All Forum Posts by: Kevin Yoo

@Jason R.

Jason asked me this question. "I read through the materials you put together for your Ground Partners and it sounds quite intriguing. One question I have: What is the minimum discount you require after factoring in your all-in costs?"

It depends on the class of property, A, B, or C.

For A class property, the minimum discount can be small because you have better tenants and better homes therefore the expenses are lower. So, the minimum discount I would take in an A class property is 20% or so.

For B class property, the minimum discount I would take is 30% or so. 

For C class property, because the tenants are not as good and the property is older the CAPEX is higher. I would have a minimum discount of 40%.

These are mere guidelines and each property needs to be looked at separately and I may take even less discount then outlined her for a property. You have to take Rent % to Purchase Price, ROI for Cash, CAP Rate, and all others into consideration.

But you can do better than the guidelines here as our partner in Jacksonville, NC is finding B Class homes at 50% discount. We are buying one of those homes a week.

@Vince Mayer

Thanks for asking those questions.

The first thing I want to say is that everything we suggest is up for negotiations because we do not have all the answers. We have certain general ideas but the devil in the details seems to need constant tweaking as we learn that certain things work and certain things do not.

One general theme we have is that EAC provides all the money needed to make you successful in your real estate ventures. Another general themes is that this money is not free money but money that needs to be paid back. When you work with us, we think of you as part of our team. It is like one big Community. It is as though it is your self. And if you spent your own money marketing, that money has to come out of your profits on your next deal. So, that is how we work as well and the marketing cost is paid by us but comes out of the profits and, therefore, ultimately it is paid by the deal. 

Let me address your other points.

"However, it looks like the best one could do in one year would be about $40,000 if approximately 10 properties were acquired at 65% of ARV."

If you can find only 10 properties at 65% ARV in one year, then $40K is about what you would make in cash. This obviously does not include the equity you will get as well. This number is perfectly fine with us, but currently we have a partner in North Carolina that is helping us buy 2 to 3 homes a month. He thinks he can do more than that. We will support him and you at any pace you want to work at as long as the deals make sense.

"One would have to acquire, rehab and manage the properties, which would not be part time. The wholesale fee would be paid in 2 payments and it looks like some costs would come out of the wholesale fee. Am I right? If a property management company is used, what would that cost the ground partner? How would the marketing costs and methods be decided?"

The wholesale fee would be paid in 2 payments, 1/2 at purchase and 1/2 at rented out, only because we want you to be committed to rehabbing and renting out the property. We have one partner in Indiana who has worked very well with us for about a year. We like him and trust him so much we plan to pay him the wholesale fee completely up front. He asked for this and it was easy for us to agree. No other costs come out of the wholesale fee. 

If we chose to use PM, then this cost must be included as expenses and reduce everyone's cash flow. We decide whether to use PM on case by case basis. Eventually we want to own 100 to 300 units in one location so that we can make a PM company ourselves. 

The marketing costs and methods will be decided by you in consultation with the group.

I hope this helps. I suggest you speak to our current GPs to get their take on their experience on joining the EAC Community. 

@Hattie Dizmond

Hattie,

Thank you for reaching out to me. You seem like the "boots on the ground" kind of team that fits our model. We currently have no holdings in Texas but this is only because we have had no one approach us to become partners. Please send me your email address and we will set up time to talk. My email address is [email protected]. 

No, problem, Jay. I will send you an email to your email address to set up a time for you to talk to our Community.

@Jay Hinrichs

You ARE what we aspire to be. I appreciate you reaching out to me and trying to help. 

John Hostetler is the work horse of our real estate company and I do agree that we are in good hands. Come to think of it, John has mentioned you before.

I also visited and signed up on your Turkey-Reviews.com website. I also know Brie Schmidt and just received an email from her yesterday wanting to do deals with us now. I am very much hoping she could be one of our Ground Partners.

It would be great if you could talk to my EAC Community in our next meeting. Can you talk with us 11 AM this Tuesday in our weekly meeting? I am certain we could learn a lot from you.

Lastly, I hope you did not take all the good Ground Partners or we are SOL!

@Jay Hinrichs

I am glad you asked me how we did with our original post in December of 2014 on finding new Ground Partners. I have been meaning to post my progress or lack thereof. 

We got a lot of interest and I talked to many many people from BP. But so far, I have not bought one property with any of them. Many of the contacts were very excited and we had great conversations and then they simply disappeared. 

Initially, the problem was we really did not have in writing what kind of properties we wanted to buy. So, I spent hours putting together the following documents and posted them recently. I then got more inquiries but interestingly no one seemed to read what I wrote.

Here are the links again.  

https://www.dropbox.com/s/r08lxslk8gh0440/Portfoli...

https://www.dropbox.com/s/msd9j8x2ogettgi/Portfoli...

https://www.dropbox.com/s/aeigey7pe64cp3f/Rental%2...

You can also read the first document at our website www.EACInvestments.com.

So, we are still looking for Ground Partners and we will always be looking for talent. I should have known that finding a Partner is like finding a good property. You have to kiss a hundred frogs before you find a prince. 

Currently we have two maybe three outstanding ground partners in Jacksonville, North Carolina, South Bend, Indiana, and St. Louis, Missouri. And even with only three Ground Partners we are buying about one residential property a week. We want to ramp that up to about 2 - 3 properties a week because at this time, we do not have enough deals to deploy all of our Investor's money. We have just begun refinancing on our first tranche of $1M portfolio after which we will again have a great deal of money that needs to be deployed again.

Please read our documents carefully. We are a Community of Real Estate Investors whose primary goal is to create wealth for all of us. Our proposal for potential Ground Partners is to create wealth for them in 3 ways. 1. Wholesale fee up front. 2. Passive cash flow during the ownership of the property. 3. Equity to be paid out at time of cash out refi or final sale of property. It is really a unique and promising proposal. We insist you talk to our current Ground Partners so that you can do your due diligence on us.

I noticed that you are a turnkey company. I have to warn you that we have been contacted by several turnkey companies and we simply cannot buy turnkey properties. We are opportunistic investors and we create value in a property for ourselves and our Ground Partners by buying them at a discount and rehabbing them with our Partner. We are currently in discussion with a turnkey operator in Ohio to see if we could do that with him there outside of his turnkey program. But if we buy a property turnkey with all the rehab done at close to retail price, we have no room to create wealth with that property. Anyhow, if you read what we have and would like to work with us, we would be more than glad to meet with you.

@Kenneth Hester

Kenneth,

We are very much interested in multifamilies as we now want to own residential and commercial properties. So, we would love to look at the Mobile, AL 48 unit with you. However, you are in North Carolina. You obviously cannot be a true Ground Partner in Mobile. But a deal is a deal. And if this 48 unit is a good deal, we would still work with you and find a way to do it. Let me know if you want us to analyze the property with you. 

Erika,

Fancy meeting you here. You should meet with us to see what we are doing or just to learn from each other.

After we posted proposal for partnerships, we got a lot of interest and of course many many questions. Over the course of several weeks, we put on paper our thoughts and what we were looking for to try to comprehensively answer everyone's questions. I have attached links to our Portfolio Partnership Doc and a spreadsheet that lays out how we plan to build a portfolio with our Ground Partners. Lastly I have also attached a Rental Spreadsheet with a real property inserted that we bought. We use this spreadsheet to analyze a possible property to buy. We are asking the BP community to look at our documents and give us feedback on our model. We are particularly interested in knowing how we can make it better for our potential Ground Partners. Thank you in advance. 

https://www.dropbox.com/s/lmt8s1pao1odoog/Portfoli...

https://www.dropbox.com/s/89n79fc6hbtqjie/Portfoli...

https://www.dropbox.com/s/dyr3qasx0xhgog2/Rental%2...

Hello EAC Community,

Over the past two months we have been buying homes in St. Louis, Birmingham, and Jacksonville, NC hold as rental properties. Our intent is to rehab these properties, rent them out, and refinance them with one of several portfolio lenders with whom we are currently negotiating. Because we are purchasing these homes with significant deferred maintenance, we are able to purchase them at 70% or less of the after repair value (ARV.) And since portfolio lenders will lend at 75% of ARV, we will be able to pay back our investors fully once the loan is in place.

Below is an example of a "Class-B" single family home in Jacksonville, NC. We know this market better than any other, as we have flipped many homes in the immediate area over the past year. In order to sell these homes they have had to appraise for what we expect, and they have done so in every case. Here is our latest home to go under contract, slated to close escrow at $99,900 within the next two weeks.

109-Mill-Pond-Rd-Jacksonville-NC-28546As you can see, this home is nicely rehabbed, but by no means does it include any higher-end touches. Even so, the appraisal still came in slightly above the selling price.

Proposed Investment - 322 Cougar Lane, Jacksonville, NC 28546

The home I am proposing that you invest in is a similar home, being 3 bed, 2 bath, and slightly smaller at 1,269 square feet, and is less than a half mile away. We are under contract to purchase this home for $30,000 and will put approximately $16,500 into the rehab. Added to this will be about $800 in closing costs, bringing the all-in price at $47,300. We expect this home to appraise for at least $85,000, meaning we are purchasing/rehabbing at approximately 55% of value. See pictures of the home, as listed:

322-Cougar-Ln-Jacksonville-NC-28546Nearby comps from my research, besides our own 109 Mill Pond: (I have asked our real estate agent, John Troup, to pull a more complete list which I will send separately.)

4906-Gum-Branch-Rd-Jacksonville-NC-28540 - Sold 10/14/14 for $93,000, 3 beds, only 1 bath, 1,120 square feet

4966-Gum-Branch-Rd-Jacksonville-NC-28540 - Sold 4/25/14 for $100,800, 3 beds, 2 bath, 1,176 square feet

111-Meadow-Trl-Jacksonville-NC-28546- Sold 1/13/14 for $115,000, 3 beds, 2 bath, 1,005 square feet, fully rehabbed and large lot.

This home will be rehabbed with durable, rental-appropriate finishes. In fact, the home was completely remodeled in 1990, so most of the systems (electrical and plumbing) are in excellent condition. I do not yet have a full scope of work to be done, but will have one by the end of the week and can provide.

This home should rent for a minimum of $850 / month, and the attached pro forma shows that it should result in a 12% return on the total investment. We are raising $47,000 on this home, and can pay 12% annual interest, with monthly payments of $470.00 paid on the 15th of each month. As with all our buy/hold investments, we will execute a promissory note and record a first position Deed of Trust on the property in your name. The term of the note will be 3 years, but it is expected that we will refinance the home and pay you back within a year, perhaps much less.

If you have any questions about an aspect of this home, market, or our Jacksonville partner, please feel free to contact me via email or the number below. We are set to close on Thursday, December 11th, so please let me know as soon as you can if you would like to invest in this home.

Many thanks,

John Hostetler, COO [email protected] 760-519-4152

Kevin Yoo, M.D., CEO [email protected] 858-449-9847

Isaac Guzman, [email protected] 619-451-5473

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