All Forum Posts by: Chad Shultz

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $144,324
Cash invested: $187,327
Sale price: $263,650

Purchased this foreclosure property through the county auction. We worked along at a good pace, until we got stopped by the County for missing a permit on a small concrete pad. This delayed the project about 6 weeks. This was a full gut renovation to include new kitchen and bathrooms with custom tile and granite, new LVP throughout, paint inside and out and new windows. This home only spent three days on the market with multiple offers coming in. Another nice project with great returns.

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

I have done several of this type of properties over the past few years and specifically a few in this particular neighborhood. I was comfortable it would sell quickly.

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

This was a foreclosure property, purchased at the County auctions.

How did you finance this deal?

We used personal cash for the deal.

How did you add value to the deal?

We did a complete house renovation, including windows.

What was the outcome?

Quick sale for cash.

Unfortunately, in this business, everyone has an opinion. Usually, everyone has a different opinion. Since circumstances are different for everyone, this makes sense. What works for one person, in one part of the country, may not work for you in your part of the country. For what it's worth, my opinion for you would be: It depends... Depending on the amount of money you will receive as your starting point, that will certainly guide your circumstances in a particular direction. If you find it is only enough to get into a flip property, then you should focus on doing a flip, or a few of them, over the first 12 months or so. This will help you generate a decent amount of cash reserves. Once you have enough to safely continue flipping, but can tie some up in a BRRRR type situation, then cherry pick a property you might flip, ad value by doing a reno, and then rent it out instead of flipping that one. After you get it seasoned, refinance out of it and enjoy the cash flow. This is generally the easiest way to start for most people.

I started a few years ago with only $33k total in my first flip project and now have enough cash to self fund several projects at one time, while owning two SFR rentals as well. My next project is a multi-unit STR in a high traffic vacation area. Yes, it took a few years to get here, but I am normally able to finance my projects with my own sources, rather than using OPM, so I save on high interest. I never had to infuse anything more than the original $33k, and I have enough now to stay as busy as I like on projects without wondering where the money will come from. I have also refinanced the rentals at an excellent 3.99% rate and have zero cash in those properties, even after a reno, etc. They cash flow nicely. With a little patience and discipline, anyone can do it.

Finally, don't get sucked into buying property, just to buy.  You make your money when you buy, so buy right.  If it is a questionable deal, let someone else make the mistake.

@James King

You should certainly start with "The Book on Flipping Houses" by J. Scott. For a beginner, it is an excellent place to start and should point you in the right direction for a successful plan. After you order the book, (and I don't get anything from it, FYI) you should head to your local sanctioned REIA chapter. In my area of FL, we have Central Florida Real Estate Investors. There is very likely a sanctioned REIA in your area. You should be able to find one near you at nationalreia.org. Any resource you need, including lending, knowledge, partnering, guidance, etc., etc. should be available there. You will be working with local, seasoned, experts in the different fields of investing and they can help you head any direction you want. Like anything else in life, never stop learning as you grow and you will be more successful. Anyone can accidentally find, flip and/or profit on one project. You want to focus on rinse and repeat, rather than being a one-hit-wonder.

1)  I am not in Texas, so I can't help you there.  Others in the forum will likely comment.
2)  Most institutional lenders will not loan for flipping.  You will likely need hard money, private money, and/or family money.
3) Right price? - Get educated at your REIA chapter and you will understand this process very well. There are general formulas to use, but what might be the right price for me, may not be the right price for you. There are many factors to consider.
4)  Again, your REIA will help with this area.  You cannot eliminate strategies, pitfalls or threats, but you can minimize them and maximize your chance for success.

Best of luck going forward. 

Local National REI chapter (CFRI) meets this coming Thursday, 6/30 at 6:00p at 5802 Journey's End Way, Port Orange, right off I-95. $10 for non-members. Come network and connect.

Bryce,

When I do my projects, I approach them with my MAYO formula whenever I get into them.  Her property may only be worth $120k to someone ready to live there today.  If it is worth $120k on the retail market, no investor would pay that for it, because investors need to make money.  In your question, you mention it might be worth $180k when done and you plan on about $50k reno.  You still need to make money in the project and you would be the ultimate reason she is making a "top dollar" potential.  In that case, I may still be looking to value the property at about $76k - $90k as it sits.  (Of course, your type of market and formulation may be different.)  Get her to agree on a starting value in that range, then put in your $50k.  As most investors know, there will likely be a surprise along the way, costing an extra $5k+-, so this way, you have some flexibility in the value to cover for unforeseen items.  I was assuming, from your previous post, she wants to sell off the homes at some point.  For this property, going into it from day 1, the agreed on goal should be a sale.  You sell the property at $180k, then split the potential $40k - $55k profit, based on the agreed on entry price and your actual reno costs.  If the property was going to continue to be held, until a point agreed on down the road, be sure this is clearly spelled out in the deal structure and you two would split net revenues from income until the sale occurs later.  As for a "fair split", that is different for everyone.  I would say minimum should be 50/50, but you might try for 70/30 or 60/40 first, in your favor.  A return of $25k on a $50k investment should be a "good day" in anyone's book.  She would be making a better return for no more risk than she already has and you have minimal risk, because you don't also owe hard money, etc.  Be sure to run this through an attorney to structure it correctly to protect you both.

Bryce,

I agree with Chris about being patient.  Most of my best property projects have come around when I am not necessarily looking, or when I least expect them.  The best approach might be to "plant a seed" with the investor and just see what grows.  If possible, get a look at a couple of the properties you like and formulate an offer for one or a few as a package.  Present a proposal to the investor to show your interest in the properties and then let her make the next move.  A good approach might be to include more than one offer, each structured differently, of course.  For example, you might offer a lower price, but all cash and also a higher price, but with owner financing and possibly no cash down.  Alternatively, see if the investor will partner with you.  Effectively, she brings the property, you bring the reno and you two split the proceeds, etc.  Sometimes, the trick is to be creative and open someone's eyes to a path they did not originally consider.  After the presentation, let it simmer and see if/when the investor/seller gets back to you.  Normally, the first one to break the silence "loses" and you might get the deal you want.  

Andrew,

Sounds like you could have a good potential passive income stream available, but make sure to do your homework. It sounds like you plan to. Many markets are starting to slow, so past performance may not repeat going forward. I find, in my area, most hard money comes with points as well as interest. Most also has a minimum use period, so the investor is guaranteed to make at least a certain amount for their money. In your case, 10% may be good, if you are not financing a whole deal. I would say if you are just giving them $10k or $20k toward a larger project, you should expect a different return than a single lender funding an entire deal. There is a lot more information that should be taken into account before anyone says whether or not it is a "fair deal". Additionally, what might be fair in your eyes and fair in my eyes, can certainly be different. I can tell you there are US Treasury I-Bonds available right now, which are paying 9.62% and that money is federally guaranteed, so no risk to consider. Now, I am not an attorney or accountant, so I cannot give you legal advice, but there are many variables as to what benefits you may get, depending on how the money comes back to you. I would suggest you speak with a financial professional for the best approach. If you are a single-member LLC, it likely won't matter how you take payment as the IRS does not recognize single member LLCs anyway. However, I believe the payments would be counted as income, rather than capital gains when you are talking about interest on a loan. I probably wasn't much help, but might have given you something else to think about while you are evaluating the possibilities.

Investment Info:

Other wholesale investment.

Purchase price: $250,000
Sale price: $280,000

Wound up getting property under contract in a Land Trust. (Only a few states allow Land Trusts.) Land Trust held the purchase contract & was able to arrange a sales contract for the same property at $300k within 90-days. After securing this entry and exit, the Land Trust interest was sold off for $280k. Additional exit strategies include subdividing and developing two parcels, if the current contracted buyer decides to default on the contract. Project took 11 days with 0 out of pocket.

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

We, (a small group of partners) decided to move on this deal due to several possible exit strategies. Ultimately, the one we took was the quickest and simplest to get in and out.

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

The deal was brought to us from an acquaintance. We tried to make a deal initially, but the seller did not accept. We actually walked away and the seller came back to us with the modified deal, which we took.

How did you finance this deal?

No financing needed.

How did you add value to the deal?

Packaged it up and delivered it to another investor.

What was the outcome?

Quick cash return, similar to a wholesale.

Lessons learned? Challenges?

Lots of paperwork and hoops, but otherwise, no issues.

Cheers,

Chad

Kudos to all those investing in the Ormond Beach / Daytona Beach areas. It sure is a great place for real estate. While it is difficult to find "investor" type properties here lately, I am sure it is difficult in most places too. I have recently acquired my 24th project property since 2017. I have done most of these as upscale fix-n-flips, but I did keep one that is two separate single family homes on one parcel, so it is a cash machine - like a duplex. I was able to get in and out of eight properties last year with two so far this year. Looking back, I don't think all of this activity would have been possible in most other markets. When I started my trip down the investment road, I was "all-in" with $34k on my first project, with a partner. We made a profit of about $46k net between us. There are not too many places you can get started like that and consistently repeat it. Ormond Beach and Daytona will likely continue to grow and show consistent ROI for those who take advantage of it going forward.