All Forum Posts by: Sam Elder

Elaborating on what Jennifer said - It definitely messes up financing - especially for FHA and VA buyers that incur funding fees. If they are paying percentages of percentages, it forces rounding, which can be complicated since they would either be overpaying or underpaying. Things like that never are noticed, but it becomes an issue on new builds when the builder adds on something to the contract price that ends in pennies. So, there's that...

Awesome that you can ask a straightforward question and get so many different opinions. The reality is that some parts of all these suggestions are correct, and ultimately is a decision that is more predicated on YOUR specific situation. Curt had the most relevant advice IMO. The biggest determinant in to LLC or to not LLC is usually how you plan to finance the property/properties. FNMA = no LLC. Local banks can/will provide loans to an LLC. Additionally, there are some loan prodicts (blanket loans for example) that will almost always be to an entity and not to the individual.

Joe is right that good insurance is great protection, but an LLC can make sense if financing cooperates. Also, with there being multiple individuals involved (yikes), the LLC can help with that. You can restructure the LLC without having to refinance the property, for example, if someone wants out.

Sam

Here's a good starting place: http://www.meetup.com/RoddyRoundUpDFW/

This is once a month in Addison and is attended mostly by new investors.

Dennis Henson is very good, too:

http://www.meetup.com/realestate-445/members/36344...

Sam

Make your offer as attractive as possible.  Remove any contingencies and close the fastest.

Cash deals are going to get the most favorable treatment.  Why?  They do not contain financing contingencies, and cash offers do not require appraisals.  They are faster and more likely to close (to not fall out).

If you are using hard money instead of cash, you are going to need to maintain as many of those elements as possible. Our company (HML) closes in as few as five business days. By focusing on this and the fact that it's a non-contingent offer, our borrowers (the buyers) have a good success rate at getting deals.

That said, the seller's agent may have been instructed to take the highest cash offer that is made.

Depending on the funds available, you might be somewhat limited in what you are able to do as a lender.  Best case scenario, you are lending at 10% - 15% and paying 3% - 5%, right?  Assuming nothing goes wrong (legal fees can eat your entire profit margin), is this the highest and best return on your money.  Most of our high net worth individuals are putting $1M - $5M into our business.  If you are talking about $100k - $300k, you might find better success partnering on deals or doing the deals on your own.

Jospeh is correct and hit on several important points.  Your refinance amount (new loan amount) cannot exceed the original purchase price, even with extensive rehab.  You must source the funds used for purchase.  You must complete this within six months.  Delayed financing is a great tool for investors!

John - There are Realtors who are adept at providing turnkey opportunities.  A few wholesalers and contractors are also very good at this process, too.  The biggest challenge that you will face is that almost everyone has a vested interest in the flip that isn't wholly contingent on the profit.  Realtors make money on the front end and back end regardless if you make a profit or not.  Wholesalers make their money on the front, after which time you might not hear from them again.  Contractors are going to be heavily biased toward their component.

By focusing on the investor, you do have a great strategy.  The challenge there is going to be finding a mentor-type person that has any need/desire/interest in filling that role.

Gerald hit on some great points, and at the end of the day, it comes down to trust.  Do you trust the Realtor?  Do you trust the Wholesaler?  Do you trust the contractor?  Ideally you work with some/all of these individuals on every deal, using them for their strengths.  Have a Wholesaler for inventory, contractor for the work and Realtor for the sale; however, understand that they are ALL getting paid regardless of how you do.  At the end of the day, the learning curve might be your best mentor.