All Forum Posts by: Michael Johnson

7127 Oakland Ave. is the property address.

Hard money is great, but can be stressful.  If you consider I need to keep the money out in a property, working the deals so the closings are tight takes a lot of time and coordination.

But consider this. If I had just $150k to lend, and the basic rate is 2 points in, 12% APR, 2 points out, 6 month term, I'd be making $1500/mo. plus $3k origination and the same on termination. Lets say things are going well and I fund a flip that lasts three months. I make $3k in, $3k out, and $4500 interest. That's $10,500 in 3 months. Then I wait a month because I was lazy and do another deal for the same money (just for easier math), and it's also 3 months. One more time to finish out the year. I will have made $31,500 on the $150k, whereas with the rents on the house, I'm making $10,800 given a $900 cash flow. Granted, the house I can just sit back and let the cash flow in. I don't have to work as hard to keep the deals flowing.

Lets say that same $150k deal didn't flip in 3 months.  We used the full 6, and then get 4 more months, but at 18% per the note agreement.  Now you're getting $2250 per month for those additional months.  That's $9k for the over, $3k in, $3k out, and $9k for the regular 6 month period.  You made $24k instead of the $31,500 had you kept it working on quicker flips.

Now look at it again with a flipper you've been working with a lot so you discount the termination to zero since they're going to pop another flip.  You're out $3k on the back end, but hopefully they're flipping more houses in a year to make up for it.

Being a hard/private money lender can scare the crap out of you, too.  Not every deal flips quickly.  Not every deal you thought was good is as good as you calculated.  You can't always turn the money into a new flip as quickly as you expected.  You might end up with a property you really don't want and end up having to sell it off to a flipper to recover your investment (although you can loan to the new flipper, too).  Understanding the lending laws on real estate can be daunting.  Researching the liens on a property can get crazy.  Lending is probably the most active of the passive types of investment.  I used to think it was called "hard money" because it was based on a hard asset.  It's really hard to do, so there's a double entendre.  =-)

Whether or not it cash flows is up to you.  What do you think you could rent it at?  The current rent is $3100.  The sale price will be around $530k, so with $135k down, you're down to $395k to finance.  If $3100-3300/mo. will cash flow for you, then yes.

My guess is you can get a good rate, around 3.75-4%, so that puts your monthly at about 1850-1900.  Add insurance on the high end for probably $150/mo.  You'll be at about $2k/mo. Renting at $3100 where it currently sits will net you about $900-1100 depending on your overhead like maintenance, property manager, etc.

I've been cash flowing around $900/mo. on it since 2010, but am moving to more hard/private money financing and notes.  I need the cash to do that, so this is a tough decision to get out of this property.  With the cash I'll net from this after paying off my current mortgage, I can make more than the $900, so the decision is easier.  =-)

If you're good with the pricing, send me a contract and we'll close at my title company, skipping realtors altogether.  I'll even do the few minor repairs needed.

The $99 services I've seen are incredibly sparse in what they do. Saying $644 is expensive in an area where the average home is sold for around $300k seems short sighted. Paying $644 instead of $9,000 (3%) seems like a pretty good savings, especially considering you get professional photography, full marketing through 30+ sites, MLS, Supra digital lock box, yard sign, and more.

The issue I've seen with the $99 services is you get the MLS listing, and that's it. You don't get marketing, you buy your own combo box, you're using what amounts to a FSBO yard sign, no photos unless you take them yourself, no marketing...just an ultra-basic service.

Some of the ones I've seen in DC are even worse in that they're $500 for the listing only, as in no better than the $99 service.

Also, in my personal experience, I've been able to get my houses sold quickly.  It's a seller's market in the DC area, so I'd expect things to go quickly.  The average time from listing to closing for Listing Spark is about 60 days.  We're looking at an average of $420 instead of $644.  Is that more palatable for you?  Either way, it's a lot less than the 3%.

Nope...nobody I'd recommend.  Nothing like Listing Spark anyway.

Hi @Tom Parris

I'm sad to hear you've likely had a bad experience with companies like Listing Spark. My personal experience has been stellar, which is why I'm looking for something similar in DC. And even though you didn't ask, they're an actual licensed Realtor and brokerage. Their business model is not to keep you on for longer, but to get you to come back on your next property. Anyone can sell a home in 6 months (usually), but they really bust their asses. I've never had a house on there for more than 46 days. My first one sold in under a week, and was on by law for another 30 days until the closing (now 45 days) for certain loan types. Listing to closing on my first property with them was 36 days. $250 got me everything I needed to sell the house. The buyer's agent got 3%, naturally. It's unfortunate there's so much FUD out there about services like this.

And speaking of service, they're full service, for the most part.  They even provide photography.  Open house is an extra fee, but only like $150 or so.  They're a real brokerage, and they're awesome.

https://www.listingspark.com/more/features

I should have added that I've been in real estate development and investment for over 40 years.  I know what to look for, but I appreciate the concern that I might short-change myself with a discount broker.  I'm not looking for a discount broker, per se.  I'm looking for a valuable service.

This is starting to turn into an ad for them, which isn't what I'm trying to do.  I simply want to let you know they're not what the hype tells you.

Hi DC area investors

I have a house in Falls Church I've been renting out for almost 7 years.  It's time to let it go as I'm concentrating more on hard money lending and apartments.

I live in Austin, TX. We have a broker here that'll list your house for $7/day. It's called Listing Spark. They include photography, yard sign, lock box, MLS listing, and promotion through the usual 30 or so distribution sites, and have up-sales of running an open house and a few others. The whole thing is done for $7/day with a minimum of 30 days. Obviously the other side gets their standard 3%.

I've looked around the DC area, and all I find is flat fee listings for $1000.  Is there nothing like Listing Spark there?  With all the tech in the area, that's surprising.

While Listing Spark isn't there, which similar service do you guys typically use?

Also, I'll be in the area in about a month to do some fix-er-up stuff to the house to prepare for sale.  Does anyone have a great contractor they'd let me use for a week or so to knock out a few last minute things?

BTW, I have an amazing rental property in Falls Church going up for sale very soon.  =-)

Hi BP Investors

I'm making a hard money loan on a deal in Chicago.  The borrower and I both live in Texas, but the properties are in the Windy City.  It's two properties next door to each other.

I need an attorney licensed in IL to draw up a hard money contract.  Actually, 4 hard money contracts, but all really similar.  The breakdown is this:

Condo #1 purchase - me and my cash

Condo #2 purchase - me and my cash

Condo #1 rehab budget - colleague #1 SDIRA

Condo #2 rehab budget - colleague #2 SDIRA

Basic hard money terms on all of these – 2 points in, 2 points out, 12%, 6 month term.

I guess I should look over the documents in the BP library, but I'm limited to a few downloads and would probably get the wrong ones before I got the right one.  =-)

Also, the profit on this is actually quite thin.  Purchase of both condos together is only about $50k.  I'd hate to wipe out the profit on just the contracts.

-Michael

Why not JV with the family members? Okay, hundreds of reasons, but read on anyway. They can own the home, you can manage the repairs, and when the repairs are done, sell it and split the profits. Agree on a value of the house, and a strict budget for the rehab, and then a fair split of the profits.

I'd probably set up an LLC with your family members as partners. Talk to an attorney to get the particulars figured out. Dan Castro is a good one in Austin, and is the attorney I used to set up my LLC.

Also consider who pays for a loss.  It's a hard truth, but we always have to consider at some point stopping the bleeding and getting a place sold.  Without a mortgage or hard money, the carrying costs are much lower, but you should still consider the possibility that you'll need to get your cash from the rehab back.

$70k is a lot for a rehab in a neighborhood where you can get a house for 3x that. Get a Realtor to do a desktop CMA for you, without giving them your $370k target. You're going to need an honest and reality based comp profile.

Hi Dustin

Come to Big Daddy's (183 and Burnet) today at 11:30.  There's a large group of us there every Thursday, and it's the best meeting in town in my opinion.  You'll find investors of every type (flippers, wholesalers, buy and holders), GCs, hard money, regular money, title people, dirt attorneys, Realtors, etc.

I agree with Jon on the green stuff.  It's a great way to stand out, but you won't get much of a premium for it, sadly.  My personal home has a solar pool heater and that was a big differentiator for me, but I'm not your average Williamson County resident.  =-)

-Michael

There are several brokers in the Austin area who would probably be willing to do this. Come to Big Daddy's on Thursday and introduce yourself to the group in the back room. We're there from around 11:30 until about 1pm, eating lunch, introducing ourselves, having a quick discussion on some hot button topic, and then networking with the amazing conglomeration of people. I can think of at least two brokers who are there nearly every week. There may be others whom I didn't realize were brokers. I'm currently doing a JV with another guy who's often there, which makes three.

Come join us.  You're sure to meet a lot of interesting people.