All Forum Posts by: Thomas Franklin

@Nicolas Da Silva Yes, I know a very good Real Estate Agent that happens to be a Broker. It all depends, on your definition of a “deal” and YOUR ABILTY TO PERFORM. If you are lacking Capital and/ or a Partnership Arangement that does, then your ABILITY TO PERFORM is restricted. 

@Cristian Aviles-Morales Than you, for your kind words. I always try, to provide informative value.

@Nicolas Da Silva I am not a fan of purchasing a Residential Multifamily Property known as "House Hacking." If you are looking to owner occupy, you may want to consider starting out, with buying a Duplex, TriPlex, or a Four Plex. Many Realtors will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a FHA 203k Loan. A FHA 203k Loan is where the purchase price and rehab costs are rolled into a single loan.

Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). You live in one unit and let your tenants pay the mortgage and other property expenses. This will give you experience as both a Landlord and Property Manager. The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC.

If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years). This is what I am encountering, in the current Mortgage Industry.

If you think you will go FHA, Conventional, FHA 203k, etc. and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days. These clauses are contained, in all Promissory Notes nowadays.

Many Realtors and/ or Mortgage Brokers will not tell you this information. Many, but not ALL are only focused on the commissions he/ she will earn and not focused, on your best interests. You may be asking yourself what can I do? Locate a Motivated Seller that will consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.

@Ryan Fuchs Your Frontend HELOC Closing Costs will be different, from your Backend Closing Costs. For your Backend Closing Costs, you should factor in 10% of a Conservative ARV (6% Realtor Fees and 4% Title Company Closing Fees). Realtor Fees of 6% is common as the Seller is typically responsible, for paying the Seller’s and Buyer’s Realtor Commissions unless the Commission Split is different and/ or one or both parties is not represented, by a Realtor. Title Company Closing Fees, of 4% is a conservative estimate.

@Roland Paicely I believe I answered your question(s), in my original post. Please do not be lazy and perform your own research regarding applicable laws, statues, rules, and regulations for your state.

@Jason Palmer Wholesaling, in the state of Florida and many other states is ILLEGAL for many reasons. According to Florida Statues, one cannot market a property unless he/ she has the intent to purchase. I refer you to the following Florida Statues and URLs, to make your own determination. In addition, I invite all others to research their respective State Statues and State Regulatory Agencies to determine what is legal and what is not legal. Florida Statues 475.42 and 475.43. https://www.richardhornsby.com/crimes/regulatory/unlicensed-practice-of-real-estate.html https://swflreia.com/2016/01/19/unlicensed-real-estate-activity-florida/

Jordan Hamilton I would factor two additional expenses, into your analysis. First, I would deduct 10% of the Monthly Gross Income, for Management Fees. As you build your portfolio, of properties, it will become too consuming, to Self Manage. In addition, you will need to stay current regarding Florida Tenancy Laws, to ensure your Rental Agreements, Late Notices, Eviction Procedures, etc. comply, with Florida Law. The second expense you should factor into your analysis is Capital Expenditures also know as Cap Ex. The way I do this is to deduct 10% of the Monthly Gross Income and put this amount away, in a dedicated Savings Account until I have built up 10% of the the property’s Fair Market Value (FMV). Once I have achieved this amount, I convert this expense to income. By doing this, you are covering yourself when a major expense arises such as Roof Replacement/ Major Roof Repair, a major repair or replacement to the plumbing or electrical system(s). Why scramble around seeking a loan or maxing out your Credit Cards? If you ever need to tap into this Savings Account, you convert the income back to an expense until you have replenished the amount you took out. On a Four Plex, you may be able to get away with deducting 5% of the Monthly Gross Income, for this purpose. I hope this helps you, with your analysis.

@Autumn Alexander I sent you a Colleague Request. Hopefully you received it. 

Autumn Alexander before you consider Wholesaling, please be aware that it is illegal to do so with a Real Estate License. I refer you to Florida Statues 475.42 and 475.43 and the following URLs. https://www.richardhornsby.com/crimes/regulatory/unlicensed-practice-of-real-estate.html https://swflreia.com/2016/01/19/unlicensed-real-estate-activity-florida/ I have been a Real Estate Investor, since 1998. Please feel free, to review my profile.

Bing T. In the future, you may want to consider the following MAO Formula that I use to determine my Offer Price, for Potential Flip Acquisitions. Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc. I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything. ARV - Desired Profit - Closing Costs to Buy - Repairs - 10% of Repairs - Holdings Costs - Concessions - Realtor Fees - Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer). ARV: After repaired value or what you think it will sell for once repaired. Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable. Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees. Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs. Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, property insurance premiums, property taxes, loan payments, HOA Fees, etc.). Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV. Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV. Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these. This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling.