All Forum Posts by: Brent Smith

DONT BUY A HOUSE YET. Sheesh man I cant believe all the one sided advice on here. Dude, you have money in savings, just got out of school, and are starting your career. You're SINGLE, too. The next few years of your life are UNPREDICTABLE. You could get married (whether you see it happening today or not, you never know), plus doesnt it feel GREAT to have money in the bank? And roommates in your own home? Rarely works out for the best. Dont be in a big dang hurry. My practical preneur podcast talk about this in episode 007. Two biggest lies we are told revolve around homeownership and college degrees. Unless you find a house you can get into with like 30% equity at closing then just wait awhile. The first 4-5 years you're essentially just renting from the bank anyway... and stats show you WONT be living there that long. 

Stay mobile. You dont want to be tied to a house if a better job comes up. I've seen it too many times where friends have to stress out and complicate their newly-forming lives over a stupid rental property that cash flows about $100 a month after expenses and tax. Values are not skyrocketing in Nebraska so just calm down and save your money. Enjoy starting your career, build more cash, then re-evaluate in a couple years... look for property at a big discount... not just a regular discount.

great job but dont retire yet... taxes buddy. you'll lose at least 33% of that to income tax... more if you live in a blue state.

Matthew Paul stole my joke! You REALLY want to do this for your FIRST investment? You got guts.

If you're not paying interest or points then you're giving away equity. Equity is the last thing I want to give up. Sometimes you have to do it to get the deal done, but like i said its the LAST thing I want to do.

going to be limited... you shouldve set up an LLC years ago and then set yourself or your wife as an employee with a w-2, etc. I did this on my primary home recently. My wife is our LLC's only employee and gets a monthly paycheck from that company. Her income was just enough to pay our bills at the time. The home we wanted to buy was more expensive and required her to make a higher salary... so we made a little adjustment in quickbooks and BOOM... after a couple months of paystubs to verify and a couple years of our joint tax returns we were easily qualified.

Lots of good advice here, but also some really suspicious claims. No HML will do it for 5% and zero points unless its your grandma or you're putting up amazing collateral in addition to first position on the trust deed. In the real world where you only have a business relationship with the HML you can expect to start out around 12% and 3-5 points. If they want a minimum fee or additional fee to the points being charged, then just keep looking. Further, not many people are talking about LTV or LTC ratios. I would NEVER ever ever ever lend more than 80% of MY ESTIMATED VALUE of the asset. Until you get a relationship you'll probably pay higher rates and lower LTV/LTC near 60% (whichever is lower). Once you have a few deals you could pay 8% and 1-2 points... but the points will ALWAYS be there (unless you pay like 18% interest with other weird terms). No HML in his right mind would do zero points AND a low rate... why would he when he can get higher ROI from a million other people while taking same risk.

Also, the loan length can be different. For flips it could be 12%/4pts for only 90 days... then they'll build a 60 day extension in for an additional 2-3 points... stuff like that. 

Be ready to prepay interest or at least make interest payments as well.

There are a lot of ways to cook the HML. All assets and lenders are different.

great points being made. as a developer and deal maker I'll tell you that it's much easier to find a partner (especially when you need more of a financial partner/investor) when you already have a deal in-hand or conceptually. This means an acquisition cost, soft costs, hard costs, and basic financing terms estimated on a spreadsheet. The better of a picture you can paint, the more likely to find a partner. it's going to change so dont get bogged down in fine details... just make sure there is plenty of profit in the deal first. I cover this in my podcast "practical preneur". dont worry its free. 

you may even want to have the property under contract before approaching someone... or at least a verbally agreed "letter of intent" from the seller. most investors/partners are busy and dont want to be bothered with a "pie in the sky"--- generally speaking. however, once you get their attention with a viable deal, then it gets MUCH easier to get return phone calls/emails. 

on your proforma you can start with a profit share (equity split) of, say, 70/30. 70% to the investor and 30% to you. See how the returns look. If you can't give an IRR annually on their money of 20% then most investors will pass. once you get credibility and deals under your belt, then your risk goes down and they'll let you have more of the pie. HOWEVER, if you are putting in a significant amount of cash/equity, then you can probably demand more than 30%, etc. You'll just have to feel it out based on profitability. I did a deal once with very little money down but it was so attractive to the investor he let me retain nearly half the equity/cash flow. All deals are different, but the main points are covered above.

make just one happy investor/partner and his network will fill you up with other potential partners. raising money is very easy once you make the first guy a nice ROI.

Please keep the comments coming! Thanks! Remember I'd also like to know if leaving out the TV but including the pre-installed mount and a conduit behind the wall for power/HDMI/cable cords running straight down would be a good idea... It could be an eyesore if someone doesnt have a TV... but dont most people have a flat panel these days?

I am developing a new 168 unit market rate complex in south Alabama. Including a washer and dryer in each unit is becoming a no-brainer since the rent premium is a great ROI and it reduces significant damage to each unit during turnover.

This being said, I consider myself very AV savvy. Wouldn't a wall mounted TV included in each unit seem like a great marketing tool as well as potential ROI? Flat screen TV's are VERY affordable these days (less than 55 inches for only a few hundred bucks), they allow for MUCH more living space by opening up the room, and nearly everyone wants or has one. Since so many people have one (just like a washer/dryer) why wouldnt I consider saving my walls by including a wall mounted TV or at least a wall mount already installed?

Would a tenant pay $15-20 more per month for this convenience? I'm assuming a bigger deposit, too?

This is my first post... so please, don't hold back your great ideas or reasons why this is a disaster or good idea! Thanks!