All Forum Posts by: Christopher B.

Full kitchen but we don't include ice maker or garbage disposals. In fact we don't even plumb in for ice makers. No need to increase potential maintenance issues. We rent in B and C areas. If we had a high-end rental we'd adjust to our competition and customer. 

Your stock portfolio has performed very well, congrats!

A little diversification is good for sure. I strongly disagree REI alone will not create wealth for someone though. With the right strategy and time it will. End of the day it's all about picking a strategy the person will consistently stick with over time. That's the biggest key to success, imo.

I don't buy or sell turnkey rentals so have no dog in that fight. However, it is not comparing apples to apples when one only uses rental cash flow vs stock market gains, imo. The beauty of real estate is it has multiple avenues of return for the owner and all of those need to be accounted for when doing a comparative analysis.

The Total Return of rental real estate includes:

1. Cash flow

2. Forced appreciation

3. Market appreciation

4. Loan amortization

5. Forced Appreciation (turnkey providers generally provide some equity upfront is my understanding)

Some discount market appreciation in their return calculations as it's not realized until sold. However, their securities portfolio is calculated the same way. Market appreciation is an integral aspect of wealth building and shouldn't be downplayed, imo. 

The Total Return of the SP500 (VOO) is its market appreciation. It has one avenue of wealth building 

 Assume you buy a $110k property for $100k on a 20yr note with 20% down that nets $120/month in cash flow and 3% market appreciation. The Total Return:

Cash Flow: $120/month 

Loan Amortization: $235/month 

Market Appreciation: $275/month 

Total Return: $630/month or $7560/yr which is a 38% return, not considering the forced appreciation on purchase or tax benefits. The SP500 returned 15.76% last year in comparison.

You're not going to find many rehabbed properties for $50k-75k in Knoxville. For comparison, we've got a 2/1 1003sf rehabbed property that is about to be listed for $120k. That's dirt cheap around here too. 

It is a two family property with ADU. I'm not sure what strings they pulled honestly. My local banker (a friend of mine) couldn't get my loan approved by his investors. However, his investor buyer which is also TN's largest mortgage lender, ended up financing the loan in the end when I went directly to one of their mortgage officers off a referral.

Few years ago I purchased a house with an ADU above a detached garage. Converted the house to a legal duplex so it is a total of 3 units. I had to shop around a little but did get a 30yr conventional mortgage on it.

 He does pay for everything. However, they fund the costs upfront and then get reimbursed when draws are made. So they do have to use their cash/credit to float the project between draws. Currently he does a 50/50 split but is looking at changing this structure more in his favor since he is taking all the financial risk. 

I agree with some of the posts after mine as well. You want the GC to have some skin in the game. How my friend has it setup is the bare minimum,  preferably they're covering the rehab cost or at least putting in $X of cash towards it so they have something to lose. 

I've seen things play out when the GC doesn't have skin in the game. They'll take on other projects in addition to yours and because their money is in those others they will give them more attention. Your project will drag and drag, losing money and precious time. It can work but it's a tough balance. 

Light fixtures, faucets, toilets, etc will be cheaper at HD than the local plumbing or electrical supply houses by about 40-50% from my experience.

I agree the quality is low at HD. I've been using the supply houses for plumbing fixtures  recently out of convenience but question that decision each time I see the bill. 

Online has its pros and cons. We'll order some light fixtures here and there but not plumbing. Too many parts and pieces, if something is missing there we have to run and get something local then do a return, etc. I agree can get it cheaper online, if one is organized and put together all the parts and pieces that are needed and buy multiple could make it work. Handling inventory then though.

Don't waste your time chasing small savings. If you want to save large then buy the bulk of your materials from supply houses. Simply create an account with them. They can piggyback you on larger builder accounts if you create a relationship with them. The supply houses are not always cheaper though. Focus on making it as easy as possible for you to get materials to/from jobsites. That is more important than cheap.

I feel Will Fraser made an important observation. There is a very big difference in being a subcontractor and being the General Contractor. Not saying he does not have the capacity to be a good GC and manage a project but there may be a learning curve. 

I used to see zero positives in partnering with a GC. A friend of mine recently started partnering with GC's and it has allowed him to attract much higher quality contractors to work with vs hiring them out. The reasons are obvious but it has made the rehab process completely stress free for him.