All Forum Posts by: Tim Hendricks

I have developed a successful strategy in a very small niche of the overall real estate market. I have been investing for 20 years but just discovered BP last year. There are tons of investors posting here who make my little business look tiny. Wish bigger pockets had been around in 2001:)

Set up costs depend upon who you use to set it up and whether or not you use a business as a registered agent, or if you know an individual who can act as the resident agent and agree to let you use their name and address for any court summons that needs to come to you. The registered agent has to be in the state where the LLC is doing business. My registered agent charges $125 /year. Tennessee has an annual report filing fee of $300 minimum.

Agree with James above. Do some research until you know how to operate through an LLC, and what is expected as far as filings, tax implications, etc. You will also have additional tax prep expenses unless you do it all yourself.

Hey Levi,

Tim Hendricks also in Nashville. I waited until I had several properties just because of the expense of setting up and maintaining the LLC. Wanted the profits from the real estate to pay for it. However if you think that there is any possibility of a lawsuit coming your way, I would do it as soon as possible. Better to have 1 property in an LLC if you get sued than to have 50 properties in your own name if you don't get sued. We now have 61 current SFR on lease options. Are you buying houses or condo's?

Tim Hendricks

My investor group is expanding into the northern AL market and would like to know if anyone has advice on which areas to avoid. Which areas of town would you not want to walk down the street at night? We are looking for "middle class" homes built after 1960, 3 bedroom two bath or larger that need only cosmetic repairs. Prefer neighborhoods with mostly homeowners as opposed to areas that are almost all rentals. Homeowners tend to keep the properties maintained better. We typically invest under $130,000 so we are not looking in the high end districts.

Thanks for any suggestions.

Tim

Investment Info:

Single-family residence buy & hold investment in Clarksville.

Purchase price: $122,200
Cash invested: $3,440

Investor put up $21,000 for 20% annual cash on cash return, or $350 per month. I put up the remaining $3440 and receive $311 per month cash flow. Also received a $10,000 non refundable down payment from the lease/purchaser.

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

Cash flow primarily, and down payment money is a nice bonus.

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

MLS

How did you finance this deal?

Investor conventional financing.

How did you add value to the deal?

Knowledge of the area, what we could buy for, what we could lease for, lender who would do the deal with a qualified investor.

What was the outcome?

Typical of the last 94 deals.

Lessons learned? Challenges?

Just need more investors who can put up the credit statement. The properties are available if you know the numbers in a specific area.

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

I am a licensed real estate agent in Tennessee.
Lenders who will work with a well qualified investor should be easy to find.

Hey Nicholas,

I started out with joint venture partners like yourself who put up the credit statement and down payment to purchase a property and I managed it start to finish. We started with a 50/50 split which was OK but it became a hassle after about 20 properties because the escrow on every property changed twice a year when taxes came due and insurance came due. I was spending a lot of time recalculating what the 50/50 split was. Since I was averaging getting the partner about 18% to 22% cash on cash return, I got them to agree with a fixed 20% cash on cash return on the amount of money invested. For example they put $21,000 into the deal. If down payment and closing costs exceeded that then I paid the rest. They got 20%, or $4,200 per year, paid in month payments of $350. I kept whatever the cash flow was after they were paid. I dealt with the fluctuations of escrow. Because federal law also allows lenders to collect a 16.6% Reserve amount (16.6% of the annual amount of taxes and insurance) this also created fluctuations. Sometimes they collected too much for a year and the next year they paid back an overage. I also am totally responsible for maintenance, repairs and vacancies. The investors like knowing exactly how much they have coming in. And it has also simplified my work load. I have never heard of another property manager who pays the PITI and then pays the investor first. So I don't know if this will help. Hope you know your new partner very well and know that he will not try to make you pay for all the upkeep out of your end of the deal.

Tim

Colan,

Are you looking to pay cash or get financing? Are you determined to do rentals? Will you have to pay a local property management company and pay for repairs out of your pocket and cover vacancies?

I have operated differently through Home Sweet Home LLC property marketing and management for 20 years in middle Tennessee. Now moving into northern Alabama. If an investor pays cash I pay them 10% fixed. We cover all the repairs, maintenance and vacancies. If you put up $84,000 you receive 10% annual ROI. It is paid out $700 every month. We can do this because we become Joint Venture Partners with you and collect a non refundable down payment from the tenant. We also get a percentage of the deal when it eventually sells. We keep any positive cash flow above your $700.

If you get financing and pay 20% down payment, we pay you 15% annual cash on cash ROI, paid monthly. Same deal, we cover all vacancies, repairs and maintenance.

My investors have gotten their check every month for 20 years.

Just thought I would throw out an alternative to rentals.

Tim

If you would consider single family homes for a fixed 15% cash on cash return, go to homesweethomeLLC.net/investors.html

You provide the credit statement and $24,000 and receive 15% annual ROI, or $3,600 per year, paid out in monthly $300 payments. Home Sweet Home LLC property marketing and management is responsible for all maintenance, repairs and vacancies. 20 year history. References of current investors can be supplied.

Tim

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $102,000
Cash invested: $20,400

Typical of what we buy. 3 bedroom 1and half bath partially finished basement, 2 car garage in basement.

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

Steady long term cash flow. Tenant does maintenance and repairs just like they would with a bank mortgage.

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

MLS

How did you finance this deal?

Bank financing with 20% down.

How did you add value to the deal?

Offered a house for sale on long term lease with option to purchase. Tenant could not qualify for a bank loan.

What was the outcome?

Cash flow for 18 years with 2 turnovers. 2 months total vacancy.

Lessons learned? Challenges?

With current price appreciation in middle TN I have learned that I should have done a hundred more in 2002.

Do what I did. Buy the system of John R. Burley and do lease options. You can create about 30,000 equity in every deal, so it would take about 33 houses to have a million on paper. At about $200/month cash flow, about $5,000 income. I did 40 houses in my first 4 years and became a millionaire according to my CPA. (and much to the surprise of my family). At 5,000 a month I did not feel like a millionaire. My banker did start calling me Mr. Hendricks instead of 'hey buddy'. The system includes you doing the hard work of learning the system and then finding money partners to put up the credit statement and the down payments.