All Forum Posts by: Dori Arazi

@Lee Ripma, that's good info to know. Thanks. 

Thanks @Twana Rasoul. I'll hold my ground and get some crosschecking in place. 

I've been working with a bird-do out of state. He send me multiple deals a day, not all terribly bad, but none of them are gems by any means. 

He obviously gets paid when we execute, and he's been exhibiting frustration that none of the deals have been selected. Backed by the concept that no deal is perfect and that I'll be bale to find something wrong with any deal he sends ( we've been hunting for deals for only a few days). 

We do have some pretty strongly defined parameters as to what would be considered a good deal.  While not common, I don't think these deals are rare. 

What are the ethical limitations here? How do you balance what seems to be a conflict of interest? 

Thank you for the reply everyone, this is very helpful. 

@Lee Ripma, wouldn't a commercial lender consider financing a deal that's only 5+ units? I've worked with commercial loans very briefly, but I've noticed their terms are far less favorable (Higher rates, no ability to lock down terms, etc.). 
How did you get around that?

Thanks again, 

-Dori

I'm working on BRRRR deals in Fort Worth, TX.

Renovating distressed SFRs into duplexs (in zones that allow it). These areas are still vastly SFR. From what I'm seeing it looks like a duplex is generally valued lower than a SFR. Sometimes dramatically so. Though I can't get exact comps of the areas I'm looking at.

Is this something I should be worried about when getting to the Refinance "R" in the system?

The rental income is obviously better and with more risk mitigation on the duplex side. 

Does anyone have experience with this?

Thanks!

@Kuba F.

All excellent questions. 

The finder's fee will be on top of the wholesalers fees, yes. He is going to be the eyes and ears finding the right deal. I thought it only fair to compensate him for that. Question is, how much is fair. 

As for the 25%, that's his contractor fees on top of his base cost. I'm more used to 20%, but we are still negotiating. 

9% is a rather common PM fee. 

As for risk mitigation, the only thing I could think of is not fully paying him for the work until the property is rented. Which means our interests should be aligned to a common goal. But yes, if he drops the ball and can take the hit on not being paid for work already done, then yes. I'm left holding the bill. My risk here is definitely more extreme. 

As for profit margins. These are complete rehab projects (BRRRR). I'm not a contractor myself, so I would have to find all these people along the way and pay them, as it is, to complete a project like this.

I do the math on the margins before starting anything, all fees included. I'm not  looking to pull all the cash I put in out on refi. 

What I am looking for is:

- All-in, to be under the market value of the property (to have some extra equity in the deal)

- Have a 12%+ Coc (net) 

- have a statistic growth in the area of over 10% a year (I'm aware things could slow down, but I'm looking in areas with steady, well driven influx). 

He is a friend of a very good friend. But not someone I've known in person for very long. 

How would you additionally mitigate the risk?

I'm from California looking to invest out of state and have found a potential partner in Texas.

This person is well connected with off market wholesalers, is a licensed contractor and is now getting certifications as a PM.

He is pretty new to this industry (a couple of years) and has already rehab'ed 21 deals with external investors. He was referred by a friend, and after meeting a few times he seems to have his heart in the right place and his remodels look good. His remodel estimates currently fall within +-5-7% of actual cost.

Our model is going to pretty much be a take on BRRRR:

- He finds a property we both agree on - I pay him a finders fee

- He renos the property - I pay him 25% contractor fees

- (I refinance)

- He then manages the property for me for an additional 9%

Final payments are not made until the property is rehab'ed and rented to make sure interests are aligned.

1. I know bird dog deals that are executed on usually go for $1000. Should I pay his a different finders fee in this model?

2. Are there any pitfalls I should be looking for here?

Any info would be greatly appreciated.

Thanks! 

I'm  from California looking to invest out of state and have found a potential partner in Texas. 

This person is well connected with off market wholesalers, is a licensed contractor and is now getting certifications as a PM. 

He is pretty new to this industry (a couple of years) and has already closed 21 deals with external investors. He was referred by a friend, and after meeting a few times he seems to have (at least) his heart in the right place and his remodels look good. His remodel estimates currently fall within +-5-7% of actual cost. 

Our model is going to pretty much be a take on BRRRR:

He finds a property we both agree on - I pay him a finders fee

He renos the property - I pay him 25% contractor fees

(I refinance) 

He then manages the property for me for an additional 9%

Final payments are not made until the property is rehabbed and rented to make sure interests are aligned. 

1. I know bird dog deals that are executed on usually go for $1000, what should I be paying him for finders fee?

2. Beyond being outright scammed, are there any pitfalls I should be looking for here?

Thanks!

Thanks @Seth Ferguson

@Seth Ferguson, That's exactly what I'm referring to. I've never set anything remotely like this up before. Will power of attorney suffice for someone to purchase a property in your behalf? 

I'm investing form California and I'm finding cash deals in Texas. Like many of these deal types these need to be executed on in a mater of hours.