All Forum Posts by: Sean Hudgins

@Kyle Johnson I am really sorry to hear that you are going through this, I know what a head ache it can be and I have seen so many bad flips here in Hampton Roads. You mentioned that you have a 2.6% interest mortgage and I have to say that sounds like something worth trying to keep if possible. From what your explaining it does sound like the roof needs some major repairs especially if there is rotten roof decking, but that may not mean that the whole roof needs replaced and even if it does I think finding a way to finance that repair is a good idea, if the property has been steady and cashflows well already. What are your numbers on the property? How much equity do you have, what is the rent and expenses? With that info I could give you a better idea of what a good way forward might be. 

As far as selling the property to get out from under the deal, if that were the direction you were to pursue, you need to take a close look at your closing costs and determine what the best way forward would be. Depending on where the house is in Norfolk makes a big difference as to who the potential buyers are going to be and what kind of condition they are likely going to accept for the house. I would suggest that sitting down with someone and discussing the fixes that need done vs what you could list the property for either "as is" or in "Market Condition". Considering you bought back in '21 and it was a flip it may have enough cosmetic upgrades that would draw more retail buyers in and you could be looking at a situation where fixing the roof issue would make you more money than selling it as is. But all of that is hypothetical without seeing the property and evaluating the best method to sell.

Definitely try and give some more specific numbers so you can get advice and opinions on whether keeping the property is the right move (I suspect that it is). And feel free to reach out to me if you want to talk through it, I am happy to give you more of my thoughts on the situation.

Brian, Welcome to the BP community! 9 flips in a year is great! Im here local and would love to connect. we have some local meet-ups you can find on the events page : https://www.biggerpockets.com/forums/521 . We just had one 2 days ago that I was unable to attend due to some minor drama at one of my listings, lol. I look forward to connecting.

I was hoping it was a temporary bug, but it seems that the military investing section of the forum is no longer with us. Any insight as to why this is the case? Or did it just move, and I am just not intelligent enough to find it? BP Help, that section is my people, and I miss it.

Sincerely,

Sean Hudgins

Definitely, in VA, it is also legal, and we require similar disclosures. The part I mentioned was illegal would be if the agent was misrepresenting one side in order to get the deal done (somewhat speculative unless they do something obvious).

Your thought to have another agent in their brokerage represent you is spot on. That is something called a designated agency where the broker "assigns" another agent to represent the buyer. This is a great method as an individual agent is representing each party, so there is less conflict of interest, but because they are in the same brokerage, there is a perceived desire to work together more openly to get the deal to close. One downside is that you may get paired up with a random agent or an inexperienced agent who doesn't have the knowledge to look out for your best interest.

Also, my perspective on this as an agent is a little more by the books, where if I was purchasing out of a state that I was licensed in, then I may use the strategy of Dual Agency and have the possibility of the agent's greed help to secure the deal. As the buyer, I would not have the legal risk; the agent who was taking part in the transaction as the dual agent would have that legal risk.

Most importantly, though, if I felt that I needed the representation at all, I would find my own agent that I could trust. When you spend that kind of cash on anything, I would say it's smart to have a trusted advisor alongside you and not leave that role up to chance.

Interesting story. I want to touch on something that stood out to me in the story first, and then I will give my opinion on the dual agency approach. 

When you got the "Offer accepted," what should have happened was that the offer should have been signed by both parties and ratified. Now, I am in Virginia, and I will not pretend I know exactly how RE transactions are done in NY. But here in VA, an offer is only accepted once it is ratified, i.e. signed by both parties, holding both parties to the terms of the deal. It sounds like you got a word-of-mouth acceptance, and your agent should have pushed hard to get the signed contract completed so that the sellers would be in breach of contract by accepting another offer, and you would have grounds for a lawsuit if they did. To me, this was a big blunder on your agent's part.

Now, Dual Agency is a tricky business. My perspective on this as a buyer and investor is that if you are savvy enough to look out for yourself, then it can be a good way to get on the inside of the deal. Technically (once again in VA), if I represent both parties to a transaction with dual agency, I really no longer represent either party. The agent is only an intermediary between the buyer and seller at that point. Now, plenty of agents out there will see this as a way to double their commission, and they will push to make the deal happen, which is not ethical or legal.

As an agent, I don't like dual agency, and I would rather get a referral fee by sending the buyer to another agent so that I can do my job of representing the seller, which is what they are paying for. I have seen that usually, in a dual agency situation, one party feels like they lost out somehow and it opens up the way too many opportunities for me as the agent to get sued.

#1 piece of advice is to make sure you're both very open about your goals and what is needed from the partnership. It does not sound like you are aligned right now, so you need to make sure you have some very serious conversations about the partnership. 

The simple answer is you use the cash flow from the portfolio to replace income, not the equity, and when the cash flow is pulled out, then you do so equally for both partners. The same is true for equity; if you need to refi property to pull equity out, then that equity should be split 50/50 and allow both parties to use the equity for whatever they please. 

The other option is to restructure the partnership. For this, you should have a discussion with the partner and sit down with a lawyer to draft up a new partnership that clearly lays out what each party is responsible for as well as what compensation each party receives. 

You say the partner is not interested in the equity, so my question is, why are they investing in the portfolio? Do they want the cash flow, or are they in it for the tax shelter? I would find out from your partner why they are investing with you, and I wouldn't make any assumptions.

@Eric Piccione Have you already been quoted the 15% for the management fee? That seems low for STR management, though I am in a beach town, so my prices may be very different.

My advice to you is first to pay down the principle and refi to a point where you will feel more comfortable carrying the payment if you have a slow month as an STR or any vacancy as an LTR. I don't know what that looks like for you, but deciding where you want to be payment-wise is a good starting point.

I think in your situation, starting with it as an STR is a great move. Your revenue is higher, and as you said, it gives you a place to stay when you travel back to the States. The upside to this is that you have a remote job, and if things went terribly, you could always travel back to the US and get your house in order, i.e., furniture in storage or sold, and then either sell the house or rent it long term. Doing the opposite order would likely be more challenging; if you LTR first, then you have a year of tenant wear and tear, and if you wanted to try and STR, you would have to come back and source new furniture.

Investing is always a risk and reward continuum, and if you have the opportunity and the financial ability to weather the storm with the higher risk and reward, then I would do that first with backups in place in the event that it doesn't go to plan. 

It can be listed on the MLS that way and put the situation in the write-up. also, local investor groups and here on BP would all be good places to advertise.

I have had investors who told me to be on the lookout for that type of investment. It's essentially the same thing as inheriting a tenant in a property. I would think that if advertised to investors that way it would be a non issue.

@Kyle Butters Welcome to the community! Virginia Beach is a great place to be, and the Hampton Road area as a whole is a decent place to learn the basics of investing. Now, as @Mike Klarman said, VB is pretty pricy and, depending on what your strategy is, may not be the easiest for a new investor. However, that's the upside of this area. You can go to Norfolk, Suffolk, Hampton, and Newport News and find pretty good cash flow that you couldn't find in VB or Chesapeake.

Your first step is to determine what you want to invest in and come up with your criteria. Even before getting too far into building a team if you are buying STRs, your team is going to look very different than if you are buying Long-term Rentals or Fix and Flips. Then, you build out your team. Obviously, having a solid contractor is a must, but that could look different if you are doing major renovations or if you are doing minor cosmetic stuff. 

Have you done some research into what kind of investing and the type of property you are looking to get into? If so, It would be great for all the people here to help if you lay out some of that, and we can steer you in the right direction.

As for meet-ups, there are a couple of REI Groups here. Here is a good starter https://www.biggerpockets.com/forums/521/topics/1161599-real... This one is an investor social at Big Ugly Brewing in Chesapeake. 1/23/2024 5-8PM.

If you want to connect and talk strategy and getting started feel free to reach out!