All Forum Posts by: Lucas Mills

Because there's a point of diminishing returns not far beyond where it starts. In other words, for each time I invest 20k, I might reasonably expect 5k profit (according to this woman). That doesn't mean I can invest more money and get the same return. It only works in a certain price range, or at least that's what it seems to me. They're flipping 50k homes, not 500k homes.

That said, why couldn't I take my money to another market where the numbers are bigger?

I don't know if Ken qualifies as "guru" but I wasn't really sure where else to ask about this.

Ken is here on BP and has his own website (you can see it on his profile) in which he offers different training models.

He offers a couple options in which the he assists the investor in finding properties, etc., but ultimately Ken will retain ownership of the property and 70% of the profit, with the investor getting 30%. This is great for Ken but also great for the investor who is essentially getting free training (if not making a small profit in the process). He offers another monthly payment option in which the investor keeps all profits/properties. I'm more interested in the latter.

I'm posting because I'm wondering if anyone has experience with this gentleman. I do not want to naively throw money away; however, Ken strikes me as being exactly who he portrays himself to be. I have spoken with him on the phone a couple times and via text/email.

Here is his profile.

Oh hey, did you add me to the mailing list lol? Just noticed who you work for.

Well, all I know is that as the loan broker she doesn't take any risk. She's not acting as a hard money lender, who does undertake risk and thus, I assume, can charge more. She just puts the deal together and makes a couple points on the loan.

The post directly above yours explains the general premise

Huh? My understanding is that, in addition to doing her own rehabs/flips, she is also a loan broker. So she pairs new(er) flippers with private investors and charges points on the loan. She takes on little to no risk by doing this and makes a little money in the process. The flipper gets their funding and the investor gets a percentage of the profit. For example, if the flippers require 40k, she may take 20k from two separate investors. Each investor may reasonably request up to 25% return; so the flipper gets 50% while the investors split their 50% two ways among each other. That's why she can allow investments using relatively smaller amounts, because she's using multiple investors in these scenarios.

That's my understanding, anyways. Does this seem nefarious for some reason?

There's not a specific reason I want to do flips out of state, per se, but if we're talking about rentals; that's another story. I know other cities get much better cash flow on average than Springfield; in fact, I saw a property in my email today from a turnkey company and couldn't hardly believe the purchase price to rent ratio.

But we're talking about flips here, as a means to more quickly amass capital. So no, I don't have anything against my own state or even city, but that may just be because I don't know a lot about the flipping market here. I've heard from other investors that it's not that great.

Secondly, the woman I spoke to impressed me. She seems very knowledgeable and competent and, apparently, has a fairly large team at her disposal. So it sounds like she has refined her processes in all aspects of the flipping workflow and, thus, can probably do flips quickly (relatively speaking) and for less than others (because she has her own rehab team(s), etc.

Also, she's only 4 hours away from me, and, apparently, in a better market (still need to verify this for myself). But, assuming this is true, and If I'm just acting as the private investor, why does it matter if the flip takes place here or Alaska? I'm not responsible for anything other than forking over the cash and collecting the return.

Furthermore, I'm not currently aware of anyone who's doing what she's doing in Springfield, at least on the scale she seems to be operating at. I haven't really been aware of this as an option for investment (passively investing in flips) so I haven't exactly been looking -- I will also start asking around to see who is doing this locally, as well. That said, she's only 4 hours away from me.

I'm looking at and debating the potential risk/reward of investing in flips out-of-state.

I have a relatively small amount of capital, about 30k. I am aware of a certain investor in AR who has her own rehab team, etc. and says that I can invest 20k-30k (sort of partial financing) and expect a 25% to 30% return. She states that flips there generally make about 20k after expenses.

So, this theoretically means that I could turn that 30k into 60k over the course of a year, if I repeat the process every 3-4 months. To me, this seems like a good way to quickly gain capital for the purpose of acquiring buy and hold units (long-term, passive income being my ultimate goal). Sure, I could try to do flips in my own market, but, I don't have any experience and I know that flips don't generally make that much here.

So is this a good idea? Any reason I should not invest in this kind of a model? To me it sounds like a great, passive way to quickly gain capital, and as I get more, I can fund larger projects for greater return.

However, I have some concerns. Does this person really do what they say they're doing? Does their business actually exist? Etc. So if this is a decent way to invest my limited capital, how might I go about verifying everything, as much as reasonably possible?

This thread is a good wake-up call, and a reminder to be wary. But man, one look at that profile is all I would've needed to nope out of there.

This is good advice, and actually I had not considered looking at the situation in this way. You are right - properties that rent for less than 600 or so simply will not cash flow to the degree that I'm looking for; at least, if we're talking about single-family homes. I've seen some duplexes for ~70k wherein each unit rents for ~550, so we're getting much closer here. The problem is that while these units may need 10k worth of work or so, the price is already close to ARV so there isn't room to refi and get my original investment back out. That said, it sounds like I need to be targeting multifamily properties that need work, enough such that it supports the execution of the BRRRR strategy, and, ultimately, the ability to cash out at the refi in order to quickly continue property acquisition.

Generally speaking, does this sound correct, given my goals, location, and market?

Lol. My thought process is such that the cash flow is already contributing to the (cap ex) reserves, because I've budgeted that as part of the monthly expenses. So that $200 that I'm putting in my pocket is truly after all expenses, including contributing to the cap ex account.

That said, I see the wisdom in your words, and you're not wrong. I can easily live off of 2k and save 1k right now, which is what I'm doing. But in the future, my tastes may change, so I would simply continue to build my monthly cash flow to whatever's number seems appropriate. For ex., build up to 5k in monthly cash flow to live off of 3k. The other 2k is just "bonus reserve contribution" each month, and it can occasionally be safely utilized as desired (for that trip to Mexico), because I've already budgeted my cap ex reserve contribution into the expenses for the property.