All Forum Posts by: Patrick Fraire

@Aaron Wade How much did your first turnkey cash flow?

@Andres Aguero What’s your strategy for acquiring properties? If your planning to be a passive investor and buy properties through turnkey providers. You might be surprised to learn how low the cash flow really is. I started learning about real estate through bigger pockets content where they preach about finding properties with $500/month cash flow and you splitting that cash flow with an investor that brings in all the money and you found the deal so you get half without ANY OF YOUR OWN MONEY! Those kind of deals are rare and I’ve never met anyone that has one of those in their portfolio. I’ve learned you can generally expect $50-$100 cash flow /month. These are your mainstream deals that are offered through turnkey rentals. This type of cash flow requires no sweat equity just your typical 20-25% down on a $100,000 house in Alabama you can expect around $50-100/month cash flow. If you want to get $500 cash flow per month per property, you would probably have to be active not passive.

@John D. Man I have been looking for something like this too! What I ended up doing is looking at the city of riversides zoning map on their website.

@Kellen Canfield It looks like you caught it before he grouted. If you really prefer horizontal I would’ve told him to correct it. It would only had an extra hour or two of labor but and he material cost would be the same. If he grouted it I would just let it go.

What’s up BP fam. I have a situation on my hands and am looking forward to getting your input. So my girlfriend owns a condo she recently moved out of. The condo is located in the city of Orange, California. She purchased it for $358k on a 5% down program in may of 2017. The payment is $2500/month (w/pmi +HOA). She is now somewhere around 15% equity as the property is worth around 400k. She is looking into refinance options but she needs to rent it out immediately. The floors need to be replaced so I have gotten a few quotes and we will most likely replace the old carpet floors with laminate for about $1800. There is a condo literally identical to hers in the same complex listed for rent on trulia for $1950/month (on market 4 days). Now her sisters boyfriends mom reached out and said her niece is moving here from Hawaii and needs somewhere to live immediately. They are in a hotel and can’t find a rental property due to their poor credit. They moved here due to family issues. They also have two kids and they want to be in a home for Christmas. I’ll give you a minute to wipe away the tears.... Where was I?...oh right so my gf’s sisters boyfriends mom said they can only afford $1700/month and no deposit. She said she will co-sign for her niece to give her peace of mind. Now my girlfriends initial response was Yes I would love to help out. She told me and I pumped the brakes and told her how this doesn’t make sense and what not. Her perspective is hey I want to help people I don’t want to squeeze every penny out of things if I can help I want to. My side of the story is due to your monthly payment...Whatever discount they are getting from you, it comes out of your pocket. That’s an extra $250/month you could be spending on gas or whatever and if the sisters boyfriends mom really wanted to help she would make up that difference not ask you to. Now I stressed her out and she doesn’t know what to do. Would love to get some new perspective on this. Am I being a greedy by being this way? I mean there are better way to help. I feel she is getting taken advantage of and this doesn’t make sense on her end but is a great deal for the other family. How can I explain this in the nicest most humanitarian way possible?

@Jonathan A. I have been on both sides of this issue. I worked for flippers and they would have me get quotes on the plans after the work was completed to make sure our in house contractor didn’t rip us off. I hated doing this because I was tracking costs and I knew he wasn’t but also I’m wasting some other contractors time by giving him a dead lead to quote. Anyways it’s normal for investors to feel this way. They probably got a quote and the contractor (without walking the job) gave a low quote. Now they are married to this number and believe they would’ve saved money going with someone else. As you mentioned before there are ALWAYS change orders. The big issue with residential compared to public works is that when issues arise in the field (its very frowned upon to request a change order and usually the contractor is left to figure it out unless it’s a huge cost difference) these changes and additional time, project management, delays...are never included in a quote (unless you mail your contingency budget). Since you are a partner they probably assumed your project management would not be charged. I don’t think this is worth their money to sue you over $100k when they very well may lose. I would make a spreadsheet (you should’ve already been tracking this but Incase you weren’t) list each line item with a column for material and a column for labor multiplier. Make sure your material cost matches your receipts. Labor costs for each trade are pretty standards. Make sure your labor rates are fair and accurate (I.e. plumbing labor should cost more than demo labor). Now the main dispute you said is coming from your cost for putting up your license, project management, insurance. Etc. The bottom of your spreadsheet should have line items for general conditions and insurance (these should be fixed percentages based on the contract amount). Just explain there are hard AND soft costs in the $275k. The soft costs are not profit, thEY are true costs that are specific to the project. Charging $40/hr for project management for example is not profit. That is a labor cost. I hope this helps.

@Ryan Plesz & @Courtney M.

I use local market monitor. They give investments scores, home price forecast, job growth, renter occupied units, rents, vacancy rates, employment by industry, etc.... Here's a snip for Chicago. Very poor investment score. Regarding what I look for...I like seeing a high appreciation and job growth. This product is pretty expensive but very high quality. 

Another option is to do a seller carry back on a property. Let’s do a real world example shall we? 

There is a duplex on Gordon st in Pomona. I personally have walked this property and submitted an offer way back in like Spring. I made an offer on it but it was well under asking. The property was listed in the 400,000s. They countered way too high and I walked away. They have been dropping the price for months. They are now listed at $350,000. Maybe you do an fha purchase at $300,000 and structure a 2nd mortgage of $50,000 due in 5 years at like 3% interest? Since you are in an fha loan with PMI you should have plans to refinance. If you can get the property to appraise high enough to get you to 20% equity (to get rid of that pmi) + $50,000 cash...you'd be able to pay off the second loan.

Maybe it’s worth it to them since they’ve been on the market for so long. 

What you need to take into account is your cash on cash return. 

3.5% down payment on 300k purchase price 

Closing costs

Rehab money

Monthly mortgage -rental income

Refinance costs

Plus if you refinance in like 3-5 years the market may be down and you wouldn’t be able to refinance and pull out the $50,000 to pay off your second. Then you’d have to fork over that cash to pay the seller and your cash on cash return would look terrible. Definitely some risk there.

Hope this helps I know I wrote a lot and there might be some parts in there that don’t make sense but I’m doing this thing in one take. 

@Bosko Mijatovic

Also did you say the lender is quoting him 5.75% interest rate on an fha? That’s insane. Last I heard fha rate was in the mid to high 4’s. Maybe it changes significantly from file to file but a whole percent is a lot.

How much do you have ready to put down? That could open the door for owner financing but owners typically want 20% down at least. 

To find a deal under 300k....I would pull the sale records for multi family in the specific areas you want to buy with a max purchase price of let’s say 250k. Then cold call owners and tell them you are an agent who is looking to buy their property. If they ask how much you’d offer just be honest and say your pre approved for up to 300k. If they are willing to sell but want to sell for more...offer to list it for them. Maybe you get some listings out of it.