All Forum Posts by: Jake Lenderman

@Doran Summers

I did find a hard money lender who is willing to do 80% of the purchase and 100% of the refinance, but I was trying not to pay them as much money and using my parents for the rehab.

Two reasons, one we wouldn't have to worry about an escrow account and how they payout on the rehab.  Second, I would not have as much holding costs during the rehab, I would not pay my parents back their interest until the deal was complete. And if I am going to pay someone interest on money, might as well be someone I know =)

Thanks,

Jake

Investment Info:

Single Family flip

Purchase price: $142,500

Cash Invested: $190,000(rehab and holding costs etc)

We purchased the property through auction.com, which was very nerve wracking with the horror stories you see from there.  We walked the outside of the property but could not go in, but through the windows things looked in good shape.  During the final couple of minutes of the auction, my partner was starting to get cold feet once we crossed the 140K mark, I knew the minimum bid had been hit so I went ahead and put in a bid at 142,500

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

Been looking for investment opportunities, either a flip or BRRRR

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

Found it through auction.com, just bid on it.

How did you finance this deal?

I have an LLC with my parents, they financed the deal with a HELOC on their primary residence for the purchase, then we used everything we could for the rehab, credit cards, cash, loans etc.

How did you add value to the deal?

It was a huge renovation, the biggest add was all the information that auction.com had showed it at 1700 SQ FT.  After getting into the property, turns out it was a 2500 SQ FT. property, lots of value add right there.  The house was built in 1919 and the previous owners changed a lot of the layout.  Another huge add for us was it was a 3 bedroom, 3.5 bath and we changed it to a 5 bed, 3.5 bath.  2 bedrooms had their own bathrooms attached.

About the only thing that we didn't have to touch was the roof.

What was the outcome?

Sold it for $460,000, after everything a total profit of 72K for the company.

Lessons learned? Challenges?

So many, being our first true flip(We have done 2 live and flips) we learned so much.  First which everybody I think gets burned is that never go with the cheapest quote.  In the end the contractor, his 20K quote cost me a total of 49K, he kept coming back with extras until we finally got rid of him.  

Another challenge was time frame, with that contractor it set us back probably 4 months in addition to being an older house, there were a lot of unknowns behind the walls.  Down on Galveston Island, everything has to be windstorm approved and the siding took forever to get approved.  Original idea was to remove 2 layers of siding, but engineer said he didn't know what was behind the original siding and how it was nailed down so we had to remove it down to the diagonal ship lap that was common on those older houses.  Never mind the fact that it has been standing since 1919 and who knows how many hurricanes/tropical storms and the siding was still attached. =)

Previous remodel they installed the custom shower pan improperly, which caused it to leak and in turn brought in termites.  I hate custom shower pans, they never seem to be installed correctly.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We have a family friend who is a great real estate agent in the area who has a lot of his own rentals and loves to do flips himself, so he has that investor mindset. Corey Cole.

@Jeff S., Thanks for the information.

Some history, we did a flip last year with them, they provided the financing and I did the rest, we split that 50/50 and it worked out great on the business side. We had a profit of 72K. Family side there was some strain =)  I want to be the sole decision maker on this next one, which is why I didn't really want to partner with them.

My original thought was to pay them 10% interest on the amount borrowed plus 15% of the total profits, so it would give them equity interest in the property but that gives them no collateral still.  Second position seems like a bad idea since the hard money lender has all the power.

We do understand the risks, they want to invest and we all want to be profitable. We are family, but it is still a business and they should make sure that they have some sort of protection of their money.  I will find a lending attorney and figure out my options.

Thanks again for your information

Jake

I have done a couple of flips, but I have a question.  My parents want to invest, but how does it work if I do a hard money lender for the purchase and use their money for the rehab?  Their concern is they have no collateral if things go south.  I tried to do some research on what recourse they would have, but came up blank.  And just because its family, its still business and the rehab will run about 100K, so it is not a small amount of cash. =)

Thanks for your time.

Jake

So we are working on a flip on Galveston Island.  All previous flips the outdoor areas have been nice and needed very little attention.  The current house we are working on is on 3/4s of an acre and sits pretty far back from the road.  The front area has no trees, no driveway and just looks bland.  I have vision for interior work, but I have no vision for how the outside should look.  Is there any companies out there that you can send a picture of the outdoors and they can do a 3d rendering for you?  Or any other suggestions on the best way to get the curb appeal?

Thanks,
Jake