All Forum Posts by: Mike Knowles
Mike Knowles has started 10 posts and replied 71 times.
Post: Help analyzing first deal. What am I missing?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
I was able to talk with the ex-husband. He's interested in buying on contract with the following terms:
$500 down + $250/month. $5k lump sum payment in April (from his tax return), then drop monthly payments to $150/month. Another $5k lump sum the following April, continuing with $150/month until total payments = $15,300.
That's what he offered; I didn't suggest it. The lump sum payments would be great, but seem overly optimistic in my opinion.
The MH comes with the land. From what I gather ,it's not worth much. The ex-husband mentioned a flood of some sort and that there was no drywall or flooring. He's willing to do the work to fix it, but from my perspective it looks like I'm just buying a 1/2 acre of land. I'll do some diligence to figure out what that's worth in that neighborhood.
I'm also considering making both contracts (buy and sell side) contingent on each other. i.e., the deal doesn't go through unless all parties agree to the terms and everything gets signed at once.
With a $5-7k purchase price, and the proposed exit, the ROI is great. (Assuming the contract doesn't default, of course).
Post: Help analyzing first deal. What am I missing?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Hi all,
I put a "we buy houses" ad up on craigslist the other day and got a call today from someone who wants to sell a MH on 1/2 acre. I've never done a MH deal and it's been a while since I've read "Deals on Wheels" so figured I'd come here for some advice.
What I know:
1993 MH, 16x80, on half an acre. Needs work, but has new flooring, vinyl siding and shingle roof.
Is not in a park, but what used to be a park. Kind of a modular subdivision now. Lots of MH, etc., but no lot rent.
On city water, but has a septic tank.
Seller is relocating to Florida and wants to sell fast. Her ex-husband offered to buy it on a contract from her, but she wants cash now. I'm thinking about just playing the bank on this one.
Asking price is $10,500, but that sounds negotiable based on her motivation. I haven't talked to her ex-husband yet, but she said he offered $15k on contract ($500 down and $250/month + potential lump sums at tax refund time).
The MH is about 90 minutes from where I live.
Thoughts? What other questions should I be asking? What risks do I need to plan for up front?
Post: What would you do with 100k to invest in RE?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Evan Scott
I invest in Chicago; there are plenty of opportunities for you here. However, I do think parts B and D of your plan are contradictory...you won't get the highest risk/reward combination from investing in working class neighborhoods (Albany Park, Humboldt Park). There are good returns there (15%+ CoC, with leverage), but South Shore, Grand Crossing, etc. can be higher. I looked at a small apartment building down there last week which rents for about $8k per month when full and the asking price was under $300k.
My initial advice is to find some partners that you trust who are already doing what you want to do. Whether that's other investors, or just a realtor or property manager that you know, it's helpful to have another brain and set of eyes working with yours. At least, it's been invaluable for me.
Looks like you've thought about buying a multi-unit, living in one, and renting the others. A LOT of people get started that way in Chicago.
Post: Setting up C Corp with IRA funds? Experience with Guidant Financial?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
I recently set one of these up. Prior to this, I was using a checkbook control IRA LLC, but was frustrated with the inability to use leverage when purchasing real estate. Regardless of what people tell you, finding a non-recourse loan is just about impossible. So, I did a ton of reading and spoke with people at Guidant, Benetrends, and SDCooper about their versions of the product. I should note that my day job is as a pension actuary so I am more familiar with ERISA than most people.
As far as risks, the IRS has clearly stated they're not a fan of these transactions, but that there isn't anything technically wrong with them (google Julianelle memo). They even did a compliance review where they examined many of these ROBS transactions and issued commentary on where people stepped afoul of the rules (didn't file 5500 or 1120, went out of business, didn't value the company). These aren't issues with the transaction itself, but with the operation of the plan or entity after the fact.
The major unidentified risk, as far as I can tell, is that the Department of Labor technically has jurisdiction over Prohibited Transactions--not the IRS. I don't believe they've said one way or the other how they feel about these. However, what tipped the scales for me was a statistic I heard about the percentage of new small businesses that are funded via the ROBS transaction. Up to 1/3, I believe. If the DOL comes down on these, a lot of folks are going to be screwed. I just don't see that happening in today's political environment, but I do see it as a risk.
Other complications with this structure revolve around operating a C-corp. You need to run payroll, file taxes (quarterly?), hold meetings and do any other number of things to stay compliant. It's likely you'll need to pay multiple someones to help you with these things. Build those costs into your decision. It's not an LLC.
Regarding exit strategies, the most likely scenario is a share repurchase. The Company then elects S-Corp status, and avoids the double taxation issue. Here's a link to a presentation that describes it:
http://sdcooper.com/ersop/PDF/Exit.pdf
I ended up using SDCooper to set mine up. Steve Cooper took the time to talk me through everything, answer questions and just seemed like the kind of person who would do the right thing if I got into trouble. It didn't hurt that their fees were lower, either.
Hope this is helpful.
Post: Made offer on 4 houses/rejected/How high to go

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Will you be able to refi within 5 years at terms that still make the deal work for you? If so, then I say jump on it. And if you don't want it, send it my way!
Post: Creative way around NOO 20% Down?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Actually, I may be interested in something like this. Send me an email if you want to discuss.
Post: Creative way around NOO 20% Down?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Assuming your numbers are all square, one of the Note guys on the forum may be interested in helping put this together. Someone could buy the property w/ cash, give you a wholesale fee, then carry back the note to your Buyer.
Post: LLC IRA - is IRS really starting to pound upon them?

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Who is your facilitator? I used Safeguard Financial; their fee was about $2k, but it comes with lifetime consulting. Any time I want to do a transaction and have a question about whether it's kosher, I can just pick up the phone and ask. Seems downright cheap to me.
The 1% annual fee seems high. Find a custodian who charges a flat fee per investment per year.
Post: Landlord Insurance: Choosing Coverage

- Investor
- Chicago, IL
- Posts 80
- Votes 21
Probably a smart call on upping the liability coverage. Better safe than sorry.
Looking at my quote, $250 of the premium is for the liability portion. I went through a buddy of mine who's a broker and ended up going with Columbia Insurance Group. The price was right and they will issue a commercial policy in the name of my LLC.
Post: Landlord Insurance: Choosing Coverage

- Investor
- Chicago, IL
- Posts 80
- Votes 21
I got a quote this week with similar numbers. $105,000 dwelling coverage, $12,000 for lost rent, $2,500 deductible and $1M liability. $573 for the year. I was happy with the price and yours sounds like it's in line.