All Forum Posts by: Heath Clendenning

Curious if anyone has discovered or seen a forum that is willing to share good material locations, businesses that cater to investors, workers/sub-contractors that are reliable and vetted? 

I do not have a lot of time to read the other replies. There is no expert calling for a crash in 2 years. If they are - an expert they are not. 

I don't even know how to formulate a clear response without getting frustrated at the question. We, the modern world, go through long term and short term debt cycles. We are nearing the end of a short term debt cycle. How our (and other) governments handle it will make some difference but we:

- have raised interest rates

- have not used a big infrastructure spending button yet

- have low inflation

- tighter rules on mortgages 

Sure, we may see a leveling off. China or Europe problems can also impact us to some degree. Our own national debt needs an eye as we have new tax cuts without spending cuts, but there is no data for any impending crash. Recessions happen, expect them and don't over-leverage your positions.  

But please let us stop with the hyperbole. 

Data:

Oil price spikes have predicted 10 of the last 11 recessions. One of these was a depression, 2008. There is a significant difference in the term and we are talking about recessions here. 

Stay focused on the Federal Funds rate and the 10 year yield. We want them to not cross if possible.

@Faye Vio First of all, welcome. Feel free to reach out to me 1:1 whenever you want. 

It is not realistic for you to find, purchase, renovate, list and sell in 2-3 months. Just the escrow period these days is 40-45 days for anyone with a loan. 

You may have a scenario where your contractor is lined up, cash is ready, the home requires no additional work and after a fast upgrade, you receive an all-cash offer without any contingencies. But... that is highly unlikely. 

Plan on:

- 2 weeks to acquire keys to the property

- 4-6 weeks on a standard full remodel (under 2500 square feet)

- add in 2 weeks for buffer, staging & other fixes

- Time on market: 45 days

- Escrow: 45 days

If you are fortunate to get the right buyer and offer to speed things up, that's wonderful, but never plan on it.

Also: I would highly suggest not using HML anymore. The rates and points-up-front make the profitability nearly impossible. The margins are thin again. Use all cash, or partner with someone else on an all-cash flip. You can gain experience while making some money.

Thank you so much Omar. 

The tax question was more for me than them. I wouldn't handle their tax needs outside of suggesting an accountant. I like your thoughts on equity %. Couldn't the "ousting" be thwarted by adding in a clause within the joint venture agreement? 

@Brian Burke very thorough. In this example, could "Your JV Partner" listed at the bottom essentially be the lender? If I am doing all cash deals, I can eliminate this entity, correct? My interest in utilizing a land trust has to do with enhanced privacy for my investors and was suggested to me by another colleague. I'll speak to an attorney about it. Truly appreciate your input.

First of all thank you so much for your detailed and spectacular responses @Brian Burke and @Theo Hicks. Your time is valuable and I appreciate your insight. 

Once explained by you, I had the "a-ha" moment of the puzzle piece that was missing. 

Follow up Q's if you don't mind:

Since you both are experienced professionals, let me inquire about the new 20% above-the-line tax deductions for LLC's. Does this alter how you and/or your investors hold property? Here in California I plan to hold property the following way (see image below). 

I understand both of you run larger companies therefore your structure might be different based on your needs. I will look to raise $10 million from foreign investors. Additionally, there will be opportunity for 1-off projects that will take a year or less. 

Grateful for your expertise. 

I have two questions regarding a syndication I will start. 

If I hold the money for X years:

- When do returns get paid, and by what priority?

- If the final calculation on ROI is determined once the term is up, then the selling/liquidating period is not included in the formula? Doesn't this cause a problem when considering what the REAL annual return is?

- Is there a maximum time limit to return all money to the investors?

An example:

A syndication holds money for 2 years and has an 8% preferred return, 1% management fee and $2500 acquisition fee. The syndication will invest in short term residential opportunities. At the end of the 2 years, the properties are put up for sale and money begins to come back to the account. How to determine what the real ROI was for the investor, given some of their money was not available until the properties were sold. There could easily be a 4-6 month waiting period to this to fully execute.

Thank you for any help you can provide. 

Just wanted to say the house is beautiful. I love the exposed wood mix. Sometimes the modern white can be too much, and it is tastefully done. Anything you would have done differently on this project? Looks like one of the burbs in downtown LA??

@James Bowie Your posts finally convinced me to go to Podio. 

Did you ever share your templates? I would love to have access to anything you are willing to share. I'll buy you lunch for a 1:1 review of Podio if you're up for it. (I also may be a future client if you're still doing lending). 

Let me know, I'm up in Torrance. 

 Sir - in the 30-40 days I have been reading about this specific topic, this is by far the best piece of information I have received. I will eagerly connect with you if I have a little more success to discuss your company. If you have any additional information, please let me know.