All Forum Posts by: Vaughn Lewis

I've seen many related discussions on the boards here - but none that explicitly address what I'm looking for - at least in simple terms.

Here's the scenario:

• Project:  Rehab and flip, own for less than 6 months
• House built: 1930
• Purchase price:  $34K
• Estimated rehab cost:  $50K
• ARV: $130K

Here's what I'm looking at w/ respect to a quote I'm ready to go with:

• Vacant/Builders Risk Insurance, 6 month policy
• Coverage amt:  $130K, ACV (gathering RCV is not available industry-wide for house this old)
• Co-insurance: 80%
• Liability:  $500K
• Theft:  $5K

My question is basically - would this be considered sufficient coverage? I basically want to be able to recover - in the event of a catastrophic loss - for at least the purchase price amount + any amount I've put into it up to the point of loss (preferably the ARV if loss occurs after rehab is complete but before it sells). Trying to understand the insurance discussions generally bends my head - so if someone can give me the scoop in very simple terms I would be ever so grateful.

Thanks

Vaughn

Hi Sam and Heather!!!

Wow - I'm really impressed.  Sounds like you guys are really lining your ducks up well and are ready to take aim.

I don't have too much to offer in the way insightful guidance; but I would suggest you consider Harford Bank for a commercial loan (if you have or will be forming an LLC). I have talked to their loan manager at the Bel Air branch (believe they have a branch in Cecil as well; but I believe the person I talked to is the loan manager for all 3 branches - but stationed at Bel Air day-to-day). Anyway - they will loan 80% of the purchase price + rehab costs. (i.e. 80%[purchase price] + rehab cost).  

The down side is the interest rates (4.75 - 5.25%) are a bit higher than normal mortgage rates for residential properties; and they ammoratize their loans over 20 or 25 years (not 30).   While not ideal - the terms could work for a buy and hold as well as flip.  Don't believe there's an early payoff penalty (I didn't ask though).  Even if it's not the selected route on your first go-round; it may pay to visit and have a chat as at some point you may want to have the option lined up and ready to fire.

The way the process works: they'll give you a general idea as to whether you might qualify in a general $ range provided everything checks; but they don't do pre-qualifications. You would have to put the contract in contingent on financing. They would then do an after rehab assessment - and then approve or deny based on your qualifications as well as the deal itself. You would draw down rehab costs as-you-go from an account. (better to over estimate a little rather than have to go back and seek approval for more; if you don't use it all then you close-out and the less you owe). As you build a history with your LLC, at some point your personal qualifications would not factor into future loan applications. I've been assured approval turn-around is quick (I haven't yet pulled a deal either); that within the $ range I'm looking (approximate to yours) she can personally approve vs. it having to go before the board as a bigger commercial project might.

Wow - this is almost as long as your original post. Hope its helpful. BTW - If you're interested, I may be interested in partnering w/ you guys if the circumstance fit. I'm devoting FT to the effort - am in the same boat as you guys in terms of price points and geographic area of interest (the 130K sounds like a 900+/- SF rancher in Aberdeen); and I have a little more working capital at-hand than you guys which might allow for cash purchase and rehab. PM me if interested. Hope to see you at a Harford REIA meeting soon - I've missed the last few.

Take care,

Vaughn

Hi BP friends!

Looking for some thoughts / guidance.....

I am considering forging a business partnership with a like-minded investor in my area.  On the business end I was wondering if there is a standard in terms of profit distribution ratio (other than 50/50) that might apply in our particular circumstance:

• I am retired, would be spending full-time on the business - and basically would be doing everything as far as legwork, finding properties, #s crunching, evaluation etc etc.  When I find a potential deal I would present all the particulars and analysis - and from there we'll collectively determine whether to get more info, drop or act on it.   
• I have the working capital which we would leverage to the end of financing properties.  Otherwise, I have little income over/above monthly obligations as my only current income is my pension - and thus probably don't have much borrowing power.
• My would-be partner works full-time; doesn't have much up-front capital to contribute - but does bring a much better debt/income ratio and thus also borrowing power to the table.

Any thoughts/ suggestions as to what I should propose as far as a profit distribution formula (for those funds not going back into the entity fund)?

Thanks so much!

Vaughn

Welcome to the community Sam and Heather

I'm a relative newbie myself - just like you, educating myself as much as I can and gearing up for that first deal. I live in Harford County. Havre de Grace, North East and Newark DE are towns near you that have always appealed to me from a "community" and real estate investment standpoint.

There's definitely lots of great resources on this site - if you haven't already done so, I recommend going through the BP Real Estate Investor Begginer's Guide. Also - I recently joined the Baltimore REIA. I know you're not interested in Baltimore City at this point - but it's really a regional REIA. In fact, there's a Harford County sub-group that meets the first Thursday of the month at Giovanni's in Edgewood. There's a couple people in that group with experience in Cecil County. Look it up or feel free to contact me if you want more information.

Vaughn

Thanks all for the warm welcomes and introductions. Look forward to learning from and engaging with BP members as my REI career gets off the ground - and beyond. I'm very impressed with this community and the wealth of information and resources that are accessible here. Feel free to shoot me a PM any time (as a potential partner, client, customer - or local insight into my area, Harford County MD) - likewise, don't be surprised to hear from me (particularly those in the Baltimore area).

Hi Everybody

My name is Vaughn. I'm from Harford County, MD - which is in the Baltimore metro area and shares a border with York and Lancaster Counties Pennsylvania to the north.

I'm very excited about getting into the real estate investing business. My background is in long-range transportation planning. I retired at the end of 2013 after 30 years of service with the Maryland Department of Transportation. Since then, I've read several books on REI, been to several auctions at the local courthouse, read countless web articles, been to a REIA meeting, joined several meetups and am currently in the midst of an on-line class being taught by Josh Fuhrer - great class, highly recommend for any of the other newbies out there (it lead me to this site). Moving forward - hoping to have all ducks in a row and ready for action within the next few weeks.

I have a financial partner - and am building a small team of people that may participate in future projects. Through this site - I'm hoping to build my network of contacts, find additional team members, find investment opportunities, learn tips / tricks, pick brains, continue my education, and at some point share and lessons learned I might have to offer.

My initial focus will be residential (single or multi-family) - rehab projects or motivated sellers in my more immediate area - eventually expanding to areas I'm familiar with in Baltimore City, SE Pennsylvania and Newark DE.

Thanks

Vaughn