All Forum Posts by: Ryan Johnston

Could be a good idea if it works. Only thing, it's going to be really difficult to make it work. to qualify what I'm about to write: I have quite a bit of background in construction and prefabrication.

I work in a large GC office in Chicago that builds high-rises and major projects nationally. Our steel comes from the US because its cheaper. Yes, Chinese steel is cheaper upfront but then you pay an import tax, then you have to hire engineers and lawyers to make sure that the Chinese product fits code. Then on top of all that, you have to find a company that will deliver the "light steel" to your construction site and find laborers to put up said light steel. It's not going to be a light as you think, for starters. You will need a crane, a crew of men, and a contractor. Pulling permits are going to be difficult because your city has likely never seen a "prefab light steel" structure before. When you hand them the prefab instructions in Chinese they're going to tell you to go away. The sad thing is, I'm not even being negative here.

Now I do have an alternative option. Offshore light prefab steel can hardly stand up to SIP (structurally insulated panels) Panel construction. If you have a good architect/engineer you can design modular homes with SIP Panel and if you work with the same contractor over and over again you can build an entire sub-division in a post-WWII fashion. Get a mobile crane, throw up SIP Panels in a week - boom you gotta exterior and interior framed building. Slap on some siding, some drywall and you're done. This is being done all of the US and Canada right now. In fact, some place in Canada just completed the first ever 14-story SIP Panel construction building. You could even get tax-credit for this since it's considered sustainable!

Prefabrication is going to be the construction of the future because the faltering labor class. If your walls can be assemble by a machine offsite, it is going to require less work on-site. This in total means using more technology and less laborers. Really interesting subject in my opinion. 

Hey BP Community,

I've been analyzing deals to flip for over a year now. I've heard multiple people say that whenever a deal comes on the market you should analyze it to get familiar with the process. I only get this far into it when I'm about to put an offer on the house. My concerns with these numbers are that the total Closing/Lending Costs are way to high. To give you some background on the house:

• 3/1 listed for $62,500 with comps around $125k-$135k
• Major reno items include: new HVAC/new kitchen/new bath/new floors/possibly new windows. Lots of DIY because its my first deal.
• It's a HUDHome that will go quick if I don't act today. My realtor actually advised me that if I want it I need to offer a little bit higher than asking.

I've been analyzing deals for some time now and I've only come across a couple of deals that actually work with these high closing costs. The closing costs are 12% of the final sales cost! As a note, the Closing/Lending Cost are for the buy and the sell. I'm not seeing a way to get a deal going and I'm becoming discouraged.

Could someone please tell me if these numbers accurate assuming my ARV and Estimated Cost of Repair are correct? I'd be happy to take any recommendations as well!

Thanks BP!

Greetings friends at BP!

I'm looking to make an offer this weekend on an upcoming property but with a twist. I need to mix it up and stand out because the market it pretty tight here. I want to attach a video to my offer letter but I'm not really sure how to do it. Has anybody done this before and if so how and what did your response look like? Does the offer differ if you're making an offer on an REO or HudHome?

As always, I look forward to your responses!

Ryan

Buyers always like that HGTV sliding barn door look. Maybe you could try that if it fits the look of the house. Another option, but it seems to be more of a cost, is to put sliding frosted glass doors. They look awesome and they make the space brighter too.

Thank you everyone for the helpful tips. I'll be checking out the property soon and putting my bid up whenever it opens to investors! 

Thanks again!

Hey BP,

Little new to the HUDHomes process but I've heard some success stories when dealing with them. I'm looking at a house that is listed on the MLS but the listing gave me information to go to the HUDHomestore. I went there and found that the house is in the "Exclusive" stage which basically means that it's only available to Owner Occupied, Government Agencies and Nonprofits. The bid expires in a few days and I was wondering what happens to the house if nobody bids on the house at this stage. I'm looking to flip this house and my market is kind of tight in terms of inventory. I need to put an offer in as soon as possible and I was looking to learn more about the HUDHome process.

Thank you in advance!!

Hey Joel, great to hear of some success in the area! I'm in the Northwest Indiana market and things are tight around here. Houses are getting some fierce competition and a lot of people are paying all cash (and a little too much imo). I had a question for you. When starting off you said you got a $25k loan from your parents for 8% interest. Did you get them to agree to this because you had a corporate job and you had a deal lined up? Was that deal a multifamily too? Also, did you have any other loans (ie student loans, primary residence mortgage, etc) when you took on the $25k? 

I'm at the beginning of my investment career, fresh out of college and pretty heavy in debt at 7% interest. I'm really just trying to figure out how to structure my deals with little money and little room for error. Ideally I'm looking to get into flipping so I can build capital first but like I said the deals are few and far between in our area. 

@Paul Allen Thanks for responding! I'm actually surprised I haven't listened to this podcast yet. I feel like I've listened to them all by this point. Thanks for the heads up. Do you have any other sources of reading/videos/podcast recommendations? And thanks for the good wishes!

Hey BP,

Exciting things are happening in Q4 this year. I'm getting into my first house flip and I plan to sell it by March-April of next year. I have a few properties lined up for me and I'm going to go do my walkthroughs this weekend. The next steps are putting in an offer and organizing financing. I have some of it figured out, but I definitely don't have everything nailed down. For anybody who has flipped a house or organized a partnership, I have a few questions.

1.) Before forming a partnership, and possibly before obtaining financing, should I form an LLC/S-corp? What are the benefits of forming an LLC/S-corp? My partner and I are not going to be in business together for this first deal. Do we both need to form separate LLC's and then when we sign the house, we put both of our LLC's down?

2.) As far as taxes go: I know individuals who flip houses get taxed out the a**. There's capital gain tax, SS tax, Medicare tax (and possibly more I don't know about. Please list if you can think of any). This all totals around 40%-60% of the profit (I think). If I set up my LLC and then tax it as an S-Corp I think that this will reduce the tax, but to what percent? I'm trying to see if it's worth it to set up the LLC

3.) I will be getting in touch with a tax professional this week and I'm coming up with a list of questions/topics to talk to them about. I was referred to them by a friend and I want to make sure that they're knowledgeable about real estate and business. Are there any questions/topics that I should ask them to clarify for me (besides the ones I already asked)? How do you know if a tax professional is good?

Well I know that was a lot of questions. As you can see, when it comes to the tax side of things, I am pretty uneducated. On the business, management, and construction side I would give myself an A or a B. When it comes to tax strategies I am about a D or an F haha!

Hey Darren! Welcome to BP! I'm originally from Hobart but just recently moved to Chicago. Now I'm looking to flip in NWI and I'm pouring over property every single day. If you're looking to flip, the deals are few and far between, unfortunately. They're not impossible but they aren't easy to find. You'll have to be well connected and have many places to get your properties from. Hammond is a pretty cheap place to get some rentals and possibly some flips. Laporte area is a good place to get some flips. That's not an "end-all-be-all" statement, but more as a starting point. You're going to have to get good at running some numbers, talking to realtors and talking to contractors (if you're not familiar with construction). Most importantly, continue the REI education! Welcome to BP. It's a great community here