All Forum Posts by: John W.

Originally posted by @Andrew Wong:

The fair way is what you both agree on! But having him put more money in than you, but you taking more money out is fair also. You should probably calculate how soon they gets their ROI back.

I do a preferred payment method for the first six months until they get back 50% of their ROI. The faster an investor gets their initial money back, the happier they are I feel.

 Thank you, that was very helpful and he would be happy to see an immediate return of his money. I think I will see if he is open to putting up down payment, and he will get 70/30 profits until he gets 50% of his money back and then figure out the rest from there. 

Originally posted by @Ron Flatt:

I know slumlords and I own property close to some of them.  I buy in these areas, I bring the property up to living standards and then continue to improve the properties.  It has worked well for me.  I have a duplex that I put in new electrical, new kitchen, and one new bathroom.  Later, I put in new vinyl windows and they have c/ha.  I have folks wanting my properties.  Does it still need a new siding job?  Yes  Does the yard need some landscaping?  Yes.  

I do contract my tenants to do certain small projects, but it is never taken off the rent.  I pay them for their work and I expect them to pay their rent.  I have one individual that turned down work because he had already received over $500 this year.  He knew that if he gets to $600 I issue a 1099.  

You do not have to be a slumlord to rent in the area.  You do have to be firm, and if you are improving the property, they will pay a little more and be willing to stay longer.  

The kicker is are you willing to do the extra work for the return.  You can have empathy for them but it is still a business and they must pay to stay.  

I started with a duplex in this neighborhood and now have an additional triplex, and 2 single family homes all relatively close, (within 2 blocks).  Now some of the other more reputable landlords are joining me here.  Paying more than I am willing to pay.  i have enjoyed seeing this stagnant part of our community begin to turn around and it is most definitely profitable.  

 Great to hear you are improving an area, that would be a very satisfying aspect of owning low income property. Maybe over time you're good work will make a tangible return to you in appreciation when you sell!

Hi,
I'm looking to purchase a vacation rental with a friend in Gatlinburg/Pigeon Forge area. I have a couple questions:
1) What would be a fair way to split the deal with my friend. I would be the one doing the work (finding the deal, setting up property management, doing the paperwork), and he would be more of the silent partner. Not sure how to split it but we could split all costs 50/50 and I get 60% profits for doing the work. Or 50/50 and he puts up the down payment?
I'm not sure, I just want to be fair, but also want to get paid accordingly. 

2) Any recommendations on how or who to get pre-approval from in Tennessee. The guy I use in NY isn't licensed down there. 

Thanks 

Yep, much higher returns but much more work dealing with problem tenants (although when you're looking at returns you have to factor in that the properties will likely not appreciate  much and may even depreciate). I've seen some areas around Buffalo where properties lost almost half their value over 20+ years. 
A lot of it depends on what you prefer. I have two properties near my house in good school districts and I enjoy managing them and working on them. When you put money into it, it actually increases the value. And every month that rent comes in, it takes 100s of dollars off the principal on the mortgage. 

On the other hand, I bought a duplex in a run down part of the city with two great, long term tenants paying a total of $610 a month for $12.5k property that needed very little work. The returns were great but I just didn't prefer having that property and sold it for 19.5K. 
If I got several of those I could pretty much quit my job or go part time, but I just don't want to do it.

Yep, take the free money, you can take a loan of 50% of the value of your 401K, but are limited to taking out a total of 50K, so it makes sense to me to fund it and let it grow to at least $100k. Also, if you are up to date with your accounting, then there may be some instances where funding the 401k can keep you from the higher tax bracket. But it's probably easier for me than most because I can play with contribution numbers myself online as well as change the number of dependents. 

Sounds reasonable to me IF he is actually going to mentor you and be available and spend time pointing you in the right direction. After a few deals when you know what youre doing, you will appreciate his help but will want 100% profits so dont get bound up in something you cant get out of (like signing your life away in a contract). The 3k might be worth every penny if he provides valuable knowledge and puts you in a position to make money for the rest of your life. Its about he same price as 6 credit hours at a community college.

Dude, run, don't sign anything, and if you can't get inside a property w/out it being under contract (which seems like a lie from the agent so he doesn't have to do as much work) , I would suggest going to the property yourself first for an initial inspection before paying for a professional inspection

Thanks everyone, very helpful.

What are the typical rates one could expect on hard money loans for short term flips and also for buy and hold investors. I know they vary quite a bit depending on your experience/relationship/reputation etc, but I'm looking for some general numbers. I am thinking about lending in my area to flippers or buy and hold investors that need a short term loan.

Thanks

-John 

Let's say you're an investor that currently rents. It would be hard to make a good argument to you that purchasing a SFH with a conventional loan is a good investment. You would have to tie up tens of thousands of dollars for a down payment and spend a significant amount of time and money maintaining your new home, instead of using that time and money to invest and make good returns.

Let's say you're an investor that currently owns a modest house that comfortably fits your family. Maybe you have some equity in the house and a HELOC, and maybe the house is in a good school district, has decent taxes, and has appreciated in the years since you've owned it. Maybe you manage your properties and have a truck, trailer and some tools that take up space. At this point, it would be hard to convince you that owning that property is financially irresponsible when you look at the alternatives.