All Forum Posts by: Sheri Lowrance

If you're looking to build a longer term relationship then it's really fluid. I agree with @Frank Geiger that it would be better to just buy it yourself but that doesn't always work for relatioships.

You could treat it like a JV and use a basic waterfall. Since you're putting up most of the capital the main thing I would do is make sure you're getting a prefered return on the financial side. It wouldn't be unreasonable at all for you to get paid 10-12% interest on the money you put into the deal right off the top.

After that it's a profit split if you're flipping the house. 75/25 or 50/50 would be my suggestion to keep things simple, but only if they are putting in some real work on the rehab. If they are, and aren't taking an hourly wage, then go 50/50 and establish a strong relationship that encourages them to do it again. 

That's a deal that helps keep overhead down on the rehab and increase the profits for both of you on the back end.

So she pretty much just found the deal. I would offer to pay her an assignment fee and just purchase the house myself. 

If you are looking to network and establish a relationship for the long term, I would consider a 70/30. What does she bring to the table? 10% and a husband working a $10/hr job. Assuming 100k all in price and 150k sales price, your partner provides 10k plus her husbands time and receives 15k profit in return. That's a 150% return.

I would make sure your contract outlines responsibilities. Best of luck.

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.

 Looks like a great deal on paper. $150k seems like a sufficient rehab budget for something like this too. I'm familiar with that area and I think the appreciation upside is tremendous, so I'd be tempted to keep it as a buy and hold for this reason if I were you. Maybe do a less expensive rehab, just enough to hit your target rent but not using high end materials that you would use for a flip (durable rental products like LVP flooring and Laminate counters instead of bamboo and granite for example). If you could be all-in for mid 200's and get $2k in rent those are nice numbers for this area, and in just a few years your appreciation should be significant.  Just spit-balling different strategy ideas here. You could also probably wholesale it/sell it quick to a flipper and make close to your projected $75k profit without doing anything. I might actually go that route, just turn around and sell it; much less stress, risk and effort. $100k for anything in Old Town is a smoking hot deal, get that baby under contract!

@Sheri Lowrance just a heads up that we were looking at a property near old town Arvada a couple weeks ago- 3/2, ~1400sq ft. It needed mostly cosmetic and a little more, listed for $375K. They've since dropped it to $359K. 

Do you have a realtor you can talk with? Wonder if you have a friend of someone you know that's a realtor that can run the CMA for you. You may end up selling with them so it's worth their time!

 You have the right idea of trying to know what it will sell for when finished though you won't know for sure until the day comes. I look for 3 similar properties that sold in the last 3-6 months within 1/2-1 mile radius for comps. 

Total gut and rehab takes time. Since I don't know the property it is tough to guess what you might run into and what the costs of rehab are. On a project that size I always assume I need to be onsite each day to be sure the contractors show up, to keep them moving forward, to answer questions about unforeseen surprises. 

Select finishes that are at the same level or slightly better than the houses that are selling around you. Don't over build. Check and see if the converted garage was permitted or do you need to get permits to convert and will they even allow that. 

There seems to be enough meat on the bone to cover for most mistakes you will run into. If the market for houses in the areas is going up some that helps too.

As for the numbers: I break everything down to the cost of the wire for the rewiring, the cost of the copper line for the replumbing, cost of the sheet rock and on and on. It's a good exercise because I catch some of the things I missed on the first walk through. If you are using a general contractor it's harder to figure your costs. They always come back in the middle of the job and say "we ran into a problem and it's only $7,000 more to fix". Lol It's best to be your own general if you can find the time.

But, with the info you have provided I'd probably seriously consider doing the flip if I believed the market would support the sales price of $370,000.

@Sheri Lowrance It's tough to gauge if you are doing anything wrong from the information provided. The two main numbers that can sink your plan are the estimated rehab costs, and ARV.

So... How confident are you in those two numbers?  Where did you get the rehab cost estimate from?