All Forum Posts by: Thomas Moran

Hi BP -

You guys have helped me immensely over the years and I am finally at a point in my investing career where I can embark into apartment buildings. I'll be honest though, the idea of writing an LOI and all the jazz is a little nerve-wracking.

Please poke holes in this, particularly those of you who invest in North Carolina, so my first larger deal doesn't become my last.

The numbers:

-$880k valuation on prop stream. 2.5 miles from the hospital and ECU. (Greenville, NC)

-Seller seems likely that he would sell in the mid 6's (he's an old dude and lives out of state)

-C class property, 12 units, built in the 90's, professionally managed, brick construction

-NOI right now is in the 50k region but based on comparables could easily be improved to 85k ish

-CoC if he agreed to mid 6's is 21%.... total ROI 61% with note paydown etc.

-It would be a 13.1 cap but my mentor owns property in Greenville and says cap rates are 6-7% which would make this worth about 975k if rents were raised.

-PITI would be about 4160 with a 162k downpayment.

-low vacancy, no evictions in the past 10 years

This is an off-market deal (communicating directly with the seller) and am currently finding partners and raising capital. If you know anyone feel free to reach out

What am I missing? Tear this one apart...seriously. Thanks so much in advance.

-Tom

@Jesse Rivera

Super helpful! Thanks Jesse!

Hey BP,

Working on my third deal (second rental) and started laying the ground work on a 91 day seasoning period loan. My question is- does personal debt to income ratio matter if the property is in an LLc when you refi? I have another rental and a primary house so I’m thinking this would put me over the threshold for debt-income but I know folks use this method to scale so I’m sure I’m overlooking something. Whats the best practice? Commercial loan? High equity? Large w2 income? Help!

-Thomas

@Ryan Lee

I’m going to close. The numbers still work and it’s too much of a headache legally and what-not to bail

@Matt Berklacy

Honestly I’ll let @Jay Hinrichs take that one, I’m sure he will love your response. 

I am not advocating that I should cut the wholesaler out of the deal or negotiate a lower fee. I never said that. I also stated multiple times that I think wholesaling can be valuable for all parties in most situations. 

Yes I am new, as you once were, and mistakes will be made. The contract was signed and I agreed to it’s terms, but the assignment fee was never stated up front. I am still in the deal and have not exited because of the fee. I have to applaud myself for taking the plunge though when so many sit on the sidelines. I was simply seeking counsel from other members. I am obviously playing in the Wild West and not the mls because I am very aware of the Raleigh-Durham market and the macro economic trends.  I have lived here for almost 30 years I don’t need a gurus advice on that. 

Who hurt you? You’ll catch more flies with honey than vinegar. 

@Jimmy O'Connor

Great post! Thank you. I actually tried wholesaling for a very short period of time and determined it was not my cup of tea, but from the little responses I got I quickly realized it's not "easy money". Thousands of dollars on marketing budgets and lots of conversations with tire kickers are a minimum. I don't doubt some of these guys claw tooth and nail to solve problems and provide value. I'm not sure the gentleman i'm working with though is that guy...but i'll give him the benefit of the doubt. 

Do you mind elaborating a little on what you consider to be "property fraud"? Is this like marketing properties that you don't have under contract and pocketing EMD or assignment fees, never closing and skipping town? Thanks again for the thoughtful and intelligent response.

@Alex K.

You make a good point. I ultimately got the original purchase of sale contract but it was after I signed the assignment contract. This is my first rodeo, so I didn't know any better. It's interesting to note the gray area between what's "technically legal" and a scenario that a judge would actually enforce.  

Update: We pushed closing back by 2 weeks and I'm still at the original agreed upon terms. There's a clause in the agreement that says $500 a day closing push-back fee, which is kind of insane and I got that removed. We will close 2 days before his original contract expires so he will be sweating. 

@Alex K. Hey Alex - that's super insightful. I know you can't speak as an attorney, but in your experience if the assignment fee wasn't disclosed upfront (the contract just had the total amount as if he was selling the property for that much) it's not legal?

It was a really good deal and there was a lot of competition (or so he said) so I felt compelled to be flexible on the terms to get my offer accepted. Growing pains. 

@Abby Ruppert

Oh I gotcha... yeah I didn't see it until the lender asked me to retrieve it from him. I'd rather learn some of these painful lessons the hard way then pay for a $10,000 real estate "crash course seminar", or something of the likes

@Abby Ruppert

Probably a dumb question but - what do you mean by front side contract?