All Forum Posts by: Sam Hickey

Build a crew, or stick with subs. Long question warning...

Started with one sub, he like us and we like him. But he can’t keep up ( I have 5 houses lined up).

So I hired a handy man on straight time

Both of these guys are worth the money I’m paying them and I’m probably getting a good deal. However, neither of them want to go w2. But neither of them have work comp either. I have been getting quotes for work comp and insurance and I am starting to wonder if having employees And building a crewi s better or worse than just hiring a licensed and bonded subs. I realize it’s been done both ways, but my question is what are the pros and cons of both directions. And is it reasonable to have a hybrid situation.? I just hired a project manager who will be a salary position, so Insurance and payroll will still be a part of my life.

Insights appreciated.

@Sam Barrow That’s true. Rules change for multi family.

Hello sir,

couple thoughts for you...

1. I am a Mortgage Loan officer in Missouri,   To second Jay's comment,  Investment Property loan would require 20% down ( sometimes 15%).  Primary Occupancy does have 3%, 3.5%, 5% options as well as MHDC Grant Program Loan in Missouri allowing for 0% out of pocket essentially.  There is also USDA Loans for primary occupancy that are 0 down in certain eligible areas.   

2. Also,  The fact that the sale price double from last year, does not necessarily mean that the taxes will double.  Although assuming some increase is a good idea,  I would be shocked if the taxes increased from 1020 to 2040.  A better way to find taxes would be to pull taxes from other comps that reflect post rehabbed value.  probably 1100-1300 or something like that.

3. Missouri and Zillow do not get along and Zillow is notoriously wrong on est. values as well as other info. I tend to pull info from Realtor.com for more accurate info.. Basically Zillow doesn't pull real data from Missouri MLS to support its Zestimates. Not true for all states but some politics and such got in the way.

Im new to investing but can speak to the above issue.. hope it helps a little.

Warning long post but i'm so dang excited and I just wanted to share my plan so far:  

First,  if you had asked me a year or so ago what I wanted to be when I grow up, ( im 39 by the way) I would have told you........ Retired!  I like my job fine, but don't necessarily love it etc..  and the only thing I "really" look forward to is the day i don't have to do what someone else wants me to do in order to get paid.  Don't get me wrong, Im paid well and i love people so i'm happy in general to help people with home loans but now......  I know what I want to be/do for the rest of my life.   I want to be a Real Estate Investor

I live in SW Missouri and in my market there is a housing shortage for homes under 100k. More specifically, homes that will be eligible for USDA and FHA type home loans. As a Mortgage Banker, I have a pretty good feel for the market pulse here and i have begun flipping houses for this need exactly. I am buying homes that wouldn't pass appraisal standard for the low credit/low down loans and cleaning them up and rehabbing for the first time home buyer with marginal credit etc..

As a Loan officer, i have relationships with various other banks and have identified my chosen institution that will allow me to put down 15% of the original purchase price and no more, so long as the "Arv appraisal has a loan to value of 85% still. My business partner and I put together an LLC and bought our first house NOV 17 and the second in April of 18

examples:

1st house bought for 40k put in 25k and sold for 85 less closing and commission and holding costs = 13k net

2nd house bought for 44k put in 20k and sold for 86k less closing and commission and holding = 14k net ( under contract pending close)

Although these are not home runs, they are my first two houses and the education is priceless and the opportunity to put some systems in place has also been valuable.  I am now under contract to buy 4 other homes ranging from 35k to 70k purchase price.  I am buying each house with the hopes of 20k net profit.  in order to get those returns, i will need to get more efficient with rehab costs and such as well.  

Partnership;  My business partner owns the largest landscaping outfit in my area and because of that he has a number of connections that are beneficial to our cause as well as heavy equipment and wholesale cost on landscaping if/when needed.  My Loan team is the largest in our area and because of that I am familiar with most the heavy hitter agents and of course quite comfortable with the finance side of things.  We have no intentions of withdrawing any funds from our llc bank account until after tax time so that we can get a good feel for the tax implication in relation to our individual income from our primary careers and, neither of us currently need the money to go back to our respective pockets so we intend to roll it all back in to more houses/flips etc..  Eventually, we are both interested in Flipping, Rentals, Multi Family, Apartments, and more.  

I feel reasonably equipped for what we are trying to accomplish ( financial freedom in 5 years) but wide open to suggestions, guidance, mentoring, and changing the plan as needed;when needed.   any and all feedback is appreciated.

My main concerns are:  

1. Is my profit margin goals to low/high

2. should i buy and hold every other house or two to start building cash flow now or just keep flipping untill i can roll on a 'big' complex or something

3.  any reason not to start a second or third partnership with a different investor. ( different area, different price ranges, different skills to bring to the table etc.) 

4.  taxes in general.   My wife and I are very blessed with our current income but with that we have great big taxes every year.  will i actually be able to enjoy any of the money i hope to make now, or should i just accrue until I am ready to quit my job completely someday?  

5.  Does anyone out there acquire rentals with a partner?  I am inclined to buy the rental property by myself since it is a much more long term asset.  As of right now, if my partner and i decide to part ways, we simply have to wait untill the next flip sells and then we are done.

Thank you all..  I hope you will be seeing lots more of me in the future.

Perry,

I talked to my insurance agent.  I was impressed to find that the insurance policies she had set me up with were including the things you mentioned.  Transients, and accidental damage etc..    Her and her husband are also real estate investors and mentioned that the transient house fire happens more often than one would think.. 

Thanks for the tips.

Hello,

My insurance agent offers me the option to insure a flip house for the estimated investment including repair costs or...  the estimated value after repairs.

purchase house for 30k rehab for 10k

post rehab value is 65k

its a small flip but should be short and sweet..  should i insure for 65k at 900 annual or 40 for 600 annual?

@J Scott @J Scott Thank you for your response ( I just got your book and plan to read this week). I’ve run the numbers and waiting for better price has potential to return 26k net....on initial investment of 10 DOWN PAYMENT However, I’m looking at 2 more houses with good IRR But can’t jump until I have some more cash flow ( or shouldn’t anyways). So 15k return now and I lose out on 11k but waiting for the right buyer could cost me these two other opportunities. My partner wants to wait for most money ( hitting double or triples). I want to buy more houses and at the moment need the cash out of the current project sooner so we can hit singles and doubles on three houses instead of waiting for this one to hit a triple. Im not In a jam or anythIng just wonderIng If there Is a common Ideaology for prIcIng lower to sell faster as a rule ETC Thanks agaIn

I am new to flipping but shooting out the gate. I have successfully sold my first, second is listed, and under contract to buy 4 more over the next three months. I do have a partner and we are bankrolling the down payments ourselves at 20% equity with a local bank for additional financing. My question is. My second house is listed for 99k. I believe it will sell at that price or close but maybe not as fast. I believe I could sell it really fast at 85k ish... I have 67 in it after commission and all. Is it better to sell fast ( hit singles) and re-invest in the next flip or wait to make the most per house. I can see the logic going both ways but would like to hear from some experienced flippers. Thx.