All Forum Posts by: Robert Sorrels

I've acquired my first flip SFR, it is 800 miles away in my hometown... I connected with an old contractor friend who I trust and is very knowledgeable and eager to become a REI... I bought at auction and with some help from a heloc and have about $40k left over for rehab. He is bringing $40k as well and we think we can rehab for around $75k. This puts us all in cash at $250k and low sales comps are 405-420k.

I have a single joint venture contract for us to sign, what else do I need to do before, during, and after (taxes etc)? 

Thanks for your input!

Thank you Bill! Ok, I would like to keep this first flip pretty simple, and see how it goes... I'm hoping that a single joint venture contract and a 1099 will do the trick...

I won my first REI property at auction, and will close in a few weeks. The property is in my hometown in Oregon and I live in Southern Ca. The Property needs some extensive work done including foundation and roof. I used savings and a heloc to purchase. Ive identified a friend from Junior High/ High School who runs his own construction company in town, and has plenty of experience to complete this project. I have about 40,000 (more) to put into it. and he has about the same. We have estimated the rehab at around 75k.

I borrowed a Single Project Joint Venture contract and reworded some things to fit our 50/50 partnership. I will have final say for design and final net profit split. Any Interest we pay on loans we take out will be paid back before split

What else should I have set in place? I am concerned with the tax implications and want to make sure it is fair as to what we recieve at the end. Do I just 1099 him for his share of the profit? what is a 1099 anyway, and how do I do that? Can we shield the profit by opening a C Corp with the profit so we can continue to flip? 1031 exchange?

Thanks in advance for any thoughts..

Rob

Thanks Doug, 

do you think if we go deal by deal and discuss a what percentage of profit we each get after is all said and done on each individually that would be a good way to go.

Property 1: For example we looked at two properties yesterday one for sale REO for 149k needed a tone of work, completely gut and replace a 3/1, with minimal upgrades and the addition of a 1/2 bath, and a lot of "little" touch ups. We could sell for hopefully $240-250. I would purchase the property cash and he would cover the rehab and rehab costs ($34-$38k) if we could manage to make $40 profit split the profit $20 each

Property 2 is a 1989 built 2/2 1280 sq ft, has a small workshop out back that needs a few new windows and some electrical work with a 1/2 bath in it. It is for sale at 189k. Comp next door for similar size 3/2  pending for $235. I think we could get $245k for this one with the value add of adding a wall in the living room and creating a third bedroom, making a large window into a sliding door, paint, carpet, and some small updates. I would be putting out a lot more money and some on my home equity line too. I'm thinking more like 65/35 on this one because the work is minimal and I'm the one taking a big risk. But the percentage keeps him interested and on time. And I'd like to build a good relationship. 

Is this a good way to set up an agreement on each individual deal? Then when he builds capital we can adjust as well?

Thank you for the reply Victor. Yeah I am totally excited to have a person that is excited about this process and wants to build wealth with real estate like I do. 

But now there are so many more things to figure out while I'm juggling my regular crazy schedule. I'm reaching the overwhelmed stage again...

Simplest will be the best to start with for sure...

Yeah, I think we're gonna start with something easy, and small and see how it shakes out.

Living in Southern California I decided to look into investing in my hometown in Southern Oregon. I started talking to my buddy from high school, who would also like to invest in real estate. He has a crew and can fund the rehab, I am finding the property and acquiring. The preliminary  plan is to flip the property and split the profit after actual expenses. (Rehab) will be cheaper because he can just pay for crew and materials, and run the project. Should we start oir own company first? Try one small property first? I trust him, but I think we both want to do what is fair...

I have reconnected with a friend whom I trust from my childhood. He is a successful owner operator of a couple strutting business and can do pretty much anything or find out how. I have the money to purchase the properties all cash as REO, and he fund the rehab and boots on the ground. I figure solidifying this as a true partnership now is worth a lot to me. What if the rehab is extensive how do we break down all the moving parts?

Wow! the 2/1 went for double my top bid 81k... And the other went for 175k. There is almost no way to make money on a flip, and you wouldn't want to move in with that much cash on hand. I don't get it...

I am a paddle holder in the Riverside County, CA Tax Deed Auction currently being held online. I researched the 650+ properties and reduced my list down to about 20 properties which have a home on them and I felt were the best opportunities and locations. I drove to see the properties and scratched about 1/2 of them because google maps can only tell you so much about the condition and neighborhood; of the remaining 10 or so all but three were withdrawn or cancelled prior to or during the first couple days of the bidding process. The three that are left are all now bidding at north of $200,000 so I am merely a spectator on those now. I went back through the properties and have found two properties that may work for me, but definitely weren't my first options either. One is currently bidding at the top of my cash on hand (around 100k), but I have a heloc that is already approved on my home which I could use to rehab, maybe 50k with holding costs? With a decent rehab it could sell for somewhere in the mid 200's, but all my eggs are in one basket, and this is my first auction....and flip...  The other is a small 2 bed 1 bath 800 sq ft. in a 55+ community. It needs some work but I may be able to pick up for around 30-40k. rehab for 15k?  and sell for somewhere around 100.

My question is how should I figure out my rehab costs on a home I can't enter?, or is there a calculation that anyone uses to figure out their high bid amount on a tax deed auction? I just ran the 70% calculator on BP...  Should I just sit this auction out? I'd hate to miss an opportunity this close to home...