All Forum Posts by: Khaled Helmi

@CarolineS Without looking at the contract (feel free to post if it is appropriate) we wont be able to give you any more than general input.

Just based on my experience, you'd be out whatever installments you've paid BUT not those you havent paid (again read the language carefully), and I couldn't imagine a situation where you'd be FORCED to buy the construction - I highly doubt you'd get any loans with that scenario LOL.  But what i'd do is talk to the builder, as if its early in the process, they may be open to letting you keep your initial $3000 (or a portion of it) especially if you're straight forward.

What I would NOT do is decide on backing out and just going MIA with the builder.  If I was the builder that'd piss me off bigtime and i'd try to go after as much of the 10k deposit as I could.  Communicate and let them know your situation and why you're backing out and try negotiate with them on your initial 3k - i'd probably start with asking their permission to back out and simply splitting the 3k ($1500 to them) for their lost time.

Just my 2 cents and i'm not a lawyer so you may want to shell out a few hundred bucks for a consult IF the builder doesnt let you out with a portion of your initial deposit.  

God Bless and keep us updated!

Thanks for the story Trey - and at $400+/mo cash flow on a 90k property thats pretty decent especially considering you're also build equity every month.  Keep us updated!

We're doing a similar project in DC though we're only adding sqft to the top floor by flattening & extending the roof.  Not exactly the same but similar.

To do something like that you're going to probably need to work with an architect and definitely get the approvals from your local county.  For us it was a bit of back and forth between the architect and county, but in the end we got it approved and our doing the work right now.

The biggest problem so far that we've encountered is the time it takes to get the approvals and do the architectural drawings (at least tell him what to do).  If you're going to do a project like this, make sure the profits are worth the additional costs because your timeframe will be MUCH longer (at least in my experience).  For us we're looking to add 100-150k to the value by doing the work we're doing and i'm not sure it'll be worth it in the end.

Hope that helps!

@SethThompson - its not just a return question its a question of risk.

Just doing the backwards math, it means a necessary $2.5mm investment to get the $380k profit & 16.5% return.

When it comes to corporate investments, 15% is kind of the unofficial minimum to higher risk development projects (i'm talking the mining industry not real estate) with 20% really being a good goal for a higher risk project.

It all comes down to what is being done (general project market), your experience in similar project, general past performance, and the quality of your plan on this project.  

If you check all those boxes and this is a project similar to what you've done before, 16.5% return wouldnt be bad in my view.  If its something out of your wheelhouse, then i'd probably look for 20+% UNLESS you had an extraordinary plan to succeed in the project.

Whether this guy is right or wrong comes down to the project risk and your experience

@Jose Duque - between us I'd ask yourself: How good are you parents financially?  Are they savvy investors?  Are they financially where you want to be at their age or not?

If the answer is "no" then you should love, respect, honor them for all the stuff they've done for you BUT understand that if they haven't succeeded in their own personal financial world then their advice needs to be taken with a grain of salt.  If their criticism isn't based on logic, and your mom crying seems to suggest its more emotional, then you just have to understand that its probably not sound investment (or life) advice.

I think your parents will be ok but it may take some time.  But the best thing you can do to make them feel better is make it a success and show them how much your banking doing it!

@Linda Weygant - thanks for correcting me with knowledge!  That's exactly why you leave the important issues to experts!

So Linda, if he assigns the depreciation deduction to his investor and lets say they depreciate $50k of the house over a few years.  Can they sell the property and assign the depreciation recapture to someone else?  Or does the one who took the depreciation have to also "give it back" when the property is sold?  

@PeteEdmondson - depreciation is based on your ownership interests, and to the best of my knowledge, can't be assigned away unless the ownership is assigned away as well.  Also, remember depreciation is "recaptured" on sale, thus if your investors are gaining the advantages of writing off passive income via depreciation, they'll be unpleasantly surprised when they owe the IRS a good chunk of the depreciation they took on property sale.

This is all based on my understanding of the tax code - but you want to verify all of this stuff with your CPA.  If you dont have a CPA, then at the very least consult one as the last thing you want is pissed off investors suing you later on - and they may have a good case here if you didnt specify the risks or you misled them.  Be VERY CAREFUL when dealing with "investors"

I'd boost up the vacancy rate (I prefer to assume 1 month vacancy per year so thats 1/12 of the monthly rent), so that may lower the cash flow to around $130ish.

I know nothing about your area, but I assume its a decent neighborhood so in that case it seems like an OK/borderline project in my view - a single versus a homerun.  Should you do it?  I think that depends on your own personal financial goals, but this makes more sense for someone already possessing cash looking for safe investments.

The only other reason that may make this a buy for you (assuming you're not a cash investors just looking to protect existing wealth) is if you've never done any project before - in which case it'd be a nice learning experience to get the ropes down before you move on to better projects.

Of course this is all very VERY generic advice since I dont know anything about the area or particular townhouse - those things make a big difference as they affect the future value or the work needed to maintain it.

Thanks for sharing! Be very curious to see how this turns out so please keep us updated!

Jesse - no offense but your story sounds fishy because it doesn't really add up.

If you've financed 44 properties in 6 years in your 20's you should know banks wont do 10% down on deals at the amount you already own - if so your connections should know them.  Secondly, if your earning 400k a year through your RE team then why even go to a bank?  Just buy them outright with your cash.

Oh yeah and your BP profile doesn't even have a picture!

Sorry bro not buying this story...