All Forum Posts by: Richard Ellis

Congrats on your big dreams! You know what they say, even if you don't hit your goal when you want, you're better off for making strides in that direction. I too would love to live off of passive income and treat my family with little surprise vacations...

@Amie Lamb

From what I've seen in Orlando, certainly the 2% rule (or close) does work. However, it's not a neat little package like some other places in the country. Elsewhere, you might find places that just need a coat of paint and they are rent-ready and they satisfy the 2% rule. However, in Orlando, it seems like you need to make your own value. For instance, if you find a property that is in an area that rents for $1,000 a month, and it is asking $40,000, it will likely need at least $20,000 in rehab. Not quite the 2% rule, but it is close (1.7%).

Because of this, I've been looking in cities around Orlando where prices are still suppressed. In those areas, I see 2% houses much more often.

It also seems that the best deals are off-market. For instance, I have had someone interested in selling me a duplex pulling in $1,600 a month in rent for $80,000 in the UCF area! It doesn't sound like it will actually go through after they decided they just wanted the cash flow, but the deal actually was promising considering they JUST sold another one of their duplexes with the same figures not even a month ago. If I could have pulled that off, it would have satisfied the 2% rule because it was already rented and needed no rehab. THOSE are the deals to look for... just keep networking and don't be afraid to ask people who own rental properties if they are interested in selling.

Hope this helps...

Wellcome to BP! If you are looking for partners, this is definitely a good place to start.

Hello all, Rich from Orlando here.

If you've seen my previous post, you know my situation regarding private money, but if you haven't here is a recap:

About a month ago, 3 investors (who are all construction contractors in multi-million dollar companies) came to me and asked if they could partner with me to fix and flip houses. I agreed in exchange for the following structure: We will split profits 50% to me (as I will likely be paying property gains tax) and 50% split among the investors based on their individual contributions. This is a beautiful deal for me because I'm essentially just finding the deals, orchestrating the deals, helping with rehab labor, putting the upfront closing costs down, and orchestrating the sale of the property. 

Now on to the current situation. We have two offers on the table for houses in Titusville, FL that look like the following:

Purchase price (Cash): $30,000

Rehab: $15,000

Fixed Costs: $10,000

ARV: $70,000

Profit: $15,000

What I'm wondering about is how should I setup the deal from a legal standpoint? I intend to open a separate bank account to keep the accounting of the jobs from a tax standpoint much easier. Also, the house will be in my name. I assume that ultimately I should setup an LLC and list them as partners, but it is very likely that the actual investors will change over time and I don't want to have to bring new members and take off the former members with each job.

What I'm wondering is if it is okay to keep the house in my name, have a separate bank account, and just have the investors contribute to the account when the time comes to close. I'm an accountant so I will be keeping detailed records of the job costs. I assume that when the job is finished and sold, I will just pay all of the property gains tax and distribute the investors their principal and profits. Whatever is left is mine.

I would love some feedback regarding what other people are doing for small-scale jobs which are being funded from private money.

Thanks,

Rich Ellis

@Eduardo C.

I have had some experience putting together business plans in the past for a couple of my own small businesses (these were 30+ page business plans critiqued by CPAs and local business mentors), and here are some pointers:

• Make sure to use phrasing that portrays confidence and action. For example, when you said "I plan to market my properties through craigslist, and with local realtors. I may use a property management company", maybe it should be more like "I will market my properties through local realtors, Craigslist, Zillow, Realtor.com, and other platforms to ensure a rapid turnaround. Additionally, to increase my deal flow, I will use local reputable property managers to manage the day-to-day activities of my rental properties."
• Include 1 year, 5 year, and 10 year goals so that investors can see your passion and how you are going to be successful.
• Include some type of spreadsheet that shows a pro-forma analysis of how you will get to your target number of properties using an assumed ideal property. 

I hope this helps.

PM me if you want to see the spreadsheet that I have been using to show proforma cash flows.

@Levi Bennett

 It's good to know that deals are still flowing in this area... I'd love to connect to hear about what you've been seeing!

@David Goossens and @Nicholas Crum

 You're right, it's crazy how just sharing your plan and dreams can inspire other people to get behind it!

As I've been reading BP posts and listening to HOURS of podcasts, there was just one thing that I never could get myself to believe: that money is everywhere.

I work full-time in Construction (the finance role) in Orlando, FL, and honestly I don't necessarily like my job. I'm good at finance, but I've always had an entrepreneurial heart. That is what initially peaked my interest in RE. I've always wanted to retire young and after finding BP and hearing podcasts from @Brandon Turner

 and @Joshua Dorkin I realized that RE could be my ticket. 

One of my biggest challenges being a 25 year old and just recently out of MBA school is that I needed a couple of years in order to save enough money to get serious about real estate investing. I talked to my father about investing in my RE buy and hold business and he wasn't having it. Then the craziest thing happened...

The next day I walk into work (still needing a cup of coffee) and one of the construction project managers (PM) walks up to me and the conversation went something like this:

"PM: Hey, since your dad shot you down yesterday, I know that you are needing investors to help you get started in real estate. I think you've got a good head on your shoulders and I think I could scrape together $30,000 to $50,000 to help you get started in exchange for 8% interest. Also, since I'm in construction, I know a bunch of great contractors that could put "sweat equity" into the deal and rehab properties for you in exchange for interest payments on what their work would have cost until you pay them off.

Me: Seriously?

PM: Yes, I really think you've got a solid plan put together and I want to help you get there.

Me: I'm meeting with investors and real estate agents for the next few months to get my foot in the door, but when I find a killer deal I'll let you know and we can do this thing."

Needless to say, that conversation woke me up more than a cup of coffee ever could!

No lie, just talking to him for 20 minutes about my RE buy and hold plan the day before peaked his interest enough to put $30-50k on the line. @Brandon Turner

 always says that RE is sexy. I guess he was right!

I tried looking around to see if this question had been answered elsewhere, but I didn't see anything. First, here is the background. I am a new investor in Orlando, FL and I am currently renting a house. Consequently, I am locked in for another 10 months on the lease. I would like to get started with investing (I think I may have access to private money). However, I have never owned real estate before. Consequently, neither my wife or I have yet used our FHA loan. My two questions are this:

• If I purchase a rental house or two in the next year using conventional financing and they are not my primary residence, could I still use my FHA loan next year for my first primary residence?
• If I use my FHA loan once and then I want to move after a year and rent out my old residence, could my wife use her FHA loan then to purchase another house with 3.5% down as a primary residence? I would think that as long as each FHA loan was used by either my wife or I and not cosigned, then we could use it twice as a family?

Thanks for the help guys and gals!

I live Winter Park, FL but I'm looking in Lakeland, FL for buy and hold deals and I wanted to get the opinion of other investors before looking any further. Upon initial analysis, it seems that there are a TON of good deals in Lakeland. For instance, 1,000-1,200 sq ft homes in decent areas built in the 1970-1980 range selling for 40-70k with maybe $10,000 in rehab necessary for make it rentable for 800-1,100/month. Anyone working in the Lakeland area have any insight here? I lived there for 4 years so I am familiar with the area. I really like the idea of multi-family properties, but these SFRs seem to be really good deals as well for their discounted price.