All Forum Posts by: Adam L.

Very good points about unsecured loans. That's what I'm worried about...this seems like he usually gets funding from family and a few other close friends on a handshake deal. I asked him what we could set up as collateral and waiting for a response.

no, it looks like he purchased property in 2017 and sold the units spring 2019.

So I'm still poking around and looking for how to invest in RE. I haven't purchased an investment property yet, but am currently offered a private financing deal w/ a neighbor/friend.

So my neighbor a few houses down is a flipper/construction guy. That's his primary thing. He buys properties, flattens them, and builds them up into fancy 2 condos and stuff. He's got a pretty solid track record and makes nice quality houses. He's found a new project and looking to build up two 2000sf SFH's on an old lot.

So he's asking for private lending to meet the 20% down on the bank construction loan on his next project. He needs a total of ~$200k and is asking for 50-70% private financing. His father (who regularly invests w/ him) is putting in $70k and so he's asking me (and others) for $30k-$100k to round it all out. 

He's offering a 25% simple interest return upon sale of the second unit. He's estimating 18-22 months to final sale/close on the second unit.

So questions and input advice here? I am certainly capable of providing this private loan to him. Any advice? I assume I can't get a junior lien on his construction loan. So I ask him to put a lien on his primary house? One of his personal rental houses? his new truck or fancy speed boat? Thoughts on the 25% simple interest? What it would effectively be if stretched out 2 years, compared to just time in the market?

Completed Projects:

• Aug 2017, purchased small house $420K, 
  • sold 2,400 sqft main home March 2019 $900K and 
  • 1,100 sqft ADU (small house) February 2019 $520K
• April 2017 purchased lot $420K 
  • built 2 , 2,100 sqft. condos 
  • sold A unit $735K August 2018 
  • and B unit February 2019 $750K
• March 2016, purchased property $690K
  • sold expanded and renovated Jan 2017 $1,832,000
• Late 2014, purchased lot mid 2013 $285K 
  • and sold new house late 2014 $932K
• 2013, purchased lot for $220K 
  • built 2 separate 2000sf units
  • sold each in 2014 just under $600K per side

WOW, ok, so I have some more details, just doing overanalysis of this dead deal....in case anyone else is reading and learning too.

https://imgur.com/a/6jZEpC8

My local Credit Union gave me a financing estimate. They appraised @ $160k, and in TX, you can only max out @ 75% LTV for investment properties.

So...

• $145k purchase price
• Rent $1150/mo
• Taxes $3700/yr
• $120k refinance
• $645/mo mortgage

...not much room for cash flow.

So would this have just been an appreciation property value purchase?

welp....the Mrs didn't feel comfortable moving so quickly on the deal. It just sold to highest bid @ $145125 .

Curious if yall think this number is too high. Plus the $5k closing.

So I'm at the house now.

It's pretty small but well maintained. 

The 3rd BR is actually a converted garage. It's nicely done and is being used for office and play room.

The single bathroom is between master and kids room, with an extra sink inside master.

Yard looks pretty ok size... Not sure if possible to add more sqft.

The tenant is a nice, clean family and they said they are actually looking to not renew, as they are expecting a 3rd kid and want a bigger space.

Man, I am paralyzed with first buy indecision.

Hey Greg,

Thank you for input.

Yes, just east of i-35, right near Dell Campus.

FYI, i'm in Austin (Balcones area)

Hey Aaron,

From what I understand, this property is listed by a local wholesaler. They routinely email out to their distribution list when they have a property. It's usually first person to show up and close, and the wholesaler charge a 2-3% fee. Often these are sold w/in days of being posted. I'm sure if I had the time to secure traditional financing, I could show up and close as normal, but these usually don't last that long. 

I am capable and able to float that cash out for the initial purchase but would most likely want to refi as soon as possible.

At first glance, the house seems to be in great shape and well maintained by current tenant. Doesn't look to be much fix up cost, but always room to make 'nicer'. 

Comps show around $170k.

Tenant situation seems solid. I've got a copy of the lease and multiple extensions. They've been there since 2016 and just resigned another year until May 2020. Single family (husband, wife, 2 small children). They appear to be maintaining nicely, as the grass is mowed and the place seems to have normal curb appeal.

want to chat directly?

@Kevin S.:

Great reply! Great advice! so it looks like rent is under valued but they have another year on their lease...and its a long term tenant w/ young family...I don't know how I'd feel jacking the rent next year.

I guess other factors may be that it is close to a large corporate park/employer, so vacancy may be slim-to-nill and its in a fast growing suburb part of Austin, so maybe property value will rise and rise and rise? Not sure how to model and evaluate this.

Also, is that a normal way to model? 100% financing? not 80/20?

It looks like a CMA ~ $160k-$170k: https://imgur.com/a/fwmxqnQ

I wrote the line about current owner/mgmt company as the backstory for why the house is up for sale.

for dealcheck.io, I'm still a bit 'green' on what I'm looking at.

does this look right?

 Hey, So I guess that's what I'm asking about w/ advice on modeling cashflow. When you say "see the numbers" what do you mean? All the numbers I know are posted.

so it's got a long term tenant w/ signed lease paying below market rate, so vacancy is likely low.

$1150/mo rent

$3700/yr taxes

$145k sale price

3.5%, $5000 closing costs

https://imgur.com/a/fwmxqnQ