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All Forum Posts by: Jeff Petsche

Jeff Petsche has started 22 posts and replied 148 times.

Post: Is Buying for Equity, but low cash flow a good idea?

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Justin C Huggins I'm on the same page as @Tim Porsche with regards to passing on the two houses. If you have not factored in R&M/Vacancy/CAPEX and are at $100/month cash flow, these properties are negative cash flow.

I don't know enough about your market for wholesaling or flipping, so I won't comment on if that is a good strategy or not. However, on the surface with only a $30K spread from acquisition and ARV, that's not much to work with if anything goes wrong with REHAB or buyer demand drops. Just my opinion.

My rule of thumb (like many) for flipping is 70% of ARV minus REHAB cost. Example: If ARV is $100K, but I need to put in $15K to get the property to that number, I'd be offering $55K on that property ($100,000 X .7=$70,000-$15,000=$55,000).

It really depends on what your end game is, which sounds like buy/hold. If that's the case, wholesale and flipping is off the table and I'd pass on the two houses.

Are you willing to share the numbers on the duplex?

Post: Acquisition in Columbus Area

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Rudy Manna I too am looking in the Columbus area and I'll be connecting with @Robert Ellis and his team. I have yet to meet them in person, but have had some great phone conversations with Robert and other team members, and their response to my questions has been great.

I'm planning on having a face-to-face with them when I go out Sept. 5th-8th.

Good luck.

Post: Question About Structuring a Partnership for Buy/Hold Assets!

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

Hello BP Community.

My group and I are starting out with buy/hold investing and as the person who is going to be 100% involved in the acquiring and managing of the asset, I'd like some feedback on how you would structure the partnership.

Our Situation:

Two of the investment partners are going to be 100% passive and providing capital, so although they really fall under more of a "private money" investor in my opinion, we are all friends who are looking to grow wealth and passive income through rental properties. Both of these partners have full-time corporate jobs and will not have the time or ability to really get involved in the managing of assets we acquire, and have not intentions on quitting their jobs/careers until retirement in about 12-13 years.

I on the other hand am already semi-retired with a police retirement and am a full-time real estate Broker in CA who runs a retail transaction business. Because of my time being more flexible than the other partners, I'll be designated as the Asset Manager in the group. I'll be responsible for the research, analyzing the deals, building relationships with others involved in the acquisition, managing the PM companies, traveling to OOS markets if/when necessary and pretty much everything related to managing and stabilizing our assets.

With that said, I'm looking for some examples of how to best structure our partnership from a % of ownership, % of capital cash, etc.

The initial idea was to have an equal % of ownership with an equal % of capital brought to the table. However, I would receive a one-time 3% acquisition fee (3% of sales price) on every purchase we make (paid for by the other two partners) and add in an 8% Asset Management fee paid to me each quarter. (8% of the total GSI).

Would love to hear thoughts and/or other ideas that you have seen or you are personally doing.

Thank you.

Post: $200K+ in Starting Capital. Several SFRs or go Multi-Family?

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Hank Keller I'll be taking a trip out to Columbus and Indianapolis from Sept. 5th to the 12th and meet with some boots on the ground, and get a feel for the markets.

I'd have no problem talking with you about your Indianapolis investments and their performance, but not sure TK really appeals to us at this time because it ties up our capital with the 20% to 25% down and no REFI out option to get our cash back. Our first strategy is BRRRR and TK is strategy #2

I'll reach out to you by phone today or tomorrow.  

Post: Why to avoid < 50 k properties

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Amit M. Not to get too into my personal life, but I got divorced in 2010, sold our house with about $60K in profit (split that with the ex) and was not in a financial position to invest for a few years. In 2012 I did enter the market, but I did not buy rental properties, I bought my primary residence with my VA loan. I bought a house for $265K with $2,500 or so out of pocket. I just sold that property in December for $420K and cleared about $175K tax free thanks to capital gains. My ROI was about 117% on that purchase over 4 years.

As for my reasoning to not invest in CA for rentals, the state is way too renter friendly in my opinion and landlords spend a lot of cash to evict tenants who know how to play the game here. And I disagree with your comment about "making bank cash flow wise"..not nearly what you think.

Example: I bought my property in 2012 for $265K and with a VA loan my PITI was $1,397/month and paid $60/month for a gardener. I could have rented this property in December for $2,100, which many investors would have immediately said, "I cash flow $700/month (Rent-mortgage=cash flow), but if you analyze the deal with a 50/50 rule or even a 40%, the cash flow is very minimal if not a negative.

At the end of the day, yes many have banked a lot of equity here in CA, but the entry to play just DOES NOT cash flow and in every investment book I've read about buying rental properties, or podcasts I've listened to, etc., say if it DOES NOT cash flow, you don't buy simply based on your speculation of appreciation.

I have benefited from owning real estate here in CA to the tune of about $400K in cash free equity through buying and selling 3 personal homes, so I have not completely sat on the sideline!

Post: Why to avoid < 50 k properties

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Jay Hinrichs Ya I get what you are saying. My parents bought their primary home in 1984 in Downey for $80K and probably said the same about me growing up They still live there today, paid it off years ago and are way too "risk averse" to do anything with their equity, no matter how much I try and talk to them. They are the prototypical example of Poor Dad in Rich Dad/Poor Dad. (Get a job, work hard for 30+ years, save money and live off a pension).

My first house was purchased in 1994 and was DOUBLE what my parents paid for theirs in 1980. I then traded up to a bigger and more expensive home in 2001 to $247K, the market got stupid and that house got to $650K+. Didn't sell because I saw the "correction coming" and it did in 2008-2009. I still sold after a divorce in 2010 for $410K. Repurchased again in 2012 for $265K and sold December for $420K. Two of my 3 homes were in Corona, which is a city that boarders Riverside, where Aaron's profile says he's from (or at least invest in this area), and I can tell you with confidence that there is NOTHING in the Inland Empire that remotely resembles his rental numbers. He has to be talking about a beach city somewhere. I have been selling real estate since 2003, primarily in the Inland empire, and NO WAY can that clientele afford those rents. A nice new apartment complex in Corona, which is a superior city to Riverside both in home values, median household income, etc., goes for between $1,800 to $2,200. I could have rented my house (3 bed/2 bath/Office/1,667 sq. ft./single story/3 car garage/7,450 sq. ft. lot/Nice maintained neighborhood) for $2,100 to $2,200/month.

I'd love to have a conversation with you in the coming days if possible because I'm getting ready to visit a few Midwest markets and would like your take. Would you be open to that?

Post: Need Help BP! Seller is backing out of deal last minute!

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

Sounds like they over leveraged themselves in a big way and should have know what they were getting into with this property.

Not giving you legal advice here, but just my opinion: I wouldn't accept anything less than 100% reimbursement of all money you're out of pocket, a desired amount for time wasted and a % of the equity you'll be losing. 

This seller should have know his position with the property and you shouldn't be penalized for his/her incompetence. 

Post: $200K+ in Starting Capital. Several SFRs or go Multi-Family?

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Nathan Mairs Sounds good. I'm heading out to Columbus first part of September and having lunch with my US Bank contact, so I'll be getting a lot more clarity after that meeting.

I'd be happy to share the outcome of that meeting with you and even give you his contact info, if he's a different guy than who you are talking to now.

Shoot me a CONNECT/EMAIL and we'll stay in touch.

Post: Need Help BP! Seller is backing out of deal last minute!

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Sean Sakaida I can't speak to the real estate laws in OH, but if it were CA and you were performing as the buyer, and still wanted to close on the property, the seller would not have a legal reason to cancel unless mutually agreed by all parties.

Not sure what they mean by "insufficient seller net proceeds and excessive penalties"? Do you know if the seller is clearing enough to pay off his existing loan, but is just not happy with what is left over after realtor fees, closing costs, etc. OR should this have really been more of a "short sale" scenario from the beginning?

Hopefully some OH Realtors/Agents will chime in here and give you their opinion on your situation with RE contract law in OH. Also, did the listing agent represent you on this deal or do you have another agent in your corner?

Truthfully, if you went with the listing agent, like many investors do thinking they will get a better deal, this is where you don't have true representation in your corner because the listing agent's FIRST client and priority was the seller, NOT YOU!. Just another reason whey I personally hate representing BOTH clients on deals.

Good luck and I'll be following this thread to see what others from OH say.

I say if you still want the property and can legally get it, then do so.

If you are okay cancelling and moving on to another deal, then ask the seller to reimburse you for all out of pocket expenses and some additional cash for your wasted time.

Good luck!

Post: $200K+ in Starting Capital. Several SFRs or go Multi-Family?

Jeff PetschePosted
  • Real Estate Broker
  • Yorba Linda, CA
  • Posts 154
  • Votes 114

@Nathan Mairs I have not made a contact with the US Bank residential side yet, only the commercial side because I'm looking at 5+ units first. However, we are not opposed to 1-4 units either, if the deal makes sense.

Why are you not able to get a 30 year amortized loan for a SFR property through US Bank?

For the commercial side I was quoted I believe 75%-80% LTV of after repair value. No seasoning and low 4% rates with 25 year amortization.