All Forum Posts by: Ben Ballinger

And my mentor is only one of my mentors, he's not my sole source of learning, but he just happens to be someone good with the contracting side since he's a contractor. He has a flipping business as well, but his partner does the equity side and he does the work, hence his lack of financial expertise.

The good news is that I have the funds to cover this (more than enough, I own my own business and have a good cushion of capital in the bank) and mostly I want to get a deal under my belt to learn from. I see this is lower risk than going at it by myself.

I am fully ok with making 0 dollars on this deal if I learn a lot from it and it helps build my confidence, so I have pretty low expectations that need to be met here.

@Wayne Brooks after clarifying with my mentor, he is doing all the construction work himself and I am only paying the material costs, so he is providing the sweat equity and I am providing the financial equity. He also found the deal, so I have to consider that. He's not pushing me to do this, and I trust him, it's just an opportunity he presented. Nobody else wants the deal because nobody else is aware of the deal, as the property isn't even on the market, she is a personal friend of his who got the property (from a dead parent) unloaded on her from a sibling last month and doesn't want to deal with it.

@Katie Neason @Jeremy S. I apologize for a simplistic original post, I actually have considered these costs and used the home flipping calculator before I decided this was a good deal. I am imagining my cut after expenses, capital gains, closing, etc to be around 9750-10k, not 15k, but I forgot to mention that in my post. I ran the calculator assuming an extra 2 weeks before closing as well, which I feel is quite conservative based on the days on market for well-priced properties in this area, plus the fact that we have a network of realtors we can let know about the property at least a week ahead of time so they can have buyers lined up to look at it.

@Jeff Copeland great points, the good news is the property is in fine condition, simply un-updated and ugly. No actual issues, we just need to re-finish or maybe just polish the hard wood floors, re-shingle the roof, paint the walls, re-landscape and do a kitchen/bathroom reno. That's why he recommended the property in the first place, because it's pretty much an easy fix up. No mold, structural damage, water damage, etc.

Total rehab will actually be around 50% of the 25k, because he will be doing the labor himself, so our total investment is looking closer to $182.5k, 4 week rehab. Resale at least 220, I see that as being very competitive, perhaps even on the lower end of what I should be selling for.

I decided to go with conventional loan and let the seller have some earnest money to cover the mortgage for this month till closing, and then fund the materials out of pocket since I have the funds for that.

Any glaring issues so far?

I am partnering with a mentor on a home flip but his expertise is more on the contracting side than the financing side so I figured this would be a better place to ask. The home isn't on the Mls, it's not even technically for sale but my mentor knows the owner personally and has convinced them to sell us the property for a great price (about $55k below ARV). The home needs 25k renovations which will take 4 weeks, so we're looking at 30k to split for 4 weeks of work. 1. My wife is a realtor and we want to save on the realtor fees as much as possible. But, I also want the house to sell quickly and not sit on the market. So is it better to list via MLS for more eyes and payout the buyer fee/agency fee and keep her split to 0% or is there a way to even cut out buyer/agency commissions as well? Or should we just do FSBO and rely on word of mouth and other non MLS marketing? 2. Financing. Is conventional financing out of the question for a project that needs to move this quickly? I feel like by the time the loan closes we would have pushed back the process a whole month already. I don't have my own cash on hand for 100% of the purchase price. What other financing should I consider? This is happening in Palos Hills Chicago area btw (for keyword alerts)

I appreciate it, but I was simply asking about how to input ARV into the buy and hold calculator here on BP. I have a mentor but he's very old school and doesn't use the internet or fancy things like the calculator. I just want to know how to use the calculator for MF, 99% of it I understand, it's just coming up with the ARV that is hard for me. Do you have any specific recommendations on that particular question?

Again, I understand ARV is a misnomer for this type of property... but the calculator REQUIRES it to be input so I have to put something in there.

What I did was run a comp for properties that were sold in the area that have the same gross income/roughly same # units as the subject building would generate (I know the going rental rates for said units in this area already) to determine average sales price as the "ARV" since this property is currently vacant. Is that an acceptable way to do it? I understand ARV is useless but the rental calculator requires it so I wanted to input an accurate number so it doesn't screw up the pro forma.

I have read through all the ARV articles but they seem geared towards single family homes. How do you estimate ARV for a multifamily? From what I understand, rental property values are more based on the cash flow than "comps", thus, does the ARV even matter? Is there some multiplier I can use based on NOI to determine ARV quickly?

I put an offer on a property, and the listing agent asked if that was "highest and best" due to receiving multiple offers (keep in mind, this property is a complete hell hole and I doubt they received any other offers).

They were asking way over the value of the place based on comps and the condition of the property (owned by a hoarder, needed to be completely gutted, new roof, etc. Racoons living in the upstairs, huge water damage across multiple roof lines/walls, everything peeling). So we offered a reasonable cash offer given the condition.

Either way, my agent told her that we would be open to considering a counter offer from the seller.

No reply for two days, then the seller's agent told us they had "accepted another offer".

Yet, it's been 48 hours and the MLS still lists this property as active.

So my gut and guess is that she was lying to us and didn't want to take our offer due to it being lower than their ridiculous request.

Is she allowed to lie to us about accepting another offer? We never received a counter offer, she just denied us.  Seems unethical to me.

If one wanted to keep track of previous/current investments, the rehab (if applicable), the cash flow (if applicable) and their profits upon sale (if applicable), for the purpose of building credibility with private lenders, does anyone have a good template/ideas for creating this?

Would a simple PDF with a few before/after photos of the property and the most basic numbers be the best? What's the best numbers to include in this kind of thing?

I agree, but in negotiations you don't typically start with your highest and best offer. Otherwise, there's no negotiation. You offer what you feel is fair (albeit, more advantageous to you), but within acceptable realm, and then they counter, back and forth till you reach a mutually-agreed upon number/terms that is still within your acceptable price limit (e.g. I will pay no more than 100k for a property, but will start at 95k and work up if needed, etc--maybe I will get it at 95k or maybe at 100, but anywhere in there is acceptable to me).

At least, that's how I understand negotiation in other areas.  Granted I am new at this but still, since when are you not supposed to try to maximize your profits, it is a business after all.

Justin Fox I'm confused, are you suggesting that if the agent replies with "what is your highest/best offer?" To just move to the next property? If so, I'll be moving on to the next property almost 100% of the time. Out of 10 offers I've made in last two weeks, 9 have come back with that response.