All Forum Posts by: Gallagher Wilson

Yea right on. I've grown up in Seattle, and like you, found I knew people in almost every field I was going to need. I have an uncle who can handle financing for one house at a time. I'm going to try my hand at one, see how it goes, and if I can handle more start sourcing private equity/HM as needed.  I haven't drawn out a formal business plan, since I don't need to impress a financier, but I have guidelines and notes for every step of the process, largely gleaned from BP and books, to help guide me.  Good luck @Lucas Fridriksson  !!

Sounds like your talking about wholesaling, but without actually having anything under contract?  Your main competitor would then be other wholesalers, but they have the advantage of having the contacts AND the contract.  How would you address that?

Good on ya for giving it a go! I'm starting similar path in Seattle, which has some of the same headaches as SF area. High prices, no deals on the MLS, etc. Read thru the forum regarding direct mailing market and driving for dollars, as far as how to acquire a deal. I met up with a young agent who's trying to establish himself. He's willing to write letters, knock doors, whatever to get a deal. Maybe find a hungry, less established agent who you can partner with? You definitely have other options than REO. My evaluation of our market was that trying to scare up my own deals by mailing, writing letters, door knocking was going to give me the best bet at a profitable flip. Before you nail down a property though, make sure you have your financing in place. If deals are moving fast, no point trying to drum up a deal till you have a solid financing source. I'd also start reaching out for contractor referrals and at the very least have a few contacts in place so your not paying holding costs while you start trying to find a contractor. I'm sure there's lots of advice here but my analysis says to proceed in this order: Legal entity (if your creating one, which you should)-> Financing (at least a few contacts and have one review your plan to make sure they'll work with you --> Feel out contractors --> Start hunting for deals.

Best of luck! I feel your pain of the spendy market. I'm envious of all the ppl on here talking about paying $60-80k for house to flip.  Feels so much easier at lower price point, but its all in your head!

Yes, we financed with a conventional NOO mortgage requiring 25% down. We each contributes 12.5% of that. We didn't set up a legal entity. We both opted to carry big umbrella insurance policies in lieu of that. There's lots of opinion on here as to what is best, but given the simplicity of the deal and our comfort with each other it seemed easiest. Our cash flow is almost exactly $400/mo, I take $200/mo as a management fee (I also do about 90% of the work) and the other $200 goes into a joint account for expenses. My uncle was content to benefit from the tax writeoffs and having a relatively hands off investment for him. We put right of first refusal agreements in place in case on or the other passes away, to make that simpler. That was about it.

I think there a lot of factors that weigh in conjunction with the 2% rule. In Seattle market, I don't think there is anyone buying a SFR getting close to 2% right now. My first buy, last year, was purchase price of $420,000, and it rents at $2400/mo. That's almost exactly .5%, which is far below the 2% rule. However, it cashflows at $400/mo, and is in a neighborhood currently benefiting from about 15% appreciation a year. The house was in perfect condition when we purchased it (owners had done all major rehab and repairs in the prior 3 years), so I anticipate being able to skate with minimal repairs and capex for the first 5 or so years. Most of the cashflow goes into a savings account, in 3-5 years will be north of $10k. Because its in the top 10% of homes in the neighborhood, so renting it at a high-market price is not a challenge at all. So yes, local market trends and cashflow are also very important. If I waited for a 2% deal in Seattle, I'd likely be buried having never bought anything.

@Ryan Kennedy I'd second that. I live in Shoreline, we're a week from listing our primary residence. It's doubled in 5 years. That'll be a sweet house when its done.  I'm starting to look for flip deals in the area btw. Keep me in mind if you get something under contract. 

Ha, old thread, bummer no one wrote in on this. I'll bite:

I purchased a buy/hold SFR in Seattle area last year with my uncle. Our partnership started because I took him out for beers and advice on buying my own rental, and I ended up asking for him to partner with me, mostly in a mentorship capacity. He's had 30 years of buy/hold experience in the Seattle area. We went in 50/50 and so far, its been fantastic. I did most of the legwork, as expected in a mentoring arrangement, he put up half the cash, and he's more established credit history. I management to find an off-market house, negotiate it below market value (in our hot market), and had it rented with $400/mo cash flow within 90 days of closing (old owners rented back for 6 weeks while they prepared to move out). He got a solid investment that he didn't have the time or energy to chase down on his own. I got a great start into RE investing.

Our deal worked out well, because I didn't initially approach him asking for money, just advice.  I think going straight to the loaded uncle for money would come of like I was looking for a handout.  He agreed to the deal because he could see that I genuinely want to put the work in and learn the ropes, while having the added stability of an experienced partner.  We also think very similarly and have similar standards/risk tolerance, so there wasn't any interpersonal conflict.

I've had so much fun with that rental over the last year, I took up managing a 3 unit in N. Seattle that he owns.  I'm also currently looking at partnering with a friend to start flipping this fall. My positive experience in that first partnership has brought me to all that, so yes, 100% awesome.

I haven't done this personally, but I recall discussion on one of the forums here in the past. I believe the challenge comes in if you still have a mortgage on your existing home. Most mortgage have a clause that requires payoff before transfer, even if its from you personally to your corp.  You'd have to ask your lender, I suppose, or read the fine print on the note with a RE lawyer? You wouldn't want them to call the note just for something like that. 

Ah great. I didn't know the tax portion but everything else makes sense.

Planning to partner with a friend on a flip this fall, try it out and probably do more, assuming it doesn't eat us alive. Plan is to form an LLC with us as 50/50 partners under a partnership agreement. Our plan is to only take minimal disbursements from the LLC until its built up a healthy warchest. The LLC looks like the best choice due to passthru taxation and flexibility to operate as partnership. Anyone with thoughts on the topic? We'll be consulting a CPA before formation, but want to run the rough idea past experienced people to make sure I'm asking the right questions.