All Forum Posts by: John Blackman

We use multiple sites as each has its own context. The primary ones we use are:

1) Sales site, has all of the pretty finished product to go buy

2) Investor site, tells our story, our values, and how we treat investors.

One is for buyers and the other is for investors. I would never merge these onto the same site. Depending on what you do determines how many sites you need. I believe each site should talk to a single desire so it is focused and clear. The more your site does the less it stands out.

Architects do this pretty frequently, but they usually build a new house of their own design, live in it for two years to get the tax free status and then sell it. You get some appreciation if you're lucky. You're moving every two years but can make a good income just flipping your own home design.

You might want to upgrade the kitchen and master bath before moving in just to make life bearable during the rest of the rehab.

Good luck.

Have you ever started that project after you borrowed some money from a friend, family member, or investor you met on BP only to have them hover over you and holding your note over your head if your project isn't going perfectly? Or do you worry that you aren't delivering for your investor? Do you feel guilty that you have their money and you can't give it back as soon as you thought you could?

Well we use a lot of investor money and we have a particular approach that I find works well on multiple fronts. It's going to sound so dull and right our of office space, but it works. The dreaded status report!

Every week as part of our process, we do a check-in at the beginning of the week to make a list of everything we want to get done, how much money we have, and what we're going to spend.

This is a great way to force you to focus on your business first thing Monday morning. You will create to-do lists, you will call your vendors, you will ask for the things you need to get your project done and one step closer to your dreams. So by creating the 'what's getting done this week' report on Monday morning you set the wheels in motion.

Throughout the week you will do what you do, check over your list, and follow up on the results of what you started Monday. Then on Friday you get to see if you actually got done what you wanted. Mark off those items in the DONE list. Measure how much money you spent, take lots of pictures, or a video if you really want to impress and send out an email to your investors (bcc everyone who will benefit from the info, the builder, the broker, the architect, your partners, the bank) every week like clockwork.

That is the important part. It has to be consistent. Your investors will get used to your emails. The very sight of them will make them happy. They will show them to their friends. They will feel that progress is being made and their money is working. The banks will tell you none of their other clients do this, because they don't. You will get more loans, you will get more investors, you will have better relationships with your team.

Don't be afraid to put bad news in a report either. Bad things happen. Just make sure you put your plan in there on what you're going to do about it. Investors know that stuff happens, they just want to be reassured that you are on top of it.

I can't recommend this practice enough, and it helps you as much or more than your investors because as the end of the week starts coming around you will tell yourself that you don't want to send a crappy report with nothing in it. It will motivate you. Go start this habit now. It has worked well for us.

Things I would recommend including in your report:

• Project Week #
• What we want to get done this week/month/period
• What we actually got done
• Blocking issues
• Budget
• Money Spent
• Receipts accounted for
• PICTURES of stuff that actually got done

Derek,

You certainly have a good list there and a lot of it depends on where you are building. Codes are typically more restrictive the closer you get to downtown and the more liberal the governing body is. The best bet is to simply ask a builder in your area, although you've got 90% of the issues we deal with in your post. Big ones are:

• Flood plain? This can be worked around sometimes.
• Plat restrictions
• CC&Rs - HOA restrictions
• Setbacks
• Tree ordinances - impacts your foundation design and footprint
• Grade or slope of the lot
• Water retention/runoff

A good architect that has designed houses in your area should also know all of the issues that you will need to overcome to get a permit because they have fought that fight in the permit office where you are building.

After you have found a good place to build and the exit prices are high enough to get the margin you desire after your land and construction costs, build a detailed budget. Count out square feet for everything. Count doors, count windows, count tile space, count floor space, count roof tiles. Count it all and put it in a spreadsheet. This exercise will give you a great tool for your next build that will make getting your budgets done much faster. After you get a budget you think will work, add 10%.

The largest source of cost overrun that I see comes from sloped lots and the grading, drainage, and foundation issues they cause. Those lots can be real diamonds in the rough though. They are less attractive to builders, but can give you leverage in getting a better price. Sloped lots can also make for very interesting architecture. This house was recently finished and had its share of challenges but the sloped lot created a great interior elevation that turned out great.

http://www.inner10dev.com/#!2700-oak-springs/c1hzv

If you are doing your first one, partner with a builder. Also check in on expenses regularly. Your profit is in your accounting. Know where you are spending money at all times. Sometimes you need to spend, sometimes you don't. When making the decision to increase your budget ask yourself these things:

1) Will I get a return on this? Is that fancy doorknob going to make me a higher exit price?

2) Will not spending this money cause a warranty issue? Is there a possibility I am going to have to come back and fix something more expensive if I don't do this.

3) The best insurance policy on your new builds is a good engineering team that will take on the risk of a foundation or framing failure. Pay for good engineers, they are worth more than any warranty.

Good luck,

New construction should yield at least 20% gross margin to make it worth the time. It takes about a year end to end to do a project. Your gross margin number should also be considered your market shock factor. You need to be able to stomach a drop in housing prices up to your gross margin.

In Austin you can do better than 20%, but not always.

@Will Barnard I get where you are coming from, and that is certainly where you want to end up. At first capital may be very tight and if you are just learning actually doing the repairs yourself at least once will teach you a lot. The main lesson you will get is to hire them out next time, but you will also learn costs, time, and materials. This will help you determine the value of a contractor and hone your BS meter. Once you've cut your teeth and made a little cash, then you can start hiring it out.

Time is the key though. You have to commit to doing the repairs. Set a schedule, get them done, follow your plan. Don't get so busy that you forget to do your own flip.

Looks really good Jon. That location keeps getting better. I really like the modern look. We'll have one down the street starting soon, so get a good exit for us.

Also consider if you are going to hold the property I wouldn't spend as much on the rehab. For a flip you want nice pretty finishes for a quick exit. For a rental you want sturdy, clean finishes that are cheap to repair.

I'd echo Craig Rismiller's advice about long term buy and holds with a partner. A buy and hold property is a long term investment, so you had better like the idea of doing taxes, accounting, and management with this guy for the next 5+ years.

I use partnerships frequently for flips, and I have one long term rental partnership which I did early on in my investing career. It has worked out quite well, but in retrospect I would not do it again. This is simply personal preference.

I've seen deal splits across the board, so it really depends on your relationship with your partner and what you want out of the deal. Typically being a sponsor for a deal is worth 20%. There are plenty of other resources to bargain for points like cash, debt, and labor. I tend to hire contractors or GCs instead of doing the work myself. I want to be an investor, not a builder.

Good luck.

Welcome to the site Joseph A. Congratulations on having the foresight to be thinking about your financial future at such a young age.

The first course of action I would recommend is to find a mentor. Your uncle seems like a perfect fit. Mentors are key to your personal and career growth for your entire career. You should always be working with someone who knows more than you and can lead you into greater skill sets and capabilities. Otherwise you'll plateau.

Getting a job in the RE industry will expose you to a lot of useful information that you can apply to your deals. However, it really depends on your income potential at your first job. Some of the most successful real estate entrepreneurs I know were engineers with good incomes that saved their money and got into real estate with their saved capital.

You can get into the real estate game without capital. It's harder, but there are many super successful guys and gals that started with nothing.

Above all, whether you're investing in stocks or real estate, manage your risk. You need to be comfortable with the worst case scenario on any deal whether it's a stock trade or a property.

Good luck and welcome.

HMLs are all across the spectrum. A lot depends on your relationship with them too. If you cozy up to one in particular and are both making money with multiple deals then terms may get better as your relationship grows.

Relationships are everything. Paths cross, and people will remember those with a good $/drama ratio.