All Forum Posts by: Shawn Parsh

Ryan,

It's great to hear that you have an optimistic view of the coming year. You are not alone in learning on each project. I've been investing in real estate for over twenty years and I continue to learn on every deal. I would also say that as you get more experienced you will be able to handle bigger problems or issues, and profit more because of them. 

For example, most investors or buyers will stay clear of houses with foundation issues. What I have found is if you can get your mason to the house before you buy and get a no bull assessment of what it will take to fix it you can grab up properties for steep discounts and little competition. I did a deal earlier this year where I negotiated a much lower price than the asking price because of the foundation issues. I then had my mason fix the problem for under 2,000 and flipped the house for a nice profit. 

I have done similar with knob and tube electric houses and many other issues that most investors shy away from. The key is to identify the issue in advance of your offer, have the right professional on your team assess the issue and the related costs to fix it, and make the appropriate offer to secure the deal. The bigger problems you are willing to solve the more money you typically  make. 

Good luck this year. 

Gioser,

  I have purchased numerous properties where I negotiated cash back at closing that resulted in me walking away from the closing table with more money then the listed down payment. This is much easier to do on cosmetically distressed properties where you can justify the cash back based on the property condition. You may have to offer a slightly higher price to the seller to entice them to accept your offer, but it is a great way to obtain properties and the cash to rehab them at the same time. 

I have also done several deals where I signed a lease option with no money down because of the condition of the property. Then after the rehab I was able to go to the bank and secure a loan large enough to cover the entire negotiated purchase price in the  lease option agreement and the cost of the rehab. 

I find it interesting that the median household income in the U.S. in 1974 was 11,100 and was 74,580 in 2022. That is about a 670% increase in income over the roughly fifty years. The median home price was 34,200 in 1974 and 434,000 in 2022. That is about a 1,269% increase in the price of a home in the same time period. The median home price cost went up by almost double the increase in income. Does that imply that home prices are going to adjust lower?? What it does tell me is that our dollar has lost a lot of its value over the years, yet we continue to pass budgets that continue our debt cycle. 

Mike,

I would try and find a service that collects the desired information, but given how quick things change I would also collect the information myself directly from the applicants. 

Nathan,

I agree with Travis and your thought process. I'm currently at the tail end of my latest rehab and I am covering the costs out of pocket. Why take a loan in anticipation of something happening down the road that would require you to have cash when it may never happen. A line of credit may be an option if you can set it up against an investment property not your own home. Plus a line of credit has the added benefit of clouding the title of the property which helps with asset protection. 

I'm not sure what your exit strategy is for the property, but you could always refinance the property or take a new loan on the property if its not financed now after the rehab is done. With less cash in the bank you may have to get more creative to obtain the next investment, but that is a good thing in my mind. Maybe a lease option on a cosmetically distressed property that you can rehab with a much lower budget. Good luck on the project. 

David,

  Timur gave you solid advice. I have approached contractors on jobs sites many times to get their contact information and find out what it is they specialize in doing. I do not hire general contractors who take a cut of my profit to call in others to do the actual work. I call the specific contractors I need....plumber, electrician, HVAC, mason and so on myself. 

Timur is also correct when he says the good ones are very busy. In my area good builders are booked for over a year, my electrician has six months of work lined up, and my excavator is booked for about the same. Fortunately, because I give so much work to these folks they are more than willing to fit my projects in. For example, my electrician came and knocked out my fix and flip project the same week I called him even though he has six months of work lined up. 

On a side note I live just outside of Mountain City TN not too far from your project. It would be great to connect so I can follow your future projects and we can share what's working in the area. 

John,

Congratulations on the new project. You have got some solid advice so far, but I thought I would add my thoughts. First of all remember that you are the one responsible for the outcome. You should listen to the people you hire to get their opinion, but you should lead the effort. I'm sure it's different in different markets, but in my area there can be a wide range of price differences for the same materials and project. I recently got a metal roof quote for a project where the highest bidder was 90,000 and the lowest was 30,000. That was for the same material list. 

  Another thing I will say is that do not pay skilled labor prices for unskilled work. When you need electrical, plumbing, and HVAC work done for example hire a qualified and referred person to do the work. When you need old cabinets removed, carpet tore out, trash hauled away don't pay general contractor prices. It should not be difficult to find a local person to do the unskilled labor. 

The more projects you do the easier it will be to get qualified people to do the right jobs. As you build your team you will find that your electrician, plumber, HVAC, excavator, handyman, and others will prioritize your projects over others because you are giving them a lot of business through out the year. I'm pretty hands on with my projects and I call the people I need to do the work. I do not pay a general contractor money for calling people for me. Good  luck with the project. 

Summit,

Congratulations on your pending investment. There are many ways to invests in real estate that can produce a great return. A lot depends on your personal preference. Having said that I will give you my initial thoughts. I would think that fixing and flipping would not be my top priority in your situation if you (and your partners) do not need the cash (plus tax implication). I like the idea of buying cosmetically distressed properties, rehabbing them, and then renting them out for positive cash flow. 

In your situation you are in a position to buy properties by paying cash which gives you an advantage. Especially if you are buying a property that will not qualify for a normal mortgage because of its condition. I am currently rehabbing a property that I bought with a cash offer. I find that I can normally beat out other higher offers because my offer is not contingent on financing. After you complete the rehab that you could pay for out of pocket then you could finance the property and rent it for positive cash flow. I would keep my loan on the property around 70% or lower of the after repair value which gives you a cushion if the market changes. 

Your plan should also be based on how involved you want to be in the business. Do you have a property manager, maintenance crew or person, and others in place that can handle the day to day details or are you or your partners going to be handling things? In my experience I have found that Single family homes require the least effort to oversee, while apartments come with more headaches. More work in the management is not an issue if you have that covered. Hopefully something I said helps.

River,

Thanks for reaching out. I've been doing real estate for well over twenty years and have done a bunch of rehabs in that time. I normally buy cosmetically distressed properties, rehab them, and then rent them. Over the last year I have been flipping property to pay for a house that I'm building. 

A lot of the properties I buy do not have heat systems or do not qualify for normal loans because of their condition. As a result I normally pay cash for my deals and the rehab costs. Because of my background I normally have no problem finding a money partner for deals if I need them. I look forward to your input and knowledge going forward. Thanks again for reaching out.

Sean,

Thanks for your input. I use a single business account for all of my rehab projects. It's good to know the receipt is not required. I just thought it would be easier for me with all the running around I do to be able to scan the receipt and and some how have it upload to the correct project. Or for my Rehab manager to be able to do the same. I just didn't know if there was a good tool to do that. Thanks again for the advice it is much appreciated.