All Forum Posts by: Solomon Floyd

BP won't accept my photo format, if you'd like to see them shoot me a message. 

Hello All, 

What a week right!?! Although it really isn't that different from any other week, there are some trends to identify and account for. Solly's Weekly Update is made from all the questions on BP as well as some key information that may be overlooked by a few. 

Week in review: 

As we see a decline in home sales due to high-interest rates, it's important to remember that there are very simple remedies to aid in moving your flips. As a new homebuilder myself, I am seeing people ease into the new home market with more caution. This is normal and totally expected as all good things must come to an end, it's up to you to identify how to move past this challenge, luckily you don't have to do it alone. On top of that, we are getting closer to higher gas prices and other petroleum-based products due to OPEC and other Petrol Producing countries reducing production and output starting in November. Not to worry, there is always a solution to the never-ending madness of the world. 

1. First things first, let's talk interest rates: 

Do any of you remember the Owner Finance craze prior to the pandemic? No, that's okay, we do. With the cost of homes and the cost to borrow money to buy said homes, you may want to turn to an alternative form of lending that allows you to cover your cost and off-load properties in a 6-12 month timeframe. I know what you're thinking "6 to 12 months! This man is on something!" Remember that the owner financing method allows you to set a rate that can compete with what lenders are giving out. Of course, there is risk and a host of variables that could end with a foreclosure, but there are a few methods that could mitigate this risk. First would be using an underwriting company for your buyer, second would be setting your downpayment to a 25%-30% down situation, and third is to utilize a debt servicing company (almost like a property manager for your new mortgagee). 

Within the conversation for rates, there is another alternative that offers speed and may even boost your comps in the area. One of the most successful seller tactics we have used to quell interest rates is the infamous seller/builder credit. This allows me to credit a portion of the purchase price to the interest rate of the buyer, allowing me to sell a home at market price without lower pricing (most of the time). 

2. OPEC, what the heck?

Are you already paying a lot for gas? It's about to get WAY more costly (if you can believe it). This is because the countries that produce the world oil supply will be cutting production by a significant number of barrels (estimated 950,000 daily). This will translate into North American companies upping their drilling and production activy in Texas, Alaska, and Montana, just to name a few. I will be speaking specifically about Midland-Odessa in Texas, it is the largest community that contributes to the success of oil production in our state, yet it is largely ignored when oil production is down. I can only imagine the amount of work that will be needing BTR housing, extended-stay hotels, and single-family housing. Now I know what you're saying "What about when they leave?!?". There are a few hundred thousand people that live in this area of TX, and most of them live in homes that are outdated and falling apart with no new inventory to come. When and if the field workers leave (statistically most stay if they can find a place to purchase) you will have a population that can purchase and rent homes to keep your investments cash-flowing and protected from fluctuation. Moral of the story? Better get in now while you can. 

For more information on these topics, feel free to connect. 

Also, BP wouldn't upload all my photos. 

Investment Info:

Large multi-family (5+ units) other investment.

Purchase price: $65,000
Cash invested: $165,000

This deal was one of my first ground-up construction projects. It had tons of issues from the start and nearly broke me, but we made it through and were able to complete the project and recapture most of the cash invested. Now they are rented out and cash-flowing, providing much-needed income and a leverageable property. The market has been an absolute joy for us as we had an idea about the type of demand we would see, but nothing compares to the real thing. BP won't let me upload all my pics.

What made you interested in investing in this type of deal?

I invest in military and tertiary markets across the country. My passion is to help military members establish responsible home ownership and to give them access to quality affordable housing.

How did you find this deal and how did you negotiate it?

I found this deal a few years back and sat on it for a very long time (3 years) until the market looked like it would take an upswing. I had to really fight the sellers originally, but we came to an amicable deal that benefitted both parties. I had them reduce the price by the estimated asbestos remediation quote ($55K) as well as do a seller lease back for a full year.

How did you finance this deal?

I had to raise money from investors, roughly $165K as my down payment for the loan. We went through a hard-money lender to get the deal financed and built.

How did you add value to the deal?

My understanding of military markets and tertiary economies added value to the deal in that my assumptions were based on proprietary information.

What was the outcome?

A headache, at first, and then sweet magical relief. We had to tear down this property and start over from scratch :(. It was tough to come up with the funds to rebuild, but we got the money from several private sources and used it to get back on top. After the refi, we are able to pay both lenders and have some cash left over to replenish my funds.

Lessons learned? Challenges?

Cheap does not equal right. If you get a higher price from an expert, PAY THE EXPERT! It cost what it cost to do it right the first time, it cost WAAAAY more to do it the right after.

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $450,000
Cash invested: $250,000

Our goal is to build a 117-unit garden-style apartment for the
growing and under-housed population of Wichita Falls TX.
Our target tenant base will be made up of mainly military and
medical personnel. With a property of this size directly across
the street from Sheppard AFB and connected to both
Interstate 44 and TX Highway 240, we are centrally located to
offer a livable housing solution that can command higher
rents

What made you interested in investing in this type of deal?

Multi-family has always been on my list of assets to build and own. As soon as I found the right opportunity I started to raise funds and begin development.

How did you find this deal and how did you negotiate it?

I was searching online for land that would fit 100+ units. The seller was happy to sell the property as it was just an asset on her balance sheet.

How did you finance this deal?

We have yet to find financing for this deal, once we get close to the full entitlement we will submit it to lenders.

How did you add value to the deal?

Site indentifaction, build, and management

Lessons learned? Challenges?

There are SO many apartment configuration methods out there, you'll want to do research on your market and what they are looking for.

Investment Info:

Small multi-family (2-4 units) other investment.

Purchase price: $18,500
Cash invested: $235,000
Sale price: $414,500

We built 7 duplexes to be kept as rentals for the growing
population of Wichita County. These homes will serve
as a strategic investment benchmark to allow for
larger rental growth over the next 3-5 years.
Liquidation of the assets will happen at or after year 10
of holding to ensure that the properties do not fall
behind market trends.

What made you interested in investing in this type of deal?

I love building high-density single-family rentals that benefit the people who need housing under $300K. The need for homes under $300K is far greater than that of the $500K+ threshold.

How did you find this deal and how did you negotiate it?

The city sold me this deal from a tax sale, they were very cooperative and helped us to get our plans approved. I did have to push for them to allow me to build 7 duplexes, but we can to a compromise that allowed us to just do duplexes without limitation.

How did you finance this deal?

I raised the money to purchase the land and get it entitled. The build financing was done through Bank OZK out of Dallas, this took roughly 6 months, but honestly was the best financing we could get with the market adjustments. 12 months to build at 6.5% interest.

How did you add value to the deal?

We brought value to the deal as the developer, sponsor, and builder. This gave us control over the project and lots of flexibility on rental pricing and sales price.

Lessons learned? Challenges?

1. Make sure you understand the money-down situation.
2. It's okay to start with one home at a time.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No, both were just okay and there were a lot of mistakes.