All Forum Posts by: Logan Hicks

Im actually getting into a few things RE, from collections to investing, to lending. What exactly are you looking for specifically? Lenders? Investors? RE Attorneys? CPAs? RE Agents/Brokers?

The deal isnt balanced well at all.

First of all, your credit, and therefore your over DTI, is tied up with those lines.

You will find this to be an issue in the future once you start to grow into the MM range in value.

Secondly, you are incurring risk just by allowing access to those credit lines. Anytime there is risk, there should be profit. That is how money works. Risk > Profit > Reinvest > Repeat.

Next, You are paying him for financing him? Since when is that reasonable? His pay is the fact that he has the means to be able to do the jobs at all. Without the lines, he cant build. Period. Its by your grace that he makes 50%. He is just another GC in the ocean of GCs, and countless GCs would rise to take his place.

A job on the side? Say what? Why is he going outside of the partnership, while still using partnership resources, to do a non partnership resource? Think about that from an employment perspective.

An employee, is using company resources, at company cost, to do non company related work, and is financially benefitting from it. Regardless of the fact of whether or not he pays it off. Also, what happens if he doesnt sell? Then the lines are tied up, you are on the hook for them, and he cant finance them out. Again, Risk > Reward concept.

Lastly, Judging by the fact that you had to even open accounts in order for the guy to "start up" tells me he doesnt have that much experience in the GC arena. 

Are you sure he is qualified to be doing your work for you? Any GC worth anything at least has a credit line at or contractor account at Home Depot or Lowes, as well as a lumber yard, if nothing else. 

All in all, very concerning conditions. 

A very trusting man is a lot like a gambler, and they lose for the same reasons.

Do you want that kinda Mojo on your head? lol

I sure wouldnt.

The biggest hurdle you will face from your partner is the push back on sale of the company.

Should you choose to sell the company, unless you have a tag along rights as well as a control transfer agreement, he will only get 20% of the full value of any acquisition you might encounter, which means overall, his equity stake in the company is severely diminished.

On top of that, unless you have a profit sharing agreement of 50/50, he will only be entitled to 20% of the profits. 

Overall, I never like deals like these. It exposes you to issues in the future, and extra potential risk of hostile takeovers. 

I would buy the property set in a separate LLC under the parent company, or outside of the partnership, then do an ownership transfer after the fact.

 Humorously enough, bullets are made of brass, or copper XD

hey that finally sent lol. A day later XD

@matthew

Ask them why the soft cost is listed at 13.5 per lot.

At 10 lots (which isnt many) thats 135k, which is massive.

Also, ask them why the lot cost is listed at two separate rates, one at 25 per lot, and then at 17.5 per lot.

if its a duplex, it should be 25 total.

If their profit is marked on at a flat fixed, why are they making 35k per physical unit lot when they paid 25k for it?

Thats 10%+ 40%+ (lot), or per unit cost, 10%+ 10%, or 20% profit per unit.

Also, for those of you who want to work with builders in the future, always require a COST PLUS contract.

Make Time an irrelivant factor, and get at least 5 quotes on the time.

State specifically the man hours will be based on the average of the 5 independant quotes, and add the materials cost to it, plus the margin, which 10-15% is a good margin for them because you are a built in buyer.

Watch how fast they finish, and how much cheaper your average unit is compared to the average RE investor.

You'll thank me later.

Aside from an extremely pissed off partner? Reducing his interest (and thus ownership) of the company by 30%, which is below controlling interest btw, is extremely detrimental to him.

He is extremely likely to refuse. 

I take it he brings cash flow to the table? IE hes the pockets, youre the tab?

@Jay Hinrichs

Correct good sir. I am focusing on growing my own forests. I own a vermiculture business so I am able to accelerate my growth and size yield substantially per tree by about 15 and 40% in size and yield. 

I am focusing on cherry, maple, oak, doug fir, and redwood (which wasnt easy)

@Jay Hinrichs Lol timberland is far from "regular flat space"  I myself am actualyl buying timber land, and for the exact reason you specified, except I also am builing my own mills and harvesting the wood myself to sell it in bulk direct to major construction, engineering, and brick and mortars.