All Forum Posts by: Jim Goebel

@Jim Blackburn

@Cristian Samayoa

Hi Cristian

I think there's a little jumping to conclusions by a couple here.  I think the 'dump her' sentiment is not supported by what was shared.

I think that Jim Blackburn has expressed a very mature and level headed assessment of a good perspective by which you can understand her perspective.  Drawing the conclusion that she is lazy is not supported at this point by what you shared.

She may feel outworked, she may feel lazy in comparison, she may feel any number of things - and it is a challenge for YOU to understand those things and communicate what needs to be communicated for someone to understand and be 'brought along' in the process of possibly sharing a life together. 

For me, I grew up with a high emphasis on sports and school.  That worked for me up to a point and I got kicked around a little bit in a professional sense - I will spare you the whole life story but the important summary is that it was a process to define myself as an entrepreneur and take the requisite actions to do that successfully.  My loving wife at a key point was instrumental in offering the support to allow our relationship to sustain itself, my confidence levels to be what they needed to be to succeed.  However, my part was to share openly the daily adventures/challenges of trying to get out and market at the time engineering services.  I think understanding that it is a process to grow and have the independence, and requisite experiences to be entrepreneurial is a process - you need to think of it as such.  For someone (ie your girlfriend) to be invested enough in that process - they need to see the benefits not just to you and your lifestyle, but to her and your possible future together.  

For us, the commitment was made to marriage (engagement) and that was the point where both of us really were able to be 'all in' and work hand in hand on my wife's house at the time.  However, the groundwork and trust had to be there FIRST, not second for that to work.

There have been trying times with all of the stress and such of doing real estate, and rehabs, as we've lived in some houses we've worked on, etc - but I've seen a lot of growth in my wife and am excited to see where she goes.  It doesn't happen overnight but sometimes the best things in life are worth waiting for.

Anyways, all this said I don't think anyone here is going to be able to speak to the compatibility and where you and your girlfriend's hearts are in terms of evaluating a committed relationship.  However, it is important in my view that if you are committed to your relationship that you display a willingness to demonstrate that commitment. For me right now, the dynamic is that I've expressed that I'm not overly excited about the day to day with what I do with real estate.  I'd like to grow in my own way however the ball is in my wife's court with regards to her continuing to grow and demonstrating behavior that would allow me to step out of my current role/lot in life.  The last month that's been working construction in the cold.  It sucks viscerally but I'm happy to do it.  I think your girlfriend understanding that you are willing to make sacrifices is important.  She may one day display the requisite qualities and characteristics, and commitment to also make sacrifices.

I figured I would provide some visibility into our relationship/situation, because some of what you have communicated has been spoken at times by my loving wife.  She has expressed that she is not as naturally hard working as I am (like it's some genetic thing or something) as well as that I may be overly focused on money for the sake of it.  A lot of some of the similar threads or thoughts as what you're expressing.  That said, it has been a challenge to demonstrate results, and demonstrate that we get to share in the positive results from the behavior/activities.  It's also been a challenge to engender a sense of shared responsibility for the results (both positive and negative) however it's important for your significant other to feel involved, to be involved, and ultimately to feel like they have something to offer and some shared responsibility and ability to enjoy the rewards of success and entrepreneurial-ism.  

hope this helps.

@Barry Je

Hi Barry

I have a different perspective - I think you should be focusing, best you can, on what you have to offer.  I don't see you writing much about this.

My view on the value of an attorney is really tied to their ability to 'stand' by you in a transactional sense.  Essentially, to represent you for an actual transaction.  Implicit in any human relationship should be a hint of quid pro quo.  An attorney that is going to share his/her time with you and valuable perspective, is going to want to know/trust that you can credibly offer something in return.  You may have work for them to offer, but you (to me) respectfully are coming across as interested in more 'tire kicking' in how you are presenting yourself.

I'm not trying to dissuade you from doing it - as you getting the comfort level you need in these important matters of life, risk, etc is very important.  However, think of it this way: an attorney is trained to know the law and be authoritative in that regard, and to represent you.  When it comes to matters of risk, business structure, etc - a good attorney may have some good experience there to give you some perspective, however at the end of the day, the attorney's value is and should be tied to them representing you on an actual case/transaction.  That's where they ultimately may help in regards to resolving conflict, being a closing attorney, etc.  

I think bigger pockets is a great community but I would honestly trust someone in business that has been through what you are planning on doing more than an attorney.  These types of questions you have to me come best from a mentor, or from a community like this (bigger pockets) - not from an attorney.  An attorney by even just talking about matters like this specific to your situation has some skin in the game given that they are paid to be authoritative on subjects (at least in terms of communicating risks, the law, etc to their clients).  

I don't know what transactions you have planned but ultimately things like closing deals, (buy or sell) are the lifeblood of what makes a good transactional office work.  And ultimately, a good transactional office is the office that does transactions, and thereby, their attorneys get the experience that is valued in the marketplace for legal services...

We enjoy a good relationship with an attorney in the Des Moines IA area that works at a firm called Wasker Door Wimmer and McCouillier (I think I probably spelled that wrong).  Our attorney that had represented us on I think 3-4 closings at the time offered pro actively that she would be fine fielding any questions we have free of charge (I'm sure within reason there).  My view is that there's enough goodwill and trust built by us treating her with respect, bring business her way, that she views that time investment as a good thing.  I think it's worked out that way.  This past year we had a couple deals that kind of 'dragged' and were more time intensive, but there's enough goodwill and trust there that if we were to seriously want to explore what you're putting out there, I think she would be happy to opine/have a conversation etc.

We were continually bringing some business to this firm and this attorney and the hope I would think from both sides is that it is a mutually beneficial relationship over time.  I guess that's my biggest piece of advice to you - think about your value proposition over time - I don't see it.  What specifically in terms of transactions are you interested in?  Business formation?  What can you commit?  What can you offer?  

Hope this helps and I also hope I'm not coming across as a know it all as I am certainly not that!!!!

Jim

I wanted to share that I had a typo on my original post - 

On rental #7 (owned under IRA) we put closer to $38k into the house, not 68k

Hi Chris

Thanks for the post.

Oddly enough, there's at least a small element of what you're communicating in what my wife and I are experiencing - however our background and history and location are different.

We operate out of Des Moines IA so the financials are way different than out in your area.  When I shared some of the numbers with a programmer making 150k in the Bay Area when we were playing a game on our phones together, he was nearly blown away.  Keep in mind some of the following are NOT what we are experiencing now - as it has changed.  That said, we got spoiled in a sense and now it does feel to us like we would be smart to explore 'other options' given the deals we are seeing out there now.

Here's a few data points: (we own 6 rentals, 2 more that are done and coming online in early 2018)
In nearly all cases we have leveraged based on the appraisal and have between a 20%-40% equity position in property

Rental 1: Wife's original house, bought for $91k, rent it for $1300/mo, appraised/estimated current value of $137,000

Rental 2: Bought for $88.9k, put about $5k into it, rent for $1400/mo, appraised/estimated current value of $117,000

Rental 3: Bought for $36k, put about $8k into it, rent for $1300/mo, appraised/estimated current value of $117,000

Rental 4: Bought for $46k, put about $25k into it, rent it for $2175/mo (duplex), appraised/estimated current value of $126,000

Rental 5: Bought for $97k, put about $24k into it, rent for $1300/mo, appraised/estimated current value of $168,000

Rental 6: Bought for $174k, put about $2k into it, rent it for $1700/mo, appraised/estimated current value of $245,000

Primary Residence (likely to be converted to rental in 1st quarter of 2018): Bought for $59k, put about $55k into it, appraised/estimated current value of $133,000

Rental 7 (owned under IRA): Bought for $52k, put about $68k into it, rent for $1550/mo starting Jan 1 of 2018, appraised/estimated current value of $215,000 - note though this property took a year to complete

Current project (will be primary residence when complete): Bought for $48k, put about $35k into it to date, estimated another 35k will be needed, appraised/estimated value when complete of $160,000 - 200,000

I'm providing that visibility to communicate where we've seen the market change.  The 'diamonds' that are listed for $30-60k that were numerous back 2-5 years ago (over supply of foreclosures, etc) are really not there anymore.  For instance, our Rental #3 is not attainable anymore.  We are finding that the deals that may be comparable to rental #5 are attainable however like anything it takes some real boots on the ground to locate them.

We had some fortuitous timing on the purchase of Rental #6 - however we do believe that at the top of market (at least here in central Iowa that property we do believe is the top where we'd want to invest and should do a great job of holding its value/appreciating over time) - there are opportunities to find the house that needs new carpets, a kitchen remodel, and a smoke smell removed in the nice neighborhood.  However, there's still an opportunity to get hurt when prices are inflated by 15-30% as I believe they are now.  That's not to say that they are over-valued, simply that I see a 15-30% 'too high' prices compared to where we are more consistently 'in the money' when evaluating opportunities.

Again, I believe in the market we have here in Des Moines the Rental #3 and #4's really are not there anymore, there were lots of them as recently as 2-5 years ago although you still would need to know what you were looking for and have the skills, balls, and grit to execute.

The #5's are there now but require some looking and obviously require a little more in terms of capital to get into them, as the trick in that price range and value of home is to find one that can be financed, or to have the cash to buy outright.

That means for us we are evaluating other options in life - however we also have evaluated other markets, and the last one we looked at for a possible out of state arrangement was Chicago.  There are tons of well built houses available where the price point would make sense, however when there is a 5-7k property tax bill coming off the top every year, that was what caused us to balk at that.  We mainly wanted to explore other markets to get some comparison to what we were seeing over the last couple years as the volume of #3-4 type deals was going away.

.................................

Now on to commenting on the possibility of out of state investing.

We haven't done it before, but a lot of the same problems / challenges occur with in state /area investing - if you are not doing the work it is a lot harder to maintain accountability and control over the end project/budget.  The way that I'm wired to be honest, on your end of it, I would NOT want to be an investor and feel 'out of control' in that way at least in terms of my comfort level and feeling sure that I wouldn't be buying a plane ticket and staying in a location for months at a time when not wanting that... - as I would feel that whoever my trusted resource was, would have too much leverage on me and my budget.

That may or may not help. 

All that said, I was ready to move forward with the exact type of arrangement with a real estate agent/developer out of the Indianapolis, IN market (which last I looked I do believe there to be some solid opportunities) - I had a contract drawn up, we had the house we were focusing on, etc...  The guy dropped off the map and I didn't get visibility into why.  I was ready to give it a go though.  For the most part, I'm a contract kind of person at least to set expectations.  That said most contracts that I've thrown together I've found most other people are NOT that way.  Especially the profile of the person that can provide the most value in terms of executing a house remodel.... If you want to see the contract I had together for this type of arrangement please let me know.  I will have to dig for it but I'm pretty sure I have it around somewhere, in email or something.

Also and if this comes across as a solicitation and that's not welcome, well - just tell me to shut up :)

There may be a fit in terms of profit sharing if you wanted to discuss some projects that we have 'in the hopper' in this market, that fall under more of the rental #5 in terms of financials.  I think a PM would be the best way to explore this and there's no guarantee from either end that there'd be a fit.  But big picture right now our current major project and taking this one on simultaneously could not quite pass our 'stress test' in terms of finances.  In terms of bandwidth and capabilities I have a high degree of confidence that we could take on another project and have one that would work.

Hi Geraldo:

I'm assuming you are talking about selecting a contractor and we have a 'roll up your sleeves' kind of mentality for the most part but I think some of the things we've done with kitchens have driven a lot of value on our rehabs and rentals.

We operate out of Des Moines IA and of course there will be differences regionally in style, contractor pricing, material availability, etc - so take this for what it is worth.

We use granite nearly exclusively for our counter-top material.  If you are creative/resourceful, look for opportunities to source granite remnants cost effectively.  It's actually possible to cut granite outside of a shop.  The polishing is the trickier part, especially if you want a bull-nose etc type of finish.  Anyways.  That's one tip but we've come out to pay <$500-800 complete done for granite which we think adds a ton of perceived value as well as having a much more hardy better long term material for rentals.

One other tip is the use of existing or used cabinets that you then repaint white.  A nice kitchen with white cabinets can really sharpen up things a ton and be easier on the budget.

Get some input from someone with some knack for color schemes / aesthetics if that's not your thing.

Obviously the tips above imply more of a heavy time investment for less money kind of approach.

But they lend themselves to getting a nice result for less money and a high quality tenant if you are renting.....

Again take it for what it's worth, there are a ton of ways to do things and more than one way works.

Jim

Hi William,

@William W. Humphrey

Thanks for that.  Our custodian is down in Austin TX and we feel has been doing a pretty good job overall.

That's good to know though and I can explore that with them.

Do you have any other thoughts on best route to go?  We are interested in hearing some thoughts on the possibility of offering financing as this is the first time we've done that.

Jim

We finished a house in the Des Moines market built in 1894.  It was a real challenge - and took a year to turn around.  It's beautiful but is an interesting one.  We have a signed lease and deposit with a couple that love the house - they have expressed interest in executing a purchase option and we have put some preliminary terms in front of them on that subject.

Anyways, one of the challenges with the house is that it's so unique.  Here is a link to the zillow listing and you'll see what we mean!:

https://www.zillow.com/homes/for_sale/783749_zpid/...

Here's some info on possible relevant items related to the market:

1. At least here in Des Moines, it's indicitive of what I'm reading nationally, that there is suppressed inventory which is driving higher than usual prices.  Not sure when that'll change but on a $/SQ FT basis, the house compares well to surrounding comparables - however the possible lever/challenge is that most of the surrounding area are houses built out in the middle of the 20th century - whereas ours was originally a farm house in Des Moines that was added on to and annexed as the city of Des Moines grew.  It's got a cool history and story to it which appeals to some, however the HIGHEST comps in the surrounding area are going to be around $170,000 -180,000 at the top end.  Most of the 1940-1960 houses are closer to 
2. All that said, the intangibles are quite striking on this one and we are getting consistent feedback to that effect.  However, it seems my initial read is that there's no doubt that we're selling/appealing to a smaller 'subset' of the market that places value on the charm and history of the house.  The average upwardly mobile family that buys what home they can afford would probably choose to move to a suburb.  
3. Two recent comparables on the same street are houses that sold for $157,500 and $162,000 - with about 1150 sq ft and 1200 sq ft, respectively.  The $162,000 transaction was the next door house which was also rehabbed during the time we were working on ours.  This house in question is 1800-1900 sq ft (not sure exactly as the assessor page is not accurate) and 'feels' different, in a good way.
4. Our numbers on this house: so first relevant info here is that it was purchased under a Self Directed IRA. So, there comes with that certain rules/limitations for us. One of those is that we need a 3rd party property management company to manage it under a lease scenario. The house was purchased for $52,000. We have in the tens of thousands into the house in terms of repairs, and we have about $6,000 left in the IRA for rainy day, etc.
5. On the current situation, we have interested tenants (already paid the deposit and signed a lease starting on Jan 1) that are looking to grow a family (first baby on the way) and we really like them.  They have an interesting background (both college educated entrepreneurial musicians) and actually went to a college where I grew up that I'm familiar with and know some graduates from (and think good things about etc) - We have agreed to a lease of $1550, and in good faith/principle, we have agreed to them having a purchase option kick in under a separate agreement after 6 months of a traditional lease.  That will allow us some time to manage whatever things come up from a maintenance perspective, and allow them to save up for the down-payment.  They have not outright agreed to a purchase price of $215,000 but the terms that we offered them for a private debt/owner financing are based on that sale amount.  We feel overall like we are offering some pretty competitive rates and the sale price is really where the possible question is - again, the comps per above and max sales data points might struggle to support this - but there's not a lot of beautifully done, restored 1894 original farm houses out there.  I tried to make it clear when the tenants asked if they could do an appraisal.  I guess worst case scenario, if these tenants want to push back on the sales price then we may have some room to push back on the financing terms.  My expectation is that if they hire an appraiser on this transaction, the appraisal will come in well below 215,000 and we would have to challenge that to 'claim value'.  But on the upside, they love the house and just an outright lease may not be the worst thing in the world under current terms if it works for both parties.  Here are the financing terms that we offered to them:
   
   We caveated that we would track an increase in rates that track increases in the prime rate (anticipated over next year or so)
   We did not mention any PMI but I am now kicking myself for not doing this given that we don't know what their ability to come up with down-payment is.
6. I'd be happy to share any other details about our balance sheet or 'big picture' if you think it's relevant in terms of evaluating our options with this property.  Just let me know what if anything you want to know there.

Basically what we are looking for is advice- Anything and everything :)

Things that would be really helpful are understanding what we should be thinking about in terms of a private debt instrument - things like - if we sell the house and have a private debt note - how do we go about selling that?

Also, does anyone have any experience doing something like this under a Self Directed IRA?

Thanks very much :)

Jim and Rachel

We have some interested tenants that want a lease to own or buy on contract type scenario that we own 100% under a self directed IRA.

Seems pretty straight forward --- we draw up financing terms for them, and then they make payments directly into our custodian based on those...

Here's some verbiage I just inserted into a boilerplate IOWA LEASE TO PURCHASE OPTION AGREEMENT Chapter 562A (Uniform Residential Landlord and Tenant Law):

Please let me know if there's other things to consider, or someone that's been down this road before!!!

Certain things on my mind include whose responsibility taxes and insurance would be... among other things....

______________________________________________________________________________________________________________________________

10. FINANCING AVAILABILITY. Seller/Landlord has communicated the option/availability of financing available upon execution of purchase option by tenants, pending a good faith review of financial disclosure information on the part of tenants, upon tenant execution of option to purchase. This financing would be available so as to provide tenants the possibility of building an equity stake in the property, with the eventual contingencies accounted for, for instance in the possible eventual sale of the property. Tenant lease/rent-to-own (length of residence) would dictate tenant's ability to execute/initiate a sale of the property. Seller/landlord desires tenants to reside in property for minimum of 10 years to initiate sale of property, measured from start date of tenancy.

At this point, tenant can initiate a sale of the property, if desired, to realize equity position.

Anticipated Offered Terms for Financing:
Consensus WSJ Measured Prime Rate + [2%-4%] on 30 year term with minimum payment being equal to offered monthly rent amount (extra is applied as principal reductions)

Default or non-payment of rent shall result in forfeiture of any possible equity position in the event that the option to purchase is

If tenants/buyers wish to execute their own financing options during owner offered financing term, sellers/landlords will allow for this after the end of five years after lease start. If this is the case, tenant/buyer balance on the house would be need to be paid off in full at that point.

Hi Tyler

Unfortunately I've been in the same boat and have settled on a 'low tech' Menards style game camera.  There's a couple decent tree locations that honestly no one would ever know they exist - but they at least give me a little piece of mind.  The biggest thing we've had to worry about it theft.  When you go through workers, it seems that the most likely culprit is often the ones that are feeling slighted (rightly or wrongly).  The one I have though I have to get up in my bucket truck to take it down and review.  To be honest, I only do that if/when there is an issue.  I am interested in the internet/motion activation but knowing myself, I'd be 'over checking' it to the point of distraction/going overboard.  

The other thing that has helped on a current project (at least I think it has) is having a (snow) fence around the property's perimeter.  Of course, this may attract attention you don't want but it will make the casual person think twice about entering to steal something.

If you do find something, I'd be curious what your solution is.

I've tinkered with a phone type of solution where you get an APP and then use the phone's camera.  The internet connectivity and motion sensing was just fine - the only issue was the power on that, and also I'd have people working that would move the thing or turn it off.  Then they would claim it was in the way - etc.  If you don't get your people to buy in then it may not help/work.

On that subject (sorry if this isn't helpful) - I had a current worker that got his masonry tools stolen.  I got the creep on camera but we couldn't ID him.  Anyways, I feel that we are 100% on the same page about that now (we both hate thieves and have a shared experience)..........

Jim

@Dave Foster that is some really great food for thought.  It sounds like you're suggesting the possibility of liquidating / exchanging some assets as an option.  We are good on the margin and confidence side in this macro market here.  It's solid - not going to crazy appreciate but the cash flow isn't going anywhere and our time horizon is longer than what the next cycle brings, even if it was 10+ years.

I may be reaching out to Jay as I'd like to learn more about the development side.  We have a deal (option) on some land that might give us an entry point into the timber industry and that is something that has been of high interest to me.

Great stuff and thanks.