this isn't a bad idea or going in the wrong direction in my opinion, she understands the value of a high income in the equation in addition to low expenses. It isn't the house and kids that slowed down the Generation X-ers, it's the spending habits found in every generation, even the millennials, I see Millennials making terrible financial decisions daily, and the generation after them will do the same.        

@Michael Ealy Congratulations! Now that you've wrapped up that 7 year property cycle, what's next, Will you be moving to larger more profitable properties in or outside of Ohio?

@Ysabel Yow As someone who grew up poor and once lived in C/D housing, when I was younger I would wonder why landlords wouldn't offer better properties, I considered them Slumlords at the time not understanding how their business goals were prioritized. I personally would never own this class of property because I would then be that landlord providing low-grade properties under the assumption that anyone who lives in this property expects to live this way, or at least that's what most of these post say. I've looked at the cash flow many of these C/D properties make and have decided I'd be willing to accept a lower net of $200-$300 a door on Class A and B properties and not participate in this arena where it's common to offer low-grade housing. At the end of the day, I think it takes the same mindset that drug dealers take, If I don't do it someone else will and make that money so why not.

@Flue Hasipi It goes way beyond just the time of year. That 50% less than already reduced price was most likely in a small town and not a major metropolitan area. You also have to factor in the number of properties an Asset Manager has on the books, the neighborhood class and how difficult it is to move properties in the area, and a long list of other variables that factor into how much of a discount as Asset Manager is willing to give. 

Because I only buy in major metropolitan areas and class B, or C+ neighborhoods, In my experience buying HUD properties, the best deal I've had accepted was 12% below asking. In the areas I invest in HUD properties don't stay on the market past the initial investor/public purchasing period, most of the time they are sold during the Owner Occupant buying period.

@Carlos Garcia I usually get multiple pictures and an explanation of what needs to be done, I then give my approval via email and/or text (even if I give verbal approval over the phone), I like a record of exactly what I'm approving. 

If it's a minor repair like broken door handles, window blinds, etc... I get the quote then say yes or no to moving forward with the repair. If it's a larger scale repair, drywall, piping, etc... I get photos etc... I also get three quotes for the work ( I still look into to the vendors and don't just accept the lowest quote) once done, I say yes or no to the work.

I get multiple photo angles at various stages of the work being completed and final photos of the work once completed, If satisfied from the pics and the PM inspection of the work, I authorize payment for the work.

I'm probably a little more hands on with the PM than some others that I know, they leave it all on the PM and just pay the bills once the PM shows proof the work is done.   

@Shmuel Waldman In my experience partnership splits are determined by the size of the deal, a 6 unit deal is going to have a different profit split structure than a 60 unit deal which will be different from a 600 unit deal, What size deal is this going to be?

If it's a small deal, A fair way to structure the profit splits will depend on a few other things, If all four (4) partners are bringing in the same amount of equity (6.25%), at that point the profit split is simple (25% each), It's what's happening with the other responsibilities of the deal that would determine additional profit splits for any given partner.

1) You mentioned that you're getting the loan yourself, Are you being compensated for assuming this additional risk on the deal?

2) Who found the deal? Is that partner being compensated for doing the research and analysis for discovering this deal and bringing it to the partnership?

3) Who's managing the deal and the partnership? Is that partner being compensated for managing the deal?

4) What's the exit strategy for this deal? Holding for a short-term 5 years or less then sell and split profit, refi and cash out partners at some point and the LLC maintains the property, etc... these different scenarios will yield very different profit splits.

A good partnership agreement will outline these responsibilities in addition to many more, these responsibilities can have value assigned to them, if this is your first partnership deal, keep it simple so these partners will brag about the great deal to other investors increasing your pool of investors.