All Forum Posts by: Rob Hakes

@Chinmay J.and @Caleb Heimsoth.  I guess there is a difference in what type of 'turnkey' provider we are dealing with.  The ones i have dealt with have more conservative returns (about an 8 cap) and all of their properties are pretty cookie cutter as far as what the results will be overtime.  They keep the PM in house and there is not much variable from their process from one deal to the other.  They know what their appraisal will come in within a few thousand dollars.  This may be because their previous property are driving the market and sales prices

There are enough investors that are looking to make just over what the stock market is offering in a tax advantaged investment.  So while you won't have a grand slam property, you will get plenty of base hits.  

Not only do they not require any EMD, they have told me that i can back out even after the purchase agreement is signed and rehab is underway. They just have enough investors waiting in line to jump into the process.

There are definite limitations with these type of turnkey providers as well.  You are not going to get any properties that have enough equity in them up front that you will be able to back out of  for at least a few years, because you would need to pay down your loan enough to cover sales costs or hope you will get decent appreciation.  You are paying full market value.

If you ARE having to put in money up front, that you may loose, AND taking the risk of buying a property that has questionable appraisals that you will be stuck with, then i sure hope there is enough upside and some good enough returns to make up for the risk.

As for me, i am more comfortable having dozens (hopefully someday) of base hits with the cookie cutter provider than try to take the risk finding the grand slam with a property that i have to put an extra $25k into because the bank doesn't think its worth it.

Then again, if you are comfortable with the downside and you are confident that it will give you the returns you seek, then go for it.

Yikes!  Huge red flag. There are enough turnkey providers that don't require any earnest money and keep the purchase price at or below appraisal. If you proceed you have more guts than me. There is a reason the bank gets an appraisal before lending.  Best of luck

Here are some pics

I recently purchased a property from Spartan Invest and wanted to post the details and make it an ongoing case study solely for the benefit of those looking into the company.  I really appreciated others doing this as I was vetting the company so i wanted to return the favor.  Though I am hesitant, will give some of the nitty gritty actually numbers of loan costs etc, just to show the true cost of what to actually expect

After a while if you don't see updates on the property's performance give me a bump and i will update with some details on actual returns

Property - 3/2 1250 sf in Birmingham.  $97,500

Projected Rent $925

Put under contract in July 2017 - This was an extensive rehab and took a while.  I don't think rehabs are usually this extensive

Rehab included new roof, windows, all new HVAC.  Interior was basically stripped to the studs and all new interior with the granite countertops and tile shower.  It even appeared that they had to run some new electrical and plumbing.  Basically as close to a brand new house without it being brand new. (i will post pictures soon)

We didn't close until Dec 1 2017 at which time there was already tenants in the house with a 2 year lease at $950/mo ($25 more than projected)!!!

The tenanting fee is one months rent, but it didn't sting to bad because the first mortgage payment was not due until Jan 1 2018.

Now the nitty gritty numbers

Down Payment $19,500 Loan amount $78,000

Loan Costs, Origination Fees Etc $2692.00

Govt Fees $204.50

Initial Insurance premium $757

Prepaid Escrow $425 (not a deductible expense, but still out of pocket)

Elective inspections: Home, Termite etc $592.00

TOTAL OUT OF POCKET: $24,170.50

PLUS legal, accounting, and title transfer fees: ++++ ongoing and pending

For the first year or so i plan on making a decent return as vacancy and maintenance will be low

MONTHLY INCOME 

$950

EXPENSES

$578 PITI (taxes are 945/yr, insurance is 757/yr)

$85 Property Management

This will leave $287 for me as cash flow.  An undetermined amount will be set aside for future vacancy and maintenance.

Overall, Spartan has been good to work with and have delivered as advertised.  There were always times it took a few days to return emails, but nothing totally unreasonable.  There was one week that emails had zero response, but found out later that the hurricane in Florida took out their server for a bit.

I got my second property under contract with them this month so hopefully things continue to roll!!

I do realized that i am a bit spoiled on my first property to have things go pretty well with such a good rehab, and having the place already rented out for more than projected.

If you want more specific details feel free to PM me.

PICTURES FORTHCOMING

@Ben C.

Not an attorney or CPA, but did go through this decision making process recently. Depending on your state, multi member LLC's will also offer some advantages to give you charging order protection, meaning if you get sued personally (car accident, etc) then with a multi member llc they will have a tougher time getting to your assets held by the LLC. In a single member llc it's may be free game. Ultimately multi member will offer the best protection, but will cost more for the extra tax return.

@Casey J Burkhead and @John Mocker.  Thanks for the input, I will give them a call.  It is State Farm, hopefully they can do it for me

@Brendon Woirhaye Thanks for your input

I recently purchased a property in my name and will have title transferred into a trust with my LLC as the beneficiary. Do i need to let my insurance agent know about the transfer or is the insurance on the property rather than property owner? Do you think they would be able to list the trust as additional insured? Any thoughts or experience would be helpful. THanks

I am debating the pros and cons of getting a business license.  I have heard several options going each way.  Here are the basics of my situation:

I am the trustee of a trust that owns an out of state rental turnkey property in Alabama.  It is fully managed by a local property management company.  Would i need to get a business license in Alabama for this property?  How would I register this if owned by a trust?

I have heard that because I am not doing any business operations in the state then I don't need to register with the state.  

Does anybody have any insights or suggestions for my situation.

I can offer more details if this does not make sense.

@Kristie Hurst

I was in the same situation about 18 months ago.  I determined to take the safe route and start adding $800 per month into my mortgage to get it paid in 10 years so i could then become a real estate investor.  I made this mistake for about 6 months.  I think that it is very tempting to get the mortgage paid off because when you look at how much you will be paying in interest over the life of the loan it is sickening.

What is more sickening is the difference of how much more money you could potentially have at the end of the 10, 15, or 30 years if you took your extra money and put it into solid investments. For me it was in the millions.

My thought process now, rather than getting my mortgage paid off to feel the burden of debt lifted, is - I would love to have the money to be able to pay off my mortgage today, but chose not too because I have my own 'money machine' that will continue to crank out cash.

Once you get the mortgage paid off you are enjoying money that you don't have to pay.  I would rather enjoy money that I actually have and can put to work.

Overall it was a simple math decision for me.  I calculated out all the scenarios and it was an obvious choice.  

Once I stopped putting in my extra mortgage payments,  I actually tapped some equity and invested $70k dollars into 4 different deals.  My mortgage payment went up by $199/month (although it did start the 30 yrs over again).  My investments after expenses will net $1200/ month

For calculation purposes, even if i never contributed additional $$ to my current cashflows at a conservative 10% annual, compounded annually, This extra $200 per month will have made just under $2 million in 30 years (Taxes not included)

The key is, which i am still trying to figure out, is find a system and investments that work.  I am still a newbie but have seen proof of concept.  If you have the right system in place it is only a simple math equation.

Good Luck