All Forum Posts by: Dan Maciejewski

@Steve K.  is right.  That's usually how I see it done.  

And that's the seller that usually takes it.  Someone making a lot of income and/or unloading a lot of property.  It's a good way to avoid capital gains taxes and/or to keep cash flow without having to run the property anymore.  Basically, real investors are the ones open to it.  The ones that have heard of it and that have done it before.  Not the guys with one or two properties that just want to take advantage of the market and walk away with a big check.

It's actually pretty common, and our Florida Realtor contract has addenda and options for it built right in.  Assumptions, too, but they are way less common with the rates the way they are right now -- nobody want to assume a mortgage with a 5+% rate when they could get better anywhere.   I prefer an attorney-written note, but if the buyer and seller agree, then whatever makes it work.

There are a few ways to look at this.  I'll add another for you.

Generally, if someone's invested time and/or money to make something turnkey, they expect a profit.  You will be paying the owner's profit in the purchase price.  That leaves money on the table by giving your profit away.

So why would you want to do that?  There are a few reasons:

1. You aren't experienced in doing the job to make a house turnkey.
2. You don't have the time to invest in overseeing the project.
3. You have more money than time and just want cash-flowing assets.
4. You are out of state and can't handle the extra load that overseeing the project would take.

Generally, it looks like 18% (in my area) is the profit that a rehab flipper will make on a project (it's hidden when it's a homeowner but still there).  That's a big chunk, but sometimes you just pay the fee to play the game.  I usually recommend newer and out of state investors try to get more turnkey than not.  There are a lot of moving parts in a rental property and you can only learn so much at once.  And you can only afford so many mistakes and non-optimal decisions before it loses money.

I do caution about buying "flipped" and advertised "turnkey: houses. There are a ton of stories where people thought they were buying great deals and got burnt. The one thing you can be certain of when you do the work yourself is that you know the quality of the work and what actually got addressed.

Only you know if you are ready to, or want to, learn about forcing appreciation yourself.  I know many investors that only make needed repairs and never update/upgrade/rehab, and others that only buy deferred maintenance and always rehab.  

So if you are comfortable with the landlord part and want to capture some of that profit (and are reasonably certain that you can do it without overspending), then maybe you want something that you can force some appreciation on.  

You can check with your municipality, but I think you'll probably need to file this with them to get the permits anyway.  Many cities don't want you to start unless they know you'll be in code requirements.  

Some GCs have architects they work with and/or recommend.  Contractors take plans and make them reality -- they are not usually architects, although a few do it all in-house.

You will always turn off some people.  No matter what -- whether they don't like your tattoos, accent, car, etc. . .   I can guarantee that some people will only do business with people with tattoos!

Your goal in every business is to avoid them and find the people that want to do business with you.  Your 1,000 true fans.  And to actively cull the bottom 5-20% that are costing you time and energy and money.

“Those who mind don't matter, and those who matter don't mind”

 Great -- That's a good plan!  The 1st few are the slowest, then the snowball can begin to grow a lot faster.

For the people that mentioned it -- no STR in Clearwater!

In my mind it's not 1750 off of 300k, it's 1750 off of 0.  I like free cash flow!  BUT, the others do have a point in that, if that could be deployed elsewhere and then make more money, it's worth a thought.  Selling and buying do have costs, though.  You're looking at 6-9% cost of sales and another 1-3% cost of purchase, on top of your actual cash costs.  That brings you down to 265k to invest -- you probably know what that gets you locally.  

It's not a great idea to trade an asset for a matching asset, especially a known asset for an unknown.  Millions of day traders make hedge funds rich every year doing just that.  The only ones that make out are the middlemen -- and this is coming from someone that makes money when people sell!

You're not going to get much of an STR locally for under 300k, although you can get something decent for 300-350 that should gross +-45k/year. That is worth looking into.

I love cash flowing, appreciating assets, and when they are very very low cost like you have, more the better.  If it were me, I would hold on to it, and use the cash flow to purchase another.  After 3-5, you may want to cull the bottom performer and trade up.

Whew!  That's way out there!  I can't help as far as contractors but try using some keywords like Jacksonville,. Gainesville, cities and counties near there, etc. . .  You may trigger an alert for someone that's out there to pop in and help. 

I got an alert because you used Pinellas.

Good luck!

Usually you should start with an agent.  

If you have, a trusted lender, it's a good idea to talk to them to get a feel for your budget and lender-side costs. 

If you don't have a lender you already know, like, and trust, you may want to look for agents.  They will probably have 2 or 3 lenders that they trust and work with that they can refer you to.  

Just make sure you have a feel for what you're looking for in an agent.  One that sells and/or owns the type of property you're looking for should be on your list.  They should be able to talk about some metrics of what makes a good or bad buy, and they should know what their ideal client looks like.  

For instance, I am great at helping with small multifamily and SFRs for long or short term rentals.  My and my partner's hospitality (hotel) background and my company's commercial expertise makes us a great choice for small to midsized hotels and motels.  If you want  a trailer park or a gas station, or an ALF, I can't help a whole lot!  I know people that can, but that's not my specialty!

Every agent on the plant can help you, "buy, sell, or invest," but 90% of them have no idea how to figure out cash flow, and a good many are going to be actively harmful.  I have a lot of clients that came to me after finding out their agents were steering them wrong.

Pick a price point and then search the ADR and occupancy and seasonality for that price in each area you're looking at.

You're not buying anything in Clearwater that will let you rent for less than 30 days, but Pinellas County has many options in the $450-$600k range that will get you 75%+ occupancy and $250+ ADR (peaking above $500/night in season).  That's your standard turnkey-ish 3-4 bed/2 bath pool home near the beach.  If you increase your price point ($850k-1.3 MM) you can get that house on the beach (not on the sand) and get an ADR of $450.

Whether hard money or conventional lender, you'll want to call a bunch of local lenders to see if they'll be able to help you out.  

I can tell you that lack of a W2 or any other taxable income is going to hurt a lot.  Lenders really want a personal guarantee on single family homes with no rent history.  But call around (a lot, possibly), you may find someone that will be able to lend.  I've given that advice before and people have found what they are looking for, even if 49/50 lenders can't help, all you need is one.

Your best bet may be to find a partner instead of a sole buyer.  There may be someone that would partner with you for a pre-determined equity split.

NOT LEGAL OR TAX ADVICE:  You will probably want to form an entity to purchase in that spells out the equity / ownership splits and lays out exit strategies.  Like, will you be able to buy each other out if one want to leave and the other stays. . . things like that.