All Forum Posts by: Garrett Hogan

In the past when i've used hard money I paid 12% and 2points. That was 85% LTV and 100% of construction.

What ive been doing lately is raising private money from investors for the down payment and then securing traditional bank financing for the acquistion and construction loan. Ill pay the investors a 6-8% return with some sort of equity split at the sale. 

Issac,

That's great that you have taken action and started cold calling. In any cold call situation, I would not recommend asking them right off the bat if they want an all-cash offer for their house. That immediately puts the conversation on edge and the seller on guard. If somebody feels like you're going to low ball them, then their guard will be up and they wont be responsive.

Instead, I would encourage you to take a softer approach and try to build a little bit of rapport with the sellers to warm them up a bit. " Hi Mr. Seller, I am looking to buy a house in your neighborhood. I absolutely love the park that's at the end of the street, I take my daughter there all the time, I'm curious about your plans for the property and If you've ever considered selling"

There are a number of great books on sales techniques. Id recommend reading a few of those to really hone your skills.

I too have had little success with wholesalers in my market. The only good wholesale deals come from other legit developers in my network who happen to sell deals because of some actually compelling reason. Too many projects, got something approved to build and now want to flip it etc. I think the biggest problem is that alot of wholesalers are beginners that actually have no idea how much a rehab should cost, what the rehab should entail etc. The barrier of entry to becoming a wholesaler is quite low, and the gurus who pitch it as a get rich quick method certainly do not help. Ive personally had more success using an acquistions manager to source deals from many different places. Since you work full time, I would encourage you to consider hiring an acquisitions manager and align the pay and incentives such that he is motivated to find you deals. 

Mike, the advice above is great and iI would definitely consult a securities attorney. 

To get back to your original question, 30/70% split is fairly common from what I've seen. You should also charge a 2-4% one-time acquisition/syndication fee for your efforts in finding the property and putting the deal together. In addition to that you should charge a small yearly asset management fee as well as a property management fee if you do the property mgmt in-house. (I would not recommend it unless this is your specialty and you are equipped to do so) 

There are a ton of different kinds of fees that you can charge when doing syndication deals, but those are probably the most common and most palatable for other investors especially when you are getting started. 

Youreoff to a good start. You should definitely budget in carrying costs for the utilities while the units are being rehabbed and or vacant. Also you have hazard insurance at $41/month (roughly $500 year). Im assuming you mean normal property insurance? If so, I think that number is low. I've typically paid $2500-3500 a year for 3 family rental properties in Boston. Obviously a different state and market, but $500 just seems very low. I would get a quote on a potential property and see what it comes out at.  

Also, I would try to avoid double closing as you will cost yourself money and complicate the deal more than it needs to be. At first, I was concerned about my fee showing up on the HUD and having the sellers see it. What I do no is just call it a "partnership fee" or "Contracting Fee" and let the sellers know I'm partnering with another investor if they ask about it.

This risk is why its so important to build a good quality buyers list. You want to make sure that the person is able to perform and get the deal closed. Typically when I wholesale a deal, I will send it to 3 buyers who I know have the ability to close. Only if those are not interested will I send it out to others. Rarely do I ever have to shop it beyond those 3. 

My advice would be to try and get your own top 3 buyers by networking and figuring out who does the most deals in your market. Until then, make sure you have a clause to extend the close date if needed. 

1st step is to pull your credit report and see. Aside from a major event like a bankruptcy or foreclosure, often times its that your credit card usage balance to available credit percentage is too high. If you keep this under 20% ratio your score should increase.  

Wow those are impressive numbers, well done! 

What is the bad debt and more importantly what is the interest percentage costing you on that debt. I would start with whichever has the highest percent interest, typically credit cards. You can also Google the snowball method for debt reduction. The snowball method teaches you to build your emergency fund first, and then list your debts from smallest to largest and pay them off accordingly. The thought process is that each debt you payoff will encourage you to keep tackling the larger debts until youre completely debt free.