All Forum Posts by: Tom NA

Biggest mistake - partnering with someone, with a legally binding agreement in place, but not thinking about how stupid my subsequent actions were. My first step then, I was thinking 'business', as I should. Every action afterward then was based on 'trust' and probably 'greed' and I paid the price. He ended up with the rehab money in his pocket and sold the property and I was left only with a judgment that I can't collect on.

On the other hand, I feel like I learned so much from this expensive lesson vs. anything I could have learned by spending money on a RE course. In my opinion, you feel and take to heart a real experience much more than you do someone's second or third-hand account of how things work.

Your question didn't really give much information. What kind of houses are you trying to unload and who are you trying to sell to? Your strategy and marketing may be different if you're trying to sell wholesale to investors vs. if you're trying to sell at retail. But, in general, if you have them visibly listed via enough venues and they still aren't moving, it's all about price and yours is too high.

Honestly, without knowing your business model, I couldn't even begin to make suggestions on the website. Who are you targeting? Why should they use you? I *think* you are trying to wholesale but it's unclear.

Without knowing your intention, I would say you could at least start by focusing your efforts on improving the spelling and grammar on your website. Get a good proofreader or writer - I'm a little (ok a lot) anal but if someone doesn't care enough to get the basics right on their main marketing face to the world, it makes me wary of doing business with them.

That aside, let us know your intentions and maybe we can give some further recommendations.

I got an AHS policy from the seller of a property and actually got a new compressor for my air conditioning but even after getting that very expensive repair, I could not recommend them. They dragged their feet and tried everything possible to avoid putting in a new one. In the end, I had to bring in my own specialist at my own expense as a 2nd opinion to convince them to pony up. And all the while, I had a tenant burning up in the middle of the summer in Phoenix.

My advice then is to stay away from these things. The initial cost ($350-$450) plus the per visit cost (another $50-$60 usually) and you only get your money back *if* you have something major go wrong and *if* they actually decide it is covered amongst the myriad of exclusions. Save your money in a reserve fund and control your repairs on your own. If nothing else, your tenants will appreciate it!

I can't speak to fungus but *every* property in California has termites, at least on the coast, so depending on part of the country and extent of damage, that's not necessarily a reason to run. Just tent it and treat it and you're good to go... until your next inspection which will also show termite activity...

I would take it to a place like prosper.com or an equivalent (sorry Joshua, I always forget if I can include URL's). People there seem to loan out money with a little more reckless abandon than on a website like this.

After reading your explanation, I still don't understand at all what you're doing and how you will afford to pay out $75k in 3 months when you can't even afford $25k today. I think what I'm hearing is (Step 1) Borrow $25k to pay a 3rd-party which will help improve your D&B rating; (Step 2) After the rating is improved, draw $75k from the new line of credit to pay back the initial lender; (End State) You have better credit but it's at the expense of being $75k(!) in the hole. I can't imagine how this is good for you and I suspect you'll get lots of people wondering the same thing.

I'm with Jon on the skepticism on this. If someone promises this return that is too good to be true, sorry, it screams scam. And with the explanation I've seen so far, it only gives me enough info to assume that you aren't making sound financial decisions which would mean no way would I want to risk $25k for the high return.

Thus, to your initial question - I would go to the type of site that I listed above. Real estate investors typically want hard assets and verifiable numbers to back their investments. I really think you're looking for someone hoping to make a quick buck and willing to take a big risk to do so.

1. I think people will tell you that your assumed operating expenses are a bit low (I calculate 44% of gross rent) but they're in the ballpark.
2. If you or your uncle can get 6% on a 30-year fixed investment property, please give me your broker's name and number immediately... I'm not fully in touch with current rates but I think something between 7%-8% would be more realistic.
3. Taking out 90-95% of your "new" equity after rehab would hit you in multiple ways:

a. You suddenly have an overall LTV between the 2 loans of 95% on the property. I don't think any bank is going to allow that and I also suspect they will be conservative in valuing your property up to $300k after you just bought it for $170k. Not to mention if you did get that much LTV total, your rate will be very high on that second loan.
b. Remember, borrowing against your equity is not free money - people tend to overlook this. If you pull another $100-$150k out after rehab - guess what just happened to that cash flow you calculated? Now you're feeding $500+ into this property every month. Do you really want to lose $6k per year for the privilege of going out and seeking another such "opportunity"?

If you go with the simple formula provided by those most knowledgeable on this forum, your calculation of what you should offer is really quite simple. If monthly rent is $2700, your (purchase price + rehab) * 0.02 is
the max you should pay. This leaves you with $95k as a purchase price, leaving you $40k to rehab. Hopefully I got that right - I'm sure the pros will correct me if I didn't. And remember that is a guideline but it should tell you the ballpark of where you need to be if you really plan on creating a sustainable business in RE.

One final note: you mentioned that your uncle flips properties. Since you are looking to buy and hold, what he does and how he does it may actually have very little application to your situation as you are comparing apples and oranges. I don't want a dentist to diagnose my heart problems and I wouldn't necessarily want a property flipper to tell me how to setup a buy and hold business based on cash flow.

Good luck.

While the asset protection provided by an LLC is unquestioned, I thought I had heard that financing under an LLC can be problematic. Is that true and if so, how are people getting around that? Obviously for someone like All Cash, this isn't a concern but I suspect most people aren't paying cash for their investment properties.

I work full-time in high-tech as a business systems analyst - engineer and MBA by education. No desire to enter REI full-time, I enjoy what I do and make good money doing it. This is just a side interest and an investment vehicle - no different than the stock market.

Hi Sam - I may also be interested in partnering. Feel free to PM me if you want to discuss further.