All Forum Posts by: Shaun Dewitt

Any experienced input would be helpful for these 2 new construction projects I'm looking at. $200k each lot, side by side. Builder who builds new homes that sell over 1m, also knows my lender and they have a great relationship. They both work with the same realtor who sells high end homes as his specialty. We have two lots side by side so that should help our cost per build since each contractor will get two big projects next to each other. Lender works well with the builder = Trust. Number look like this.

$200k each lot = $400k
$550-650 each home build = $1.1-1.3m home total
Total acquisition and build = 1.5-1.7m
Hard money costs ~ $200k roughly
Realtor, staging, closing, misc fees, costs, insurance, taxes = $100k estimated
Target ARV = $1.1-1.3m each

Neighboring houses built in early 2000's selling for mid $900's & some over $1m. Properties built modern selling for closer to $1.1-1.6 from our comps. Neighborhood is very hight end. Both homes would be ~ 4000 sq feet with great views of the city and sunset from front of house. Both are 10,000 sq foot lots but have green space in back (Oregonians!) that requires about 3500 sq ft to be undisturbed = nothing can be done. So we have about 6500 sq ft to work with on each home. Back of each home is against wooded area = not much backyard areas.

Seller bought them back in 2014/15ish for $250k each, had all plans drafted and approved by HOA ($1500 each review!), GeoTech report done (2015 so needs refresh), but realized that he didn't have enough money to build both at the same time. Spoke with him directly today and he tried to get other builders to go in with him and each do one so cost is lower.

Agreed to either $350k up front cash for both now or $400k for both with $300k now and carry $50k on each property until the homes are built and closed on at the end. That allows for my hard money lender (his idea to lower my interest) to require $50k down payment vs $150k. Then monthly payments for interest. Negotiating with lender to write one loan to acquire lots for $300k and then write a new loan after permits are issued and work starts approx 3 months later and wrap the old loan into new loan. (Lowers interest) Also saves $500-1000/mo on interest carrying the $100k.

Would pre-list houses for sale mid project to attempt to line up buyers for each by the time houses are built.

Would attempt to build modern or modern/craftsman and that is the specialty of the builder. We went to church together years ago, know a lot of the same people, have same eye for detail and care for quality work. He knows good friends of mine.

One other part may go in with me at $100k with a guarantee $50k return after homes close.

Lining costs up this way:
$400k lots
$1.3 build
$200k hard money
$50k interest 3rd part investor
$150k selling, marketing & closing costs
+________
$2,100,000

ARV: $1.1-1.3 each = $2.2-2.6m
$2.2-2.05 = $150k Profit potential
$2.6-2.05 = $550k Profit potential

Assuming it doesn't dip to $1m each or less, we would make money over the course of 12-14 months.

$550k profit potential is good buffer
$150k profit potential scares me on this size of a project that would take over a year to start and exit. I could do 3-5 smaller flips and make more than that with less risk.

We would have to really try hard for the $1.3m price ranges.

***Any other factors that I'm not thinking about? We have the money for it, we have the skill for building and selling it, it's a great location. If I can lower either, 1 - hard money costs, 2 - build costs (closer to $550k each), 3 - find an alternative to save the $50k from the 2nd investor AND the $50k to get the lots secured now would free up $100k right there. Not super feasible though since that would require $150k down payment plus monthly interest payments. I have just enough to do the $50k down payment plus interest payments.

Again, any experienced input would help for new construction.

My dad doesn't want to do that. He basically wants to keep renting to us or just give him a check for $300k. He's been burned in the past by people, family and renters, who didn't follow through on agreements. We want to keep it as clean as possible so we frankly need an outside investor of some sort.

My wife and I have been renting my deceased grandparents home from my parents (inherited 4 years ago) for the past 3 years. They were going to just sell it but being newly married, they let us live there and just pay enough to cover property taxes and give them a little extra. The house is paid off so whenever they do sell it, it'll be pure profit for them, except for taxes of course. Essentially, houses in this area (SE Portland just down from Hawthorne) are selling for between $500-600k, renovated. This house needs some major work but my parents have agreed to let us purchase from them at $300-350k. We're overestimating but we would budget another $100k for renovations to update it and completely modernize it. Our goal is to walk away with a $100k profit or more to put down on a larger home since we have our 5th child on the way. It's a 3 bed, 1 bath home, 998sq ft & built in 1953. It might appraise at $350ish so we should have instant equity. We've been taking care of this house for the last 3 years and since we pay such low rent, we cover any expenses that come up. But my mother needs to retire soon and them selling this home will go a long way toward her retiring. So with that back story, we want to buy it obviously but we have some challenges that I'm looking for a solution to. The only solution I can conceive of is finding a private investor to finance the whole deal. I currently own an auto glass company here in Portland so we can't get a typical mortgage, nor do I want to report more income than I need to just to buy this house, if we can avoid that. We don't have much more than about $10k to put down and that's if we don't have to inflate our reporting to the government (decrease our deductions. Don't worry, it's all legal). Credit is just over 650. And we have our baby due in December. So I'm looking for a solid investor or company to work with who can get us access to funding and resources or any other ideas anyone else may have on here. We've been in business for over 3 years now and every year has been growth so we have at least some experience in business. This isn't just a shot in the dark. We've been watching the area, evaluating and scrutinizing this house for the last year as we've been building our company and we feel extremely confident that this is a great deal. But we need funds! We do have an estimate sheet available for all updates we would need to make. Any input would help. Thanks!

Shaun DeWitt

I see, thank you for that clarification. 

Hey all, in researching wholesaling and general RE investing I've been seeing a common pattern that I would like to some clarification on. Would it be correct to say that a RE license can get wholesalers into trouble while a brokers license can keep wholesalers out of trouble? Since having an RE license gives said agents a fiduciary responsibility toward the homeowner/seller, they can't in good ethical conduct commit "equity stripping" in order to get the home under contract at a price far below the market value. BUT in putting deals together some say that wholesalers, if not careful, can slip into brokering their homes and therefore a brokers license can keep them safe. It also seems that there are some gray areas more in the brokerage issue than the RE license issue, essentially being a universal statement from investors across the board. Thanks for any and all input!

Shaun 

Thanks everyone for all the well-rounded advice. I've definitely decided on networking with people in the industry in my off time and attending some REI meetings in my area. Basically my intent in even posting this question was and is to absorb as much information on how things work realistically in my specific market. I figure what is working well in one market may be a formula for bankruptcy in another market. And no I don't want to reinvent the wheel. I'm just looking for an additional income stream and skill that I can use regardless of geographic location. Real estate has always been topping my list to give me flexibility in schedule and that my wife and I can do together while raising our family. Thanks again everyone and this has probably kept me from making some tremendous mistakes. I definitely don't have time for that!

Your input is much appreciated. He did seem to have a weird opinion of bigger pockets, so what alluding to pooling them in with all the "gurus" who overpromise millions in 3 months. He sent me their non-disclosure agreement so perhaps I can post it here for anyone to review if they want

@Brent Coombs 

There was no strange investment strategy they were trying to steer me into. He seemed straight forward and said I can work for them as a bird dog or go at it myself. He said they typically pay $1000-$3000 bird dog fee. They are a real estate investment company. 

So I just spoke with a guy at an investment company who told me that if I try to put a home under contract without personal financial backing, meaning the ability to personally fund the property I intend to put under contract, I am committing fraud and this is "highly illegal"? It makes sense logically that there could be a law about this but there's also the possibility that he is/was steering me wrong to avoid competition. Does every wholesaler really have their own financial backing for every deal they find? What are the laws surrounding wholesaling and where should I go to research them in my state of Oregon?  Thanks,

Shaun Dewitt 

Hey there everyone, I currently own a small business in an entirely different industry but I have been keeping my eyes on real estate for about a year now. I have no desire to put money down and I have been rebuilding my credit. But since my taxes show nearly zero income due to deductions, I can't get a mortgage to buy any house anywhere. Therefore I can't exactly acquire financing to buy up properties, renovate and sell. I want to dive into this industry but gradually because I have a wife and kids to support while running my current auto glass business. It's definitely not an exciting industry but hey it pays the bills and allows me to give to my church and buy my wife wifey things. We both have fancied the idea of going into real estate together. Bottom line, my question is where is the best place to start investing with zero money down, bad credit and with the highest ROI In the shortest amount of time? Alongside that question is where in the heck do you find investors if you don't have tons of wealthy friends or family members? Or any for that matter? Craigslist? That sounds a bit sketchy. I refuse to ask people I know for money because of the risk to relationship. So where can I legitimately go and say "give me $350,000 to buy this house, renovate it and I'll give you 50% of the profit"? I suppose I could just walk up to random people and ask but I suspect that won't yield a high percentage of eager investors. Any and all advice helps. Thank you in advance!

Shaun Dewitt