All Forum Posts by: Crystal Smith

We just had one of our investor partners send us this article.  Not sure she realized that by today's standard this article from March 2013 is  old news but I thought it would be interesting to see what those of you investing in Chicago think about the Mayor's plans. How has the city done since this article was written?  Have you modified any of your investment strategies based on the city plan.  The areas include:  Bronzeville, the Eisenhower Corridor, Little Village, Pullman, Uptown and Rogers Park.

Chicago Sun Times Mayor's Strategic Vision

Welcome

One strategy you may consider to raise the downpayment for a buy and hold is to purchase a property to flip then use the gain from the flip as the downpayment for your next buy and hold. Now your 1st reaction is- I don't have the money for a buy and hold so how can I do a flip. If you find the right deal, one w/ a high ROI, then a partner will materialize to fund a flip.

Or find someone that just invested in a long term bond @ 2% & offer them 4% for the downpayment.  

@Elizabeth Colegrove 1st off, Kudos to you on the podcast.  My partner was in private industry supporting the military.  One of his favorite bosses was retired general that moved 30+ times during his career.  He had a strategy similar to yours.  During every move, except a couple of Int'l moves, he purchased a property to live in & kept the property after the move.  When he retired he had a nice portfolio.  He never managed the properties or dealt w/ tenants.  Always hired a management company otherwise he said it would turn out to be another job.

When he retired there were some properties that appreciated; he cashed out & moved in to larger commercial deals plus land.  He held on to the properties that did not appreciate but said he would eventually get rid of all the single families.  

We used to do business in India (unrelated to real estate)  Most of the business was in New Delhi & Bangalore setting up technical facilities, which required acquiring/leasing commercial spaces.  Some questions:  

• Would the investment in the Indian company be in $ or rupees?  i.e. would they convert the $ to rupees.  I assume the 9% return you refer to is in rupee's.  What would the return be after the exchange rate?
• The Indian gov't had certain rules that made it almost impossible for foreign companies to take $ out of the country.  Part of the policy to grow the country.  What are the rules for pulling money out of the deals;  i.e. out of the country? 

We're not wholesalers but we have sold some deals which would be classified as wholesale.  We've also purchased a number of deals from wholesalers over the years.  The deals we've purchased have only been from wholesalers that have completed a few renovations in their careers and/or have a real estate portfolio of their own.  The numbers on their deals have always been accurate and verifiable.  They have also provided us w/ more than the numbers.  My opinion- If you want to do a "good job" wholesaling, then get a masters degree in understanding the value of the property;  understanding renovation costs; have a network of handymen, GCs, tradesmen available to provide bids when needed...... Also make sure you have access to $ to really control the deals that you're trying to sell.  If you treat it like a "part time" job you'll make "part time " money or no money.  If you treat it like a business then.....

Join a couple of local REI groups to learn your market, build your network; get an education; then decide on your strategy. That strategy may include keeping your current property and leveraging a HELOC to support a purchase of a property for flip or selling & using the cash. If your credit is good you can combine leveraging OPM w/ your cash & purchase properties to flip, flip again; then use the cash from the flips to buy & hold. There's naturally a ton of other details, such as setting up the property company structure to protect yourself and minimize taxes. Hence why the 1st recommendation is learn, learn, learn.

Many lenders, banks &/or private will insist licensed contractors complete the work.  to protect their investments.  W/ that said if the work your talking about is lipstick then hiring a licensed GC may be over kill.   Check w/ another bank but in the mean time I recommend the following:

• If you truly understand what needs to be done then put together a Scope of Work & price it out as if you we going to GC the job yourself.  You need to separate labor & materials.  Regarding labor:  You should include what you believe you are worth per hour.  You may change your mind about how much money you save if you consider the value of your own time.
• Provide the scope of work- minus the costs to 3 or 4 GCs for a bid.
• Once you receive the bids you can then use your own scope of work to start negotiating. 
• Make sure the contract you sign w/ the GC you choose has provisions for you as the owner take away a line item in the scope of work from the GC for reasons such as not performing and/or they aren't competitive on that line item
• Ensure that the bank pays out draws directly to you; not the GC.  You'll then be able to pay other subcontractors if you decide to exercise the option to hire someone else.

Last- Check to see what work in your area actually requires a license to complete.  

If the objective is access to the MLS then you should consider only one partner w/ the license while the other becomes an assistant. If the objective is to save on listing your property then you'll have to ensure your partnership agreement has provisions for the person w/o the license to share in the savings; i.e. the commissions. The only reason I would see for both of you getting a license is if you eventually want to start a brokerage firm together.