All Forum Posts by: Jeff Wallenius

Our typical setup is a 50-50 split with a 15% preferential return to the investor. Investor puts all the money in for purchase and rehab and the profit is split 50-50. The preferential return provides a minimum for the investor with the upside of participating in a large equity position with the 50-50 split. An example below to clarify.

Investor funds $100K which includes purchase and rehab. Home takes 6 months to sell. 

Investment-$100K

Term- 6 months

Preferential return- $7,500 (15% held for 6 months)

Total profit-$30,000

Investor return-$15,000 (since this is the higher of the two numbers)

If the total profit came to be $10,000 then the investor would take the $7,500 preferential return and the operator on the ground would only make $2,500. 

Clear as mud?

@Ulises Astorga you don't need a network that you have to pay for, especially upfront costs. There are many options to invest and if you want to do it locally I would seek out a mentor to help you get started. Each side must bring something to the table! If your looking to invest out of state, you can do flips or get involved with buy and holds, the sky's the limit!

@Kevin Drouillard request a full SOW (Scope of Work) done on the property so you can see exactly what was done with the property. If the scope of work does not upgrade mechanicals (electrical, HVAC,etc.) then run for the hills. If it does continue to dig further. Does this company own their own property management company? If not, I would be very hesitant. Never buy a property where you are relying on appreciation, its a bad investment model. Have you accounted for vacancy, capex, maintenance, HOA, and management in your calculations. Miss something and your cash flow can quickly bottom out. The cash on cash return is good but there are plenty of questions. Also, $40K down is a large chunk and will handicap you for increasing your portfolio. I'm happy to discuss further if you have additional questions or if I need to expand on anything touched on above. Happy to help!

@Kaleb Carsten I'm a firefighter and I would tell you to stay away from these properties if there is significant fire damage. Fire that was contained to a room can be dealt with, but if it has breached the room and entered into the structure that's a problem. The heat alone can melt all electrical, HVAC and plumbing which will cost big money to replace. You also have to deal with the smoke damage. A product called KILZ does a nice job of encapsulating the odors but you have to paint everything. Fire in a basement can travel through pipe chases and building voids so it can be difficult to determine the extent of the damage. That's my $.02 

@Eugene Peh are you stuck on the Austin market or willing to go elsewhere to invest? I have much of the same scenarios here in the Portland market which has driven me to invest in the midwest and south where I can get some nice cash flow on rentals. As @Aaron Gordy mentioned, you can find some deals but it's going to mean hitting the streets and putting the time and work in. Best of luck, but know that there are other options to invest across the nation.

@Fauzia Jomes I don't have an operator in that are, let me know if you come across one as we're always looking for great partnerships.

@Hosnah Agban let me know if you need assistance, I would be happy to help.

@Anthony Rullo the Portland market is absurd right now. I'm liquidating my local projects and moving all my investments to the Midwest and South. Just too much competition here now and a plethora of better options elsewhere.

@Nathan Click I sent you a PM. 

Welcome @Marcus Mathews to the site. The BRRRR strategy will be difficult around here as prices continue to climb and rents are being controlled by local government. I like Indianapolis for the BRRRR strategy as there are plenty of opportunities in that market.