All Forum Posts by: Jeff J.

Considering these meet the 13% rule...unless these are safe houses in ISIS controlled Syria, or the houses are constructed out of lead-paint infused asbestos this is the slam-dunkiest, slam-dunk in the history of slam-dunks.  

If it were me I'd get hard money.  You only need to show up with $120k, and with those metrics, it won't be hard finding a lender or paying back the loan.

If your polite, you just negotiate it with the agent, and it's put in the contract.  I've done it several times, and I don't think it that uncommon.  Usually, I will request 25% of the total commission if the sellers agent fulfills all the the administrative tasks of the transaction.  They can't pay you, but the value of the negotiated amount can be reduced from the sale at closing when they do all the puts and takes.  It's a nice little plus-up if you think you understand the risk in the deal.

Quint,  The best split is what you can negotiate and still keep a productive relationship with your boss, so you can do another deal.  If this project is a slam dunk, 50/50 would possibly be an equitable cut, if you are working for free and you found it.  Another option would be to pay yourself for your time and then do the 30-70 split.

Your buddy could do this alone and contract it out completely, leaving you in the weeds. There are 8 billion people out there who can sweat, not many people show up with cash.  You need your friend more than he needs you - that's why Joe recommended that split.

Would you risk $60k for $12k in profit while the broke end of the deal makes $35K assuming nothing?  

You can also liquidate it and pay the penalty and tax.

My story is funny.

I had a thousand shares of pre-pre-split apple stock that had been meandering around $12 for two years. I cashed it in for about $13/share and bought a rental house that has lost $20k in value. Today that stock would be 14,000 shares @ $90/share.

However, the experienced I gained with that house allowed me dive into multi-fam which has also been a very good investment, and the difference with my real estate is that it cash flows like heck and I own all the growth potential.

If you keep your credit clean and have a documentable situation you shouldn't have a problem with your job. I don't think it very wise to advertise the fact that you have a security clearance to an internet chat board.

Hi Derek,

I'm not sure if these are valuable for a pro-forma, but they are real world expenses on my P&L's - Office Expenses, Phone, Auto expenses, returned deposits.

Jeff

Perhaps it's because I don't have tons of cash standing around, I don't want partners, and I don't completely trust the risk equation of larger more expensive Class A projects - these are the only kind of rentals I buy.

Assuming you want a project and you can and will put in the elbow grease - If they are performing and in an okay location and in rentable shape with good bones, $6k - $7k income with value-add potential for $100k is a great deal.

They should cash flow enough to pay for almost all repairs except for large capital, but then again you should be able to save for those out of cash flow, or refinance in a few years.

If they are willing to hold the note for a couple of years, you could offer them a high interest rate if they finance the entire thing for two years, or maybe they can take %10 down. By cleaning these up, you could refinance them in two years with a base value well north of $350k. Worst comes to worst you can borrow $5k - $10k from your Dad and traditionally finance.

These kind of deals are more risky, but if you feel like you can mitigate your downside risk the upside is huge. But this is a hands on deal, you can't be passive.

The payoff is that after a few years you have fixed all the problems and will have a nice performer for low value plus a lot of equity.

All the best deals I have ever seen involve trusts, divorces, or inheritance situations where the parties that acquired the property didn't know what they were doing or devolved to the lowest common denominator. They are a mess and that keeps most people away, but if you want to do the work you can find stuff for quarters on the dollar

You have a great strategy buying a down-market property in an up-market location. You will walk into strong good revenue for your intro price, your apartment will be largely renovated and your forward maintenance costs should be low so you will generate good operating income. Strong cash flow covers up a lot of mistakes, if you made any. You are going to be fine.

The only risk I see is carrying the property during renovation and re-population, but that is probably one reason you got the place for a good price.