All Forum Posts by: Michael Doherty

@Pat L. the inspection report would only be accessible by the previous buyer who didn’t go through with the property for various reasons. From my understanding, the seller would only be made aware of the report if certain items needed to be fixed.  

@Charlie MacPherson- all great points. If need be I can still get out because of a financing contingency and get my deposits back. Turns out the inspector I hired (as of 1 hour ago) recently just inspected this house last month so he is familiar (small world) and agreed to give me a discounted price at $400. The previous buyers must have backed out due to financing but needless to say he is very familiar with the home. 

@Christopher Giannino great points and story- thanks. I think it's worth from the standpoint of pointing out items that would keep you from moving forward, foundation cracking, mold ect. For those reasons alone it's worth the money and piece of mind. 

Hi all, 

I recently had my offer accepted on a duplex for 140k. Apparently, there were higher offers but the seller liked my terms better. With that said, because they are letting the property go for a lower price, they are not willing to fix anything that may arise during the inspection. After walking through the property (currently rented) there doesn't appear to be anything major to fix (at first glance).

My question is- because I will be on the hook to pay for any needed repairs, is it worth getting a home inspection? On one hand, it is peace of mind to know what may need fixing or what may need fixing in the future and at the end of the day it's only 400-500 dollars. On the other hand, because I am getting the property 'as is' essentially, it may be a waste of money. Thoughts? 

After going through the purchase of a different duplex last year, the inspector didn't realize the heating system was installed incorrectly and two bedrooms weren't getting heat at all. $1000 dollars later, this is something he should have noticed. Needless to say I am partial to inspectors. In addition, their obligation is to inspect only “readily accessible, visually observable” systems and components of the home. 

Thanks!

@Ashish Acharya all this sounds like an interesting opportunity and something I want to learn more about. Some questions- 

1. If I am somebody who doesn't know how to manage a business/apartment or rental property, can I use my money and invest in someone else's QO Fund? In addition, how will I be rest assured to get my money back after 5,7 or 10 years say? Is the money tied to a piece of collateral or business? 

2. If I decide to roll my cap gains into one of these QO Funds in a designated QOZ in year 2019. Am I allowed to roll my cap gains the next year into the same QO Fund or Zone. Or would I be required to choose a different fund/zone? 

3. As far as I know, there is not much clarity on what is considered a QOF. For example, what is limited or excluded, single family houses, MFH, apartments ect. Furthermore, could I purchase a single family home or MFH with my cap gains and rent it out in a QOZ. Some would say I am using my cap gains to spur the community by providing decent housing to low income families. What's the stipulation on this?

Appreciate all the help!  

@Theo Hicks the building is 22 potential studio units (2nd floor) and 4 commercial spaces down on the first floor. I have previous property management experience but nothing to that degree. My partner however, manages about 20 tenants currently so he is a bit more experienced than I am from that aspect. 

What I think is most important is having a team/process in place ie.... contractor, electrician, plumber, ect. which we have. Between myself and my partner we are going to give it our best shot, if however it becomes too much to handle, which in all honesty it could, we have a couple management companies in mind. 

In your experience, what separates a good management company from an average or okay one? 

@Bill F. @Dan Handford @Theo Hicks @Omar Khan- thank you all for your posts. Because this is our first deal with these two investors, we want to build good rapport and credibility because to your point Omar they will be our biggest advocates going forward. 

My partner and I plan on doing the entire project management from start to finish and then manage the property afterwards so there will be no management company. Typically PM in my area charge 10%, but for a building this large I would expect 6-8%. We are projecting 330k in gross rents. I am just struggling to put an equity amount on the management portion. But perhaps we keep an equal split once everyone is made whole (after the refi) and then just take 6-8% of the rents to be split between my partner and I and leave equity out of it.

As for the equity going into the deal, from a cash standpoint only contributing 50k of 300k would put our initial equity at 16% without considering deal acquisition and project management. For this reason I think it should be reasonable to ask for 20% initial equity to be split between my partner and I. Thoughts? 

Hi all,

My partner and I have found two individuals to help fund a commercial deal we found. The total amount  down will be roughly 300k. My partner and I don't have any substantial money put down however, we will be managing the entire project from start to finish. After two conference calls they are both excited but are asking for some money on our end (50k total) to have some skin in the game. They are not looking for a return but rather equity. 

My question is: how much equity do you place on project management/property management? If they are responsible for 250k of a 300k down payment and we are responsible for finding the deal, project management and property maintenance, how do you split the equity? 

How we ended our last call: They start with majority equity and when we refinance and make everyone whole it becomes 25% each (100%/4 partners). But determining that initial equity is where I am struggling. Lastly, if my partner and I end up managing the property full time after rehab that also has value so it should not be a 25% split..... Our partners understand this but we have yet to put a exact number in writing. 

Property management would be on 4 commercial spaces/22 studio apartments above (same building) roughly 330k gross income. 

In our minds, this deal is not going to make us rich but rather open the doors to better opportunities and the experience is priceless. So with that in mind, I am not looking to be greedy but also need to be compensated accordingly. 

All suggestions from past experiences would be helpful, thank you! 

Hi Karen,

I am interested. Could you please send me a direct message to discuss further details- thanks. 

Appreciate all the responses and thoughts. Going back to my original post there's pros and cons for both sides. I suppose it really comes down to a case by case basis. On one hand, you speak out, meet great people, form relationships or give back to others what you've learned. On the other hand, you speak out and you feel like you are spinning your wheels or it could come back to bite you on the butt. I think it's important to remain humble no matter where you are at in your career but also take the time to help others when asked. That doesn't mean divulge your cash flow or # of units unless you feel comfortable. However, with certain people who you think can further your REI career, going into specifics may help build credibility. Again all situational and a case by case basis.