All Forum Posts by: Jim Kalish

Like you I've attended a few free seminars, which are merely thinly disguised sales pitches. Quite often things open up with everyone telling the room about themselves. One of the first things I noticed is that most of the people there have little if any experience or understanding of what real estate investors do. And secondly it seems most of the people would be hard pressed to pay for the lunch if it weren't free. But by the end of the hard sales pitch at least 2/3 of the people stand in line to shell out big bucks for a week end boot camp to hear what the so called gurus have to say. These folks, although well intentioned, do not offer any local networking. And as you pointed out all of the information is readily available for free or nearly free as long as you are willing to put in the effort. Your local REIA association is a much better option for local networking. And forums like this on BP have provided me with all kinds of advice and insights. So my recommendation is to dig in and do your research, attend your local REIA meetings and try to find a mentor, and put that 5k towards your first flip.

As Remington said true hard money can get very expensive. Double digit interest and 3 or more points. Not to mention very short loan periods. You might have to buy, rehab, and resell or rent and rfi in 4-6 months. If you are still holding the note at that point it could be another point or 2. Very ambitious, especially for a newbie, There is a middle ground between conventional loans and hard money, private lenders. They usually run around 8.5%. Places like Lima One, Lending One, Lending Homes. There are others. Just google fix and flip loans or private lenders. The will usually do about 70% of the purchase and 85%-100% of the rehab. Some places like RehabFinancial will do up to 100% of both as long as the total is less than 70% of ARV, you have a decent credit score and verifiable income. In this climate it will be hard to find anyone who can turn things around in a few days if that's the goal. But hard money should be a last resort.

Good luck

One more thing then I'll get off my soap box.  Bigger Pockets has some great resources.  Look at their education tab. " The Book on Flipping Houses" by J Scott is really good read and gets into some real details.  Its under 15.00 and gives you a lot of bonus content.

The issue on the LLC is if it will be a sole ownership or a partnership. This is from the IRS website.

A Limited Liability Company (LLC) is an entity created by state statute. Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner's tax return (a "disregarded entity"). A domestic LLC with at least two members is classified as a partnership for federal income tax purposes unless it files Form 8832 and elects to be treated as a corporation. For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and affirmatively elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

So basically unless you have a partner or choose to be taxed as an S-corp, Richard is absolutely correct.  The LLC won't file a tax return and you won't get a K-1.  The K-1 is what is issued to each member of a mufti-owner LLC to reflect their portion of the profit or loss and included in their personal income tax return.  You simply show the profit or loss on your taxes in I believe schedule C.  And be careful about looking like you are self employed.  You could get hit with an extra 7-1/2% in taxes.  It all depends on what types of income you have and how it is declared.  Just another reason to get an accountant involved.  Flipping and renting are a lot easier than the taxes.  Get help from an expert.

2.25% is really high.  And if you already made contact what in the world is he bringing to the table?  A good broker has the inside track with VPs and other senior managers at all sorts of lenders.  Sounds like you know how to find lenders.  

Maybe I should be a broker.  Sounds like a lot easier than what I'm doing now :)

Hi Tyana,

I don't mean to pile on but I would hate to see you get burned.  Everyone who is saying getting a business line of credit is very difficult, especially for someone just getting into this, are absolutely correct.  Most if not all lenders will want something other than your personal guarantee.  They will usually want collateral or a lot of experience.  So I doubt you will be able to get it.  These high priced courses and so called gurus tell you the concepts but not how to really do it.  Bottom line it takes and experience.  Flipping can generate cash.  But one at a time won't make rich.  If you see a profit of 20k on your first deal you are doing really well.  And if you don't already have a team of contractors and a good accountant and realtor you will quickly find out how expensive carry costs can be.  Really good subs are hard to find and charging a premium.  And if you think you can do it all yourself be prepared for a very long rehab period.  I'm a GC and I don't lift a hammer any more.  I hire guys who do the work all day every day.

As for LLCs, if you are going to flip its probably not necessary. Like someone else said get builders risk insurance, runs about 100/month, and absolutely make sure your subs have workers comp and general liability. And make sure they name you in their policy. A sub can show you a policy when you hire him and drop it a day later. If you aren't named you will never know. If you plan to buy and hold you absolutely need an LLC and insurance. One disgruntled renter can cost you everything yo have.

Bottom line, your approach is the ideal that we all wish would work.  But it takes time to get there.  If you decide to proceed build your team first.  You should have an accountant, a real estate attorney, a business attorney, and a GC you can trust or a group of subs who are licensed and know what they are doing.  Get references and check them out.

Best of luck.  Let us know how you do.

The mortgage broker makes his living by putting investors like us together with lenders.  They usually have better contacts and get us moved to the front of the line.  You didn't mention what the fee was.  My broker charges 1%.  I would suggest you consider more than just the cost of all of this.  There is the ethical issue as well.  Ask yourself if you would have been able to make the contact without the broker.  If not you should consider paying him.  And you can always negotiate the price.  Ask him what he brings to the table and will it save you time and aggravation.  That's worth a lot right there.

Good luck

Thanks John, I appreciate the advice.  I have a Pike's Nursery near me.  I'll give them a try.

Hi follow investors. It seems rehabbing has gone through the roof. So we are trying to increase our list of reliable subs. The crews we use are great but really busy. So any contact info for carpenters, electricians, plumbers, HVAC, roofers and especially really good punch list/handyman type guys would be greatly appreciated.  Most of our properties are in teh Charlotte, NC area.

Thanks

I think first impressions can make a big difference.  So when a perspective tenant pulls up to one of our properties the curb appeal has an immediate impact.  We put a lot of effort into the condition of our homes for rent and have even helped neighbors make their properties look better.  But we are absolutely terrible at coming up with an attractive, low maintenance landscape design that is repeatable.  We tried a couple of local guys but it gets expensive and the end results aren't the best.  If anyone has any resources or suggestions other than talk to local landscape maintenance guys I would be very grateful.

Thanks