All Forum Posts by: Tim Porsche

@Account Closed

Thanks for the replies John and Jerry. I do normally factor in about 20% of rent right off the top for vacancy + repairs + capex, I guess my question was more at what point should I stop saving excess income for future repairs and capex costs, and start putting it into more properties or investments? Assuming that there are no expenses that I know are going to be coming due in the near future, such as an old roof or water heater.

My goal is to reinvest as much of the income as I can as fast as I can instead of having it sit idle, but without putting myself in a position where I'm unprepared for a big repair\replacement or two. 

Hi All,

I have a quick question I'd appreciate your input on, especially if you already own numerous multi-family properties yourself. I currently have two rentals with good cash flow, one a single family and one a duplex I'll be moving into in the near future. My goal is within 3-5 years to own 3 or 4 triplexes or quads with about 20%-30% equity in each (don't want to over leverage). My question is, assuming each property is in good overall condition and solid, no major capex expenses are on the horizon like a new roof for instance, how much should I be keeping in liquid cash for large unexpected repairs to these properties? Also assume these properties are worth about $180,000 each. I know there are many variables, and maybe no single correct answer, but I'm just looking for a rough ballpark figure here. Is $20,000 a good number? Too high, too low? Thanks in advance for any input you can give. 

The one thing I would say is, whatever amount you choose to increase the rent by, give the tenants at least 3-4 months notice ahead of time. An increase that they have time to prepare for a few months in the future, will be less likely to scare them off than one you are going to implement immediately. 

Also, consider making the increase amount an odd number...increase by $27\month for instance instead of $30. This will make them feel like the increase is tied to actual costs and not just an arbitrary increase if that makes sense. 

@Franklin Romine From all outward appearances he seems to be. I know he gets a good amount deals done as an agent on the selling and buying side each year, owns his own home, and also some rental properties. In this particular scenario what kinds of things would you recommend checking for to assess someone's true financial position? 

Originally posted by @Jay Hinrichs:

@Tim Porsche  see my post above any of these deals that are basically just fix and flips my advice is to just put up all the money .. but be very careful who you select.

you want to vette them like a tenant... full background.. credit etc.. being a realtor is another level of skill and trust as well.  turned out the guy I did my Atlanta deal with had his GA brokers license revoked.. I broke my Own darn rule there I did not do enough checking that would have kept me from doing any deals with that person.

All the stuff you talking about is in my mind just super over kills for simple rehab deals.

I would expect this type of detail if I was building a multi million dollar project were real money was on the line...

the cost of enforcing all those provision etc your deals if they are under say 200k just not worth all the brain drain cost up front etc.. people are either going to execute or they are not.  If they do fine your the money pay them... If they don't your the money take 100% control and do not have to mediate or litigate or spend one dime controlling your money or asset..

After almost 40 years of HML I learned this one the hard way..

 Hey Jay thanks for your input. I'm not sure I want to just be the money, at least at first, for a couple of reasons though. Number one and most importantly, I don't have the money to be the money haha. Right now I am only comfortable investing about 10-15k, so having a partner to split costs with me is ideal right now. I'm just starting off investing in real estate so most of my money is in equity in the two properties I currently own. Secondly I want to try to learn this business more hands on, so I think partnering with someone will help me more with that rather than just lending the money, but perhaps down the road after doing a bunch of successful flips I might do what you suggest. That is if everything goes well. 

So as far as the written agreement with my realtor, you're saying you think it's better to just not bother since the money involved is (relatively) small? Like I said I am new to this, so perhaps I'm just overthinking things. I'm sure once things start to get rolling some of my questions I have no will dissipate and new ones will come and replace them.

@J Scott

@Dan Bunch

@John Rogers

@Daria B.undefined

@Russell Brazil

Okay so I have finally gotten around to drawing up a  short equity and profit sharing agreement. It's just something short, simple and in plain English laying out the terms of the partnership. I would super appreciate it if you could tell me what you think and give me some input before I send it over to my partner and ask him to sign it...is there anything I should add or remove or change? Please see below.

House Flipping and Rental Property Equity and Profit Sharing Agreement

between

Tim Porsche

and

Partner's Name

This is an agreement between Tim Porsche and Partner's Name.

Financing and Responsibilities for Associated Costs

1. Both parties agree to provide 50% of the required down payment for a hard money or private money loan to secure financing for each house they purchase with the intent of renovating and reselling for a profit.
2. Both parties agree to provide 50% of any other costs associated with financing a property, including loan points and closing costs.
3. Both parties agree to provide 50% of the money required for all renovations needing to be performed on a property. This includes the costs for materials, the costs for labor, and any other related miscellaneous costs.
4. Both parties agree to provide 50% of the money required for inspections, appraisals, and any required surveys.
5. Both parties agree to provide 50% of the money required to pay holding costs on a property, including but not limited to home owner's insurance, property taxes, mortgage payments, utilities, lawn care, and any other miscellaneous holding costs.
6. Both parties agree to provide 50% of the money required to sell a property, including but not limited to a buyer home warranty, buyer closing costs, buyer termite letter, and seller closing costs as required.

Individual Roles and Responsibilities

Partner's Name agrees to perform the following:

1. Act as buying agent when searching for and acquiring properties in need of renovations.
2. Act as selling agent after a property has been renovated and remodeled. Will be responsible for listing, marketing, showing the property to interested buyers, and handling all back end processes relating the the sale of a property.
3. Share equally in all tasks related to finding a property to renovate and resell, analyzing deals, renovating a property, and selling a property after renovations have been completed.
4. Provide 50% of the money required to purchase, renovate, and resell a property.

Tim Porsche agrees to perform the following:

1. Share equally in all tasks related to finding a property to renovate and resell, analyzing deals, renovating a property, and selling a property after renovations have been completed.
2. Provide 50% of the money required to purchase, renovate, and resell a property.

Profit Sharing

Both parties agree to each receive 50% of the total profit that is left after all expenses have been deducted from the final sale price of the property. Partner's Name has the option as the selling agent of either:

1. Taking a 3% commission on the final sale price of the house after renovations are complete, and splitting the remaining profit after the commission is deducted 50-50 with Tim Porsche.
2. Declining to take a 3% commission on the final sale price of the house, and splitting the remaining profit after all expenses have been deducted 50-50 with Tim Porsche.

Arbitration

In the event a dispute shall arise between the parties to this agreement, it is hereby agreed that the dispute shall be referred to United States Arbitration and Mediation for arbitration in accordance with United States Arbitration and Mediation Rules of Arbitration. The arbitrator’s decision shall be final and binding and judgment may be entered thereon. In the event a party fails to proceed with arbitration, unsuccessfully challenges the arbitrator’s award, or fails to comply with arbitrator’s award, the other party is entitled of costs of suit including a reasonable attorney’s fee for having to compel arbitration or defend or enforce the award.

Wow, lots of awesome answers here, thanks everyone! I am leaning more towards buying multi-units for my future investments since my primary goal is positive cash flow right now, and not so much appreciation and resale at a later date. 

For those of you who own trixplexes or quads, what is the average time per unit every year that you take to manage it? I work full-time now so my goal is to keep my total time managing properties to under 5 hours per week, or 20 hours per month that would be the maximum. Anything past that and I would want to look at getting a property manager. 

Hey All,

Just curious to get opinions and thoughts from you on what makes a better rental property. I know there are pros and cons to single families and multi-units, and I'm still undecided what direction I want to take long term. Right now I have a single family I purchased for $122,000 that has a positive cash flow of about $350\month after EVERY expense has been considered, as well as an allowance given for capex and maintenance of 10%. I just bought a duplex as well which I'll be moving into in the near future. So in general multi-units will give you a better return on your investment, but take more time and energy to manage right? What other pros and cons are there to each type of property? Do you invest mainly in single family homes or multi-units, and what are the reasons for your choice?

Hi All,

I am planning to start a partnership with my realtor to do house flipping in the Wyomissing area of Pennsylvania. I need a simple, plain English, legally binding agreement drawn up to protect both of our interests when doing the flips. The requirements are listed below.

1. Needs to specify that we are each putting down 50% of the downpayment for the purchase of the houses and the cost of the renovations.

2. Needs to specify that we are each paying 50% of the closing costs on the purchase of the house and 50% of the loan points.

3. Needs to specify that we are each paying 50% of the holding costs associated with the flip.

4. Needs to specify that when the house is sold, the 6% costs for selling the house will be taken from the overall shared profit. My realtor partner will earn his 3% on the sale.

Example:

Sale Price = $100,000

Purchase Price = $50,000

Renovations, purchase closing costs, loan points, loan interest payments, holding costs = $25,000

Sale Costs = $6,000 (my partner would get his 3% cut or $3,000)

Total Shared Profit = $19,000

My Share = $9,500

Partner's Share = $9,500

5. Needs to specify that if house is not sold within 4 months of being listed for sale, either partner shall reserve the right to take the house off the market and list for rent. All expenses will associated with the rental will be split 50-50, as well as all profits from the positive cash flow. 

6. Needs to specify what will happen in the event that one partner would want to back out of the deal, is moving out of state, is unable to keep his end of the deal for any extenuating circumstances such as medical issues, etc. I am open to advise as to how this should be structured and laid out. 

7. Any other things that you can think of that should be drawn up to protect both parties.

If any of you would be able and interested in drawing up such an agreement, please let me know :). We can discuss the details then through private message. 

Originally posted by @Daria B.:

@Tim Porsche

I voted for a well thought out beginnings of a plan. My friend and I were discussing the venture of finding a partner this morning. We have $$$ and some experience but are entertaining the thought of finding someone that is experienced in not just flipping but acquiring for buy and hold. The b-n-h I see as finding a RE realtor-investor to acquire property and that would get the agent their commissions. We're purchased a few already but want to keep going on some good deals.

@Daria B - Thanks for the vote Daria. I have also been thinking about implementing the BRRRR strategy that Brandon Turner recommends. I plan on doing some flipping first though to raise as much money as I can in as short an amount of time as possible...and then later on purchasing multi-unit properties that require some work and renovations...fixing them up, renting them out, refinancing them, and then holding on to them for the long term for the positive cash flow.