All Forum Posts by: Shiloh Lundahl

@Joe S. the answer to your question is yes, it can be. If I profit off of you buying real estate, then yes!  I have a conflict of interest. Just as the person who works at the clothing store has a conflict of interest when they say that the piece of clothing you are trying on looks great on you. It might be true. But it is a conflict of interest. At the same time though, if you are the one who walked into the store and tried on the clothes and asked the sales clerk how it looks, then your asking to be influenced. 

if you spend time on a real estate investing website where people are in the business of investing in real estate and you ask if you should invest, you will likely get a lot of responses that say you should invest in real estate and let me help you for a fee. You came into the store and started trying things on and asked questions. Of course people are going to likely say yes you should buy. Especially if they profit from the transaction. 

Here is an example, you know that I do some real estate coaching and I also partner up with money partners to buy real estate. I am going to be pro real estate purchasing in my posts. If people reach out to me and want me to coach them or to partner up with me then I will make money. That doesn't change the fact that I think it is a good time to buy if done strategically, regardless of whether I profit off of someone buying or not. I think less people are buying right now and it is probably the best time within the past 2-and-a-half years to buy. With that being said, I have probably purchased around 20 or more properties in the past 2-and-a-half years and I have made money on all but one or two deals. And about 90% of the people that I have coached have made several times the cost of the coaching program back in increased net worth by doing the coaching program.  So of course I am going to be pro purchasing real estate with the caveat that it is done strategically, oh and by the way... I have a strategy that would work great for you. I can say that because I think it is true. Even if I do profit from it. 

Hi@Stuart Udis. Are you very familiar with how lease options work?

@Stuart Udis and @Jaycee Greene The way that I set it up is as follows. 

1. We sign the partnerships agreement which includes verbiage defining roles and profit share. We share the profits and split losses if any 50/50.  The money partner will provide the money for the down payment, the repairs, the reserves in the account and the $5,000 that goes to me which is a part of my 50% of the profits.

2. I identify a property that is under market value that after it is fixed up, it has between $40,000 to $50,000 worth of equity.  

3. I purchase the property in the name of the LLC with a hard money lender and use the money partners money for the down payment and the repairs.

4. I work with our project manager to get the property fixed up according to the specific property which may be fixing it a lot or a little. I get rehab draws from the hard money lender to reimburse for the repairs.

5. We find a tenant buyer to do the lease option who also pays on option fee of between $4,000 and $6,000 depending on the value of the property.

6. I get a DSCR loan on the property and we try to suck out as much money as we can to leverage the property at 75% of the ARV. This will probably necessitate leaving $20,000 to $30,000 into the property.

7. Anything over and above the $10,000 left into the account after paying me the $5,000 goes back to the money partner. 

8. I will manage the property through my assistant. Management is pretty low since the properties will be on lease options and the tenants take care of the fixes and most anything that comes up with the house.  It usually takes a quarter of the time to manage a lease option property versus a regular rental.  The payments for the management of the property and the book keeping will come out of the cash flow of the property.

9. We sell the property to the tenant buyer with minimal closing costs.

Here are the numbers for our most recent project:

Purchase price 138k

Rehab around 40k 

Closing costs 7k

Carrying costs 5k

Second closing costs 7k

All in 197k

ARV 245k

Lease option fee that comes to us 4k

Loan amount 180k

Money left into the property 17k in the property, 10k in the account, 5k to me

Sales price in 3 years 270k

Loan balance in 3 years about 170k

Cash flow 140 a month.

Estimated profit over the 3 years is around 70k. 

The total amount left in by the money parter would be 32k and the estimate profit would be 35k over a 3 year period of time or a 36% IRR over 3 years. Of course the sale of the property is dependent on the tenant buyer exercising the option. however, if they don't exercise the option then we can just sell it if we want to or we would put in the property another tenant buyer with another option. It would just depend on where the numbers were in 3 years.

This is the way I structure the partnership.

Hi @Daniel Carrillo. What type of investing do you do in Arizona to where this information is helpful?

I'd love to get some feedback and hear your thoughts on the investing model that I am planning on ramping up this year.

Let me give you some background for context and to help you understand why I am moving in this direction with investing this year. 

I have been investing in real estate for the past 15 years but more actively for the past 10 years. People started to ask me to help them learn how to invest so I started coaching new investors over the past 7 years on how to start investing in real estate. I would charge them $5,000 with the ability for them to earn back $2,500 and I'd have a call with them every other week to guide them on how to find deals and money lenders and how to get the properties fixed up and get them refinanced, etc. About 90% of my coaching students bought properties and increased their net worth on average of $100,000 the year we worked together. A mentor of mine told me that I was charging too little for the amount of value I was providing. So I increased my rate to $10,000 with the ability of my coaching students to earn back $5,000 if they completed their homework in betweeen coaching sessions that was geared towards helping them meet their real estate goals. The results of my students were about the same and they would create about $100,000 of increased net worth during the coaching program. My mentor told me I was still charging too low for the value I was providing. 

Towards the end of last year, one of my buddies contacted me and told me his accountant told him that he needed to buy some real estate to lower his tax bill. I shared with him some ideas on how to buy undervalued real estate and he basically told me that he would rather just partner with me and provide the money and have me find and manage the investment and then split the profits.  So I found and purchased 3 undervalued properties from wholesalers and we are just finishing up the 3rd one. Each property is estimated to create about $70,000 of profit over the next 3 years.  He has deposited $100,000 into the business account. That covers the down payment for the purchase, the rehab, and the $18,000 for reserves for the account, and $5,000 for me for each property for the time and work involved. That $5,000 is part of my portion of the 50% of the profits and will be deducted from my payout when the property is sold. 

The property will be rented out on a 3-year lease option and will be either sold to the tenant buyer or sold on the market if the tenant decides not to exercise the option.  

The money partner on these deals will bring in about $35,000 to $50,000 for each deal and the expected IRR is around 25%-35% each year for the 3 year period essentially doubling their money in 3-4 years.

So rather than focusing on picking up a couple of coaching clients this year, I think I am just going to focus on finding money partners to buy deals with.  I already have the knowledge, experience, and systems in place to do about 20 properties this year. So I think I am going to  shift my focus away from coaching and more towards partnering.

I'd love to get hear some of your thoughts and get some of your feedback. 

@Jose Morales Private money loans are going to be better than other types of loans on these types of assets. Even if you pay 10% in interest. It will likely be cheaper than the cost of financing. That is why it is hard to get regular real estate loans on assets valued so low, the cost of the refinance makes it so you are paying higher than they can legally charge you percentage wise. For example, if the refinance costs you $5,000 then you are paying 20% of the value of the asset just to get a loan on the asset. That can sometimes break usury laws in some states I believe. So you are better off finding someone who wants to rean interest on their money and getting a promissory note signed and giving them a 10% interest rate and having them give you a 15k loan interés only for a 12-24 month period. It will take away from your cash flow each month but you will have the 15k per property that you get a loan on and then you can get another property with it which may create enough cash flow to pay the new loans that you have created.

You can also consider selling the properties to the tenants on terms. Which means that they pay you a down payment and you finance the properties to them. They may pay you $5,000 and then you finance them the properties with a loan of $35,000 at 9.95% interest for 15 years. That can get you some money up front to continue to build your portfolio and it takes you out of being a landloard and puts you into the position of being the bank instead. 

@Sam Ojo here are a few ways of continuing to scale.

1. Refinanced the portfolio if it is leveraged at 60% or less. This may kill your cash flow due to high interests rates though. 

2. Get a line of credit from a bank that leverages your equity without refinancing the properties.

3. Partner up with money partners and you be the operator. This may provide low cash flow up front but it is a way of scaling if you are good at adding value and then trading up that value. This is what I am doing personally at the moment. I am partnering with with other people who want to invest in real estate and they have money but they don't have the time, experience, or knowledge of how to invest in real estate in a way that makes a lot of money quickly. So they are the money partners and I am the operator and we split the profits. The gain takes a few years to realize but it is a way to scale when your own capital is low. 

@Veronique Leroy I would say it is possible if you force equity, hold for a few years and then sell and then average the return of the whole profit over the timeframe of deal. In other words, an IRR calculation.

Have you ever considered doing lease options? I have found that they worked really well when it comes to getting better tenants and better rents, and having less hassle, less headaches, and then getting a higher sales price; without paying closing costs or realtor fees. Then you can trade up to another property where you can force equity. 

@Basit Siddiqi Have you considered getting an assistant to manage all of those things rather than a property manager.  Depending on the location of your properties, an assistant might be much better than a property management company. An assistant can do most everything that you need done and they work directly for you rather than a property management company that has several clients and you’re just one of them.

Also, again, depending on the location of your properties, have you considered doing a lease with the option to buy?  It takes about a quarter of the effort to manage a lease option property that it takes to manage a rental property. In other words, you can manage for lease option properties with the same amount of effort that it takes to manage one rental property. So it would cut down dramatically on your time, effort, and headspace. You can also trade up these properties quicker into other properties where you can force equity.

Who here has 50 to 100 properties or more, and has built a net worth of over a million dollars in real estate and is still building? 

What are your goals for this year?

Looking to network. Do you find it difficult to network? And where do you find others to network with?