All Forum Posts by: Ben Baye

Investment Info:

Other other investment in Cameron.

Purchase price: $300,000
Cash invested: $15,000

Combination of 12 lots: 7 - 1/4 acre single family, 3 - 1/2 acre single family, 2 - R3 lots.
Sold the 2 - R3 lots and 1 - 1/2 acre single family lot.
Just listed a couple new plans and have several more in the works, hoping to start building and selling specs this summer.

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

I enjoy planning and building spec homes.

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

I bought a lot from the owner of the subdivision. He is an older gentleman and wanted out of this, which was his last investment property, as his wife's health is in decline. We discussed price and terms.

How did you finance this deal?

Land contract

How did you add value to the deal?

Working on it, but building specs

What was the outcome?

In process

Lessons learned? Challenges?

Don't buy a subdivision using lending, pay cash. Lending on the specs is different as if they don't sell you can rent them and cashflow.

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

TM Title

Hello Everyone,

My business partner and I are looking to take on investors. They are a mix of family and friends currently. Most of them would not be accredited. We want to create some options for them to work with us but need legal counsel. We have contacted most of the attorneys in our area and they all have said they don’t do that type of work or they refer us to one office. That office has told us that they are unable to take any more clients, no waiting list option. Any thoughts as to finding an attorney who specializes in Real Estate? We live in Rice Lake Wisconsin but would be willing to travel (preferred to meet first time in person) 

@Lina Bibikov

We are currently setting up to market specs. I built a number of them pre 08’ but backed off for a while. Built one 2 years ago and got the itch again. Our area is low on available housing so flipping is difficult but I was able to acquire the remainder of a subdivision this past summer.

I’m doing something different from what I’ve previously done this time. I am having a designer come up with three options for interior and exterior combinations that are in the same price point. This will allow me to have tangible examples of the finishes and end result, yet market from blueprints. There are 7 lots that I’m marketing the same house plan but the different finishes. (After selling a few, I may do another house plan or turn some into rentals)

I’m hesitant to build any with materials being so high but I figure if they buy it before it’s built my risk is mitigated.

Glad to here your first one went great, keep it up, the housing Industry is fun!

Hello Everyone,

I have a potential investment partner and we have some questions as to how we would split our percentage of ownership based on risk/involvement. I will layout the scenario and any thoughts or previous experience for similar situations would be appreciated.

My contribution:

Acquisition of land for new build (4 plex)

Planning for blueprints and lot layout

General contracting 

My crew(s) would do a majority of the work for the build at cost

Property management 

His contribution:

Down payment 20%

We are discussing the possibility of him taking full responsibility for the loan, but given that the loan typically is paid out of the gross revenue I'm not sure how he could take on the full loan amount out of 50% net profit (EX: $4000 rent - $1000 property expenses = $3000 net rent, each of us would get $1500 and out of that he would pay the mortgage of whatever) My concern with that dynamic would be that the mortgage will likely be over the 50% net amount and leave him in deficit monthly. 

I'm thinking we would need to go the standard method of paying the mortgage out of rent and splitting the net profits at the end. 

He would like to be 50/50 but given his contribution in comparison with mine I'm not sure what a fair percentage split would be. 

Thoughts or questions to clarify???

Thank you

Investment Info:

Other other investment.

Purchase price: $300,000
Cash invested: $15,000

Combination of 12 lots: 7 - 1/4 acre single family, 3 - 1/2 acre single family, 2 - R3 lots.

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

Our market is in need of both homes to sell and rentals

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

I got to know the owner and discused buying the remainder of his subdivision as he is getting older, he made me a good price offer and gave me the terms I wanted.

How did you finance this deal?

Land contract. 5% down, 4.5% interest 40 yr amortization with 3 year balloon. Individual lot but out to build on them.

How did you add value to the deal?

Was able to close on all lots instead of a couple to free him up from his last investment.

What was the outcome?

Still working on it

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

TM Title and Team Realty.

@Jordan Lewis I absolutely love seeing young people getting excited about real estate and planning for the future. That motivation is the primary starting point. No one gets anywhere without drive.

As for credit score, the previous comment was great. Make sure to pay it off in full every month like they said. That is key.

I was driven like you at your age. Bought my first property when I was 16, 1/2 acre with an old shop on it on a dead end road. Ended up building my own house there when I was 20. Built and sold several spec homes and one fix and flip by 20 too. I lived in a small town. Less than 3000 people but was willing to do what most weren’t - hard physical labor but I loved it. I say this because with drive and a willingness to do what others won’t you can accomplish a lot and you don’t need to be in a big city to do it.

I would suggest you try to get a job in the trades. Construction related, this will give you knowledge of buildings from many angles. You don’t have to stay in the trades but being as young as you are 5-10 years will give you a really good foundation for investing. In the trades you will also be building relationships with contractors you can work with down the road. It’s even likely you will get to know agents and lenders as they are integral to construction.

Save money - this was my down fall in my youth. Don’t spend it cause you make really good money. Do a budget and only spend what you’ve allowed yourself to spend on play things!

Buy a fixer upper for your first property, something you can work on after work/school and on weekends that will be low cost. If your parents are willing to co-sign while you’re still at home and have minimal expenses even better. That’s how I got my first parcel. Since they are in that market they should be able to guide you into a good investment.

Really try to grasp the business end from your parents. That’s another thing I didn’t pick up until later. My parents were both self employed and they built a lot of specs. Taught me the trade but they weren’t good with the business end. I feel like I lost years of success because I didn’t understand that side of things. Pick their brain about everything you can think.

Good luck

@Maimouna Sow

I am a licensed General Contractor in Wi so my info may not be the same as your area but you shouldn’t hire an electrician or any contractor for that matter that isn’t licensed and insured. You should be able to get proof from him easily and you can look it up on your state licensing website.

It’s really fishy how quickly he dropped his price. Any good contractor in any field is so busy they don’t need to negotiate.

As for the money down, every area and company has different policies. I personally won’t schedule a job until I receive the signed contract and 50% down. But I have a verifiable license and insurance and if someone needed a reference I would give them that also.

It would be worth getting some other contractors in to give you a quote. Have them email you a copy of their license and certificate of insurance before having them look at the job or at least before you pay them anything.

@Haixia Yuan it’s good to hear your looking to get started. I can’t say I know much about PA but I lived in VT for 10 years and did some analysis on the Burlington market. Rents are pretty high in VT through and taxes aren’t too bad. Property prices were in the low 100’s. It’s been 3-4 years since I moved but I was leaning heavily on investing there. It may be worth a look. Big college town too so there’s also that dynamic you could pursue.

Best of luck to you!

Hello Haley,  

That’s a great question. I chose to go for the commercial note for several reasons, I will give you the brief run down but if you would like more clarification please feel free to ask. 

The interest rate on a commercial loan and a residential rental loan were very close. I was looking at right around 4% for a non-owner occupied loan compared with the 4.25% commercial loan. This isn’t a house hack so I wouldn’t wualify for the 2.75 - 3.75 for this. I do have the low rate on my personal home which o refinanced in May  

With my current strategy I am not looking largely for cash flow. I still need the properties to cash flow but the amount doesn’t matter to me as long as they do cash flow beyond expenses. I am doing reasonable renovations which decreases my maintenance and capex substantially. The capital I can pull out is what matters currently. This made it so I didn’t need the 30 yr amortization to keep cash flow higher.

A 30 yr loan vs a 20 yr loan at similar interest payments would cost me about $30k in interest over the loan term. Since it cash flows at a 20 yr term I would prefer to save the $30k over the long haul. 

The closing costs on the commercial note are a quite a bit lower than the residential loan. 

The commercial loans are really simple to get because it’s easy for the lender. They do them in house so there are way less restrictions and paperwork. 

That’s the bulk of the reasons. Glad to hear your looking to get started. It’s a fun venture!

I just purchased my first duplex and during the closing I found out something interesting about the use of equity to purchase multiple properties. I’ve never heard of this and wanted to hear other people’s thoughts. 

My Lender stated that I could use up to 80% of the equity, less mortgage obviously, as a down payment to purchase other properties. This would allow me to not make payments on the full 80% supposing my mortgage is under that percentage. I can list the property as collateral on another property to cover the down payment. This can be done on multiple properties - cross collateralizarion. 

Has anyone done this? 

Is it a good strategy?

Are there things to be aware of?

I would love to hear people’s experience or thoughts on this! I haven’t ran real numbers with it yet but the concept sounds exciting!