All Forum Posts by: Andy Sabisch

As the saying goes . . . there is no free lunch and that applies in real estate for sure.  As Michael said, 100% financing usually means higher interest rates, more points and less profit in the end especially if the deal takes longer to complete and then to sell.  Carrying costs can kill a deal quicker than anything and high upfront costs to get 100% financing is a big factor.  

Cosmetic rehabs are in high demand but they are out there and can be the bread and butter of flipping.  We have opted to avoid total rehabs simply because of the time and the volatility of the market today.  Comes down to risk versus reward . . . we opt to go for more deals with less net on each but in the year, we end up as well as if we took on fewer total rehab projects.

We are seeing the same in the markets we deal with.  Higher interest rates, higher inventory and the economy drives the market towards a buyers market.  We watch DOM as that says more than the list price as the longer it sits, the greater the carrying costs and the less of the pie remains for your profit.  We have picked up deals that were sitting on the market that were poorly listed (photos, description, etc.) that with some cosmetic improvements, netted more than what many saw and hence passed on.  We also make sure we keep in touch with what amenities sell and what would be over improved and lost money.  The markets are changing and if you want to survive, you need to change with it and that may mean passing on deals that may have been a go a year or two ago.

To go full time, what income do you need to replace?  It sounds like you are sitting at $7,000 / month at this point . . . how many more properties will it take to make the commitment to go full time?  I think we are all having to consider DIY (even with full time jobs) until we get to the point of swapping lanes.  If you can define when that will be in terms of cashflow, that is the first step.  Then how much time are you willing to trade for $$$?  As they say you can always make more money but you can't make more time.  We have started to see that and it has tilted some of our acquisition decisions.

As the old saying goes, "You make your money on the buy, not the sell"

At least you got out mostly intact.  The problem with a double block is that unless you own the entire building you are at the whims of the other side and if they do not want to maintain it, your side will never be worth what it can be.

Remember, do not pay in advance as many of us that have been there before can attest.  Be sure if who you hire and are not surprised when they never come back  . . . be wary about Facebook options as they often are individuals that claim they are experts but are far from it.

Another option is to call a property management company and see if they will give you a recommendation

So the questions we will all be asking and I understand that there is no one answer for every scenario as credit, experience, etc. play a role but . . . . 

1) What is the minimum value you work with?

2) Can you bundle multiple properties under one loan package to close at the same time?

3) What is the RANGE of your interest rates?

4) What is the RANGE of points you charge?

5) With the required documentation, what is your TYPICAL time to close?

Thanks

This is not unusual, but you need to have roles and responsibilities clearly defined - and that is verry important to a successful outcome.  The timeline needs to be included - if you are carrying the property, overages can cost you dearly and how will the carrying costs factor into the profits.  The agreement needs to clearly state who is doing what in detail, what the timeline is, how the profit is computed (ensure carrying costs are part of the contract) and what the downside is if timelines are not met.  For example, if the contractor gets pulled onto another paying job and your flip sits for a month, you are paying the carrying costs until he / she comes back.  It may come out in the end but debt service can put a crimp on immediate cash flow.  A lawyer may not be versed in the project to give you a detailed breakdown - there are templates you can use and have it signed and notarized by both of you.  We did this once and if there is something that is not clear or covered you can be sure it will come up and then the challenges between the two of you arise.  

Here is a template that should serve as a starting point.  

16 Joint Venture Agreement For Fix and Flip | PDF | Joint Venture | Trust Law

Stick with the KISS principle.  Unless you have the time, staff or interest in learning a program like Quickbooks, a spreadsheet is really all you need.  We have a workbook for each property that starts with the acquisition costs, tracks expenses and ends with the sales spreadsheet.  That way everything from start to finish is in one package and we can quickly find expenses, costs, etc.

Think we all have that badge . . . my wife has learned the hard way that everyone is not as trustworthy as we would hope they are.  Had an guy come over to rewire a house from the weather head on.  He came over, replaced the lead and breaker box - looked good.  When I got home I looked at it and said OK, when is he starting the rest of the work.  Wife said tomorrow and then added, he asked for all of the rest to be able to buy supplies and wanted it in cash . . . care to wager if he ever showed back up?  Even blocked our phone numbers - bottom line, no cash up front unless we have used them before or if it is a big job and they are not a Facebook warrior.  Lessons can be cheap or expensive -- at least your lesson seemed on the cheap side