All Forum Posts by: Shaun Vembutty

@David Moon, welcome. I am a spec and custom home builder in Houston as well. I have built a lot of houses in The Heights also. I organize a meet-up for RE investors once every two weeks that you might want to attend to network. You can call me if you want more details or want to touch base.

This is the second edition of the Houston Real Estate Investor Meet-up. We had a phenomenal response to the first event. This is not a typical RE meet-up where products/services are pitched or guru programs are offered. This is just an open forum for Houston investors to get together, network, discuss their deals and collaborate. Please RSVP.

Josh Miller , I think that is too broad a question to answer. 'Best area to invest in' for what purpose? Cash flow? Appreciation? Steady income with a possible land play down the road? It really just comes down to what your goals are and also what you are able to pull of at this time. As The Heights gets built out, the areas right outside the Heights will grow but that is quite a bit further down in the future. In my opinion, investing purely for appreciation is nothing short of plain speculation.

@Melanie Daigle, Try Icon bank and City Bank of Texas. Also talk to Laith Daik at Texas Loan Star. He is usually able to find solutions for such unconventional situations.

@Kristen Daniel, thank you. The return is really not that high when you consider that they are financing the deal as well. The return is commensurate with the value you bring to the table. I cannot discuss actual numbers on the forum due to privacy reasons but I was just giving you an example of how we structure our deals. There are so many different structures out there. Sometimes, the investor is just required to fund the equity portion of the project and the builder carries the financing. In that case, the investor only makes an aggregate return of between 22% - %30 because all they are doing is just bringing a certain amount of money to the table. The investor makes a guaranteed interest rate in addition to a small piece of the profits. Again, all this is pretty common in the spec building space and you do not hear about this too much because the successful builders have no shortage of capital from investors. Even in our case, we have way more investor capital than what we can deploy and so there is no need to go out there soliciting.

Kristen Daniel , like you said there are two key questions to answer. How are you going to bring value to someone who already does this and second, what is a worthwhile rate of return for you on your capital. You are in a tough spot. If you need the partner to being in capital and also do the work, then you are essentially just a glorified lender and so the return you can expect to get cant be that much. The reason I suggested you fund the whole project and let the partner do the work was because now your actual cash on cash return is way higher and also the partner is now able to do another project that he/she might have otherwise not been able to do because of being capped out. This is very common in my world - spec home building. Builders have credit lines with banks but once we reach a certain amount of projects, we cannot borrow anymore until we get one of those under contract. At this time, if we were to get a deal, I would pitch it to my investors. They would finance the project and provide the down payment and my company would manage the entire project and we split the profits. In most cases, the investor makes between 70% - 80% cash on cash return. This is what a lot of spec builders do. Maybe you can reach out to some local spec builders and see if that opportunity exists. Whatever you decide to do, just check references, their track record and make sure the partner is trustworthy.

Kristen Daniel , here is my opinion. Look for someone that has a track record, check their lender references and see if they have paid off their prior rehab loans on time without any difficulties. Your best bet is probably someone that has quite a few projects going and is capped out in terms of capital but still has deal flow. You will need to lay very strict ground rules in terms of communication, how expenses are documented and timelines. Come up with some kind of profit split with a bonus clause that incentivizes them to finish within budget and on time. Also it would be prudent to not invest all cash but rather do a loan with you funding the down payment. That way the financing costs affect the profit amount and the partner does not get to 'free-roll' that aspect. This would also help because now you have a lender doing an additional layer of analysis of the deal especially since it is not in your local market. Even if you end up giving up more, it makes sense to partner with someone that has a solid presence i.e they have several projects on the ground. Those people are not going to let one deal affect their overall reputation and credibility. So even if things go wrong they are going to do what they can to make it right so no one gets affected. Be careful with giving someone a chance to try this out with your money. If you finalize a deal, make it a condition that you will be hiring a realtor to sell the finished house and the realtor will be working on your behalf to monitor progress periodically and provide you with updates. A weekly conference call with all parties is probably good as well.

@Grace Jordan, thanks for your support and we look forward to seeing you again in two weeks!

@Amit Dhawan, sure thing. See you there!

Stephen, yes, but even if it was their fault, you have signed a contract stating you will settle incorrectly calculated taxes between buyer and seller. The right thing to do ethically and legally is to pay your portion because it is something you would have paid if not for an error. But that is just my opinion, so please consult your attorney and make a decision accordingly. Good luck.