All Forum Posts by: Warren Smith

@mattschaum

Sounds like you have a good deal in the works. If its a retirement nest egg, are they willing to consider owner finance for several years to offset the capital gains? They would likely have the tax liability immediately if it's not primary residence, so spreading it out over years may be helpful if they're not doing a 1031 exchange into a new investment property. For retirement, many people want some residual income which may make it attractive to get monthly income for several years in the form of loan payment. Plus it can add to your bottom line - longer term payout means you have more cash in hand in the immediate future to make other deals. This is some of the most enjoyable part of REI: being creative and finding what you can do to make the deal work best for all involved.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $25,000
Cash invested: $25,000
Sale price: $90,000

Starting a fix and flip, purchase from probate, starting the rehab process. 2/1, 900sf, total gut, remove a kitchen to living room wall to open it up. Plan is to re-roof, clean up yard, paint, windows, doors, floors, electrical, plumbing, kitchen and bath. Working with out of state realtor and contractor for the first time. Estimated ARV $90k.

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

Working with a friend out of state who has past history of similar deals in FL and MT.

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

Friend lives in the area, he found deal as a pocket listing.

How did you finance this deal?

HELOC for purchase and rehab

How did you add value to the deal?

complete rehab

What was the outcome?

still pending that!!!

Lessons learned? Challenges?

currently learning how to maintain contact with realtor and contractor.

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

Missi Adkins (Ashland KY)

I agree with Tyler's response: its definitely a way forward. Have you talked to your lender about a HELOC? If you have equity in both properties you currently own, you may get a line of credit on your properties such that you can invest with that money short term and refi, as it seems you look to be doing with BRRRR. ( it will be a % of your equity, but at least then you can keep your property). You can become your own hard money lender (in some markets) or at minimum have the % the HML may wish you invest for your next project. If the numbers work, they work. If you already have a cash flowing property, why get rid of it? It can be an asset in your portfolio that gains more value and opens you to more HELOC $$ in the future.

Start with asking what the seller needs.  Some down? more at sale as you are suggesting?  find a way to make it a deal that benefits both of you.  Terms are always flexible, and if you can find their values and address them, they may be more willing to make it feasible for you.

Investment Info:

commercial investment investment.

Purchase price: $190,000
Cash invested: $200,000
Sale price: $470,000

Purchased 4500sf steel frame office building, 1974 build, used by dentist. Single occupant at time, rehabbed around current dentist to create 4 more units, one for my primary business, a massage suite with 3 treatment rooms, small professional space and small commercial space. When dentist moved on remodeled his office now houses financial adviser. Currently run my primary business out of 1750sf, have had full occupancy for almost 3 years, generate more than $4300/month gross.

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

I was outgrowing my current office space, owned that building, so sale was in order to allow further primary business growth. This was an opportunity to buy on the the main business corridor at a low cost due to rehab need, and the ability to customize to my needs. Added bonus was having ongoing rent income during the remodel process.

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

Found through real estate agent.

How did you finance this deal?

Traditional bank lending and construction loan

How did you add value to the deal?

I was able to build to suit for a massage therapist who I have a working relationship to build her an expanded suite to suit her needs to expand her business.

What was the outcome?

More energy efficient, better set up to my work needs. Rent incomes are $1500/mo greater than expenses and loan service.

Lessons learned? Challenges?

Time frames can be challenging and challenged. Our contractor did nice work, but had some family issues that slowed his progress. He busted his *** to complete on time (we had to move out for closing of old office location on specific date), but strained our relationship (now since restored). Future I would require added verbiage in contract for incentive to finish on time to encourage contractor hiring more adequate team to complete on or ahead of schedule.

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

John McDermott at McLeod realty was great to work with. Sold my other other building and helped facilitate purchase of this one.

Hi J. We just picked up your second edition books and how to analyze the market by economic factors. Great reading! We are looking at an REO that has been on market 7+ months, had 3 price drops by the bank (down 30k), for a potential rehab and flip. It is a 1970 build under 1000sf/floor, and in need of complete gut, is short of FHA qualification (right now) which is why it hasn't moved. I have a couple contractors looking at it to provide bids for remodel and rehab. My question is about dealing with the bank: what kind of approaches have you used to pick up REO's? Cash in hand at offer? Fast closing to remove non-performing asset? We have investors ready to move, but have not dealt with banks on how to approach the offer. Some direction of where to further research how to make an offer that is highly likely to succeed while still getting the a deal would be greatly appreciated.