All Forum Posts by: Crystal Smith
Crystal Smith has started 65 posts and replied 2754 times.
Post: Beginning Steps in a Fix-and-Flip
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Jared McCorkle:
Hello,
Currently I am in the beginning stages of doing my first fix-and-flip with a Hard Money Loan and I am running into an issue with the Hard Money Lender and Realtors in the area. I have a couple of prospect properties I would like to tour and get a better SOW for the Rehab, however because of the still someone hot market we are in realtors are not taking me serious as a potential client and tour the property without a preapproval letter, however the Hard Money Lender will not issue me a Preapproval letter until I get a better estimate of the SOW and come up with a plan on how I am going to do the project which I can't do without looking at the property first with a Realtor.
Is this typical when it comes to fix-and-flips and how should I approach and solve this situation that I am in?
My first recommendation is never rely on one Hard Money Lender. When you eventually get a deal under contract and only have one lender if the lender decides not to do it then your stuck. So find another lender. Find one that will provide you with a Pre-approval. We will never take a client out to see properties or submit a contract until they proof they can close. The first part of that proof is a preapproval letter. Even if it's one of the properties we own or control with a contract- You don't get my attention without proof.
Find another lender.
Post: Hold or sell?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Corinne Faivre:
Hello everyone, I posted about 6 months ago whether to sell or hold my condo. I had a bad run with property managers, the last one being the worst. The condo has been updated and is now finished and ready to be rented or sold. It sat vacant for 2 years while being fixed due to a small kitchen fire and the need to seek a public claim adjuster. I am at a cross road. I acquired it in 2006 and I own it free and clear 3/2 @ 1400 sq' in Orlando. The complex is well located and 90% investors owned so renters occupied in Avalon Condominiums S.Semoran Blvd and Pershing Ave in Orlando. Either I rent it and self manage to recoup some of the past loss and start making money right away with the possibility of tenants trashing it or sell and lose more money on realtor commission and closing cost or find a cash buyer at the right price? I even considered seller financing? Investors are hounding me weekly with low ball offers. Can anyone give me some advice on how to reach a decision? Any feedback is greatly appreciated. Ultimately I would like to invest in more rental properties for "passive income"
The benefit of owning the property free and clear are the options it opens up. Based on your comments or fears about tenants one of the options that you should eliminate is renting then self managing. So your options are to sell. And in my opinion you can use multiple strategies simultaneously to sell
1. Sell at full price through a flat fee realtor- It would have to be the type of listing contract that allows you to find your own buyer without having to pay the realtor. You won't really get much service from a realtor except exposure of your property
2. Sell at full price or just below price on terms - i.e. Seller financing or lease with option : You can request a small or large downpayment. That's up to you.
3. Sell at a discounted price to cash buyers- I say discounted as an incentive to cash buyers because we are always looking for deals
Post: Which real estate strategy works best to escape the 9-5 rat race?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Rodney Love:
My question for anyone that escape the 9-5 rat race is. What real estate strategy did you use? Example if you had between $20,000-$70,000 to invest in real estate. How would you use that to replace your income of $7,000 a month from your job? Fix and flips, tax liens, mortgage notes, rentals, Airbnbs?
Since you have given a wide range of funds -$20K-$70K I have 2 answers. If I was starting over and only had $20K I'd be looking for partners, be they silent or active. In my opinion, $20K is a good start to start discussions with others who may only have $20K to $30K about what we could potentially do together. And it really doesn't matter what the strategy is, fix and flips, tax liens,.... it doesn't matter.
On the other spectrum if I was starting over and had $70K, I'd be looking for partners while at the same time getting pre-approved for a fix and flip loan from either a private money or hard money lender. Also at the same time finding someone with experience in fix and flips. My strategy- Fix and flip 2 to 3 homes, then use the cash to purchase a buy and hold. Rinse and repeat the process while learning about other strategies. This is what we did.
Post: looking to buy rental property in any state - 100k down, traditional financing
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Robert Ellis:
Quote from @Crystal Smith:
Quote from @Les Z.:
Hi all,
I've been looking to invest in rental properties for a bit of time. I am currently located in Illinois (Chicagoland). I looked around this area, however the taxes here range from 5k-12k on typical home which made me look out of state. Condos downtown are affordable, but that adds HOA and taxes can easily hit 8k.
I visited Farragut/Marryville TN. Houses are still affordable (new construction especially), taxes are low, but I'm concerned if people really rent there (86% owner occupied). Also thinking about visiting Nashville to check out properties and neighborhoods.
I've also looked at Washington state, but only houses under 500k are in Tacoma (56% owner occupied). Chicago is similar, mid 400+ for a single or multi family, old construction, highest taxes. In WA you can get new construction, but that is far away that I don't expect Seattle/Bellevue tech workers to live there.
My boss suggested Pittsburgh (emerging tech hub), my coworker is based out of Atlanta which seems to still have affordable houses and seems to have lots of tech jobs. I work in tech so I'm naturally gravitating towards areas that have a lot of tech workers (lots of foreign workers renting).
Any ideas? I can put down up to 100k, maybe even more and I can qualify for traditional financing.
I note in your post that you never mention how much you can get for rent in the markets you've explored thus far. I make this comment because a lot of our portfolio was in Chicago and every year we explore other markets to invest outside of Chicago. Markets where prices & taxes may be less. What we have often found is that while the prices & taxes are less so are the rents & we could not meet our hurdle rate targets. Note: We still pull the trigger on some deals even if it's just below are target numbers. So how much you can put down on a property & qualifying for traditional financing should only be part of your evaluation. How much rent can you get in a market and does it meet your Return on Investment objectives should be the most important part of your evaluation.
if you do a Google search you'll find lots of articles on the best markets to invest in. My recommendation on markets to explore is Columbus Ohio, Pittsburgh PA, Indianapolis,
what are your target numbers? I've never heard someone say they can't get the numbers they get in a major top 5 metro by investing in other places. what is your current strategy right now and typical deal?
Our hurdle rate changes from year to year. For 2024 it's 20%. It's a target number as we try to maintain a balanced portfolio. Some investments will be 5 Cap while with others we'll take more risk.
Our current strategy- We invest in single families to flip or built-to-rent communities to hold. We acquire distressed multifamilies, improve them, and then rent. We also invest in large multifamily syndicates.
A typical small multifamily deal for us is to acquire a shell between $100K to $300K- (2 to 4 unit); Spend $200K to $300K to renovate- then rent each unit between $2000-3500 per month.
i encourage investments outside of the major metropolitan areas but was advising this first-time investor to not forget the bottom line ROI.
Post: looking to buy rental property in any state - 100k down, traditional financing
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Les Z.:
Hi all,
I've been looking to invest in rental properties for a bit of time. I am currently located in Illinois (Chicagoland). I looked around this area, however the taxes here range from 5k-12k on typical home which made me look out of state. Condos downtown are affordable, but that adds HOA and taxes can easily hit 8k.
I visited Farragut/Marryville TN. Houses are still affordable (new construction especially), taxes are low, but I'm concerned if people really rent there (86% owner occupied). Also thinking about visiting Nashville to check out properties and neighborhoods.
I've also looked at Washington state, but only houses under 500k are in Tacoma (56% owner occupied). Chicago is similar, mid 400+ for a single or multi family, old construction, highest taxes. In WA you can get new construction, but that is far away that I don't expect Seattle/Bellevue tech workers to live there.
My boss suggested Pittsburgh (emerging tech hub), my coworker is based out of Atlanta which seems to still have affordable houses and seems to have lots of tech jobs. I work in tech so I'm naturally gravitating towards areas that have a lot of tech workers (lots of foreign workers renting).
Any ideas? I can put down up to 100k, maybe even more and I can qualify for traditional financing.
I note in your post that you never mention how much you can get for rent in the markets you've explored thus far. I make this comment because a lot of our portfolio was in Chicago and every year we explore other markets to invest outside of Chicago. Markets where prices & taxes may be less. What we have often found is that while the prices & taxes are less so are the rents & we could not meet our hurdle rate targets. Note: We still pull the trigger on some deals even if it's just below are target numbers. So how much you can put down on a property & qualifying for traditional financing should only be part of your evaluation. How much rent can you get in a market and does it meet your Return on Investment objectives should be the most important part of your evaluation.
if you do a Google search you'll find lots of articles on the best markets to invest in. My recommendation on markets to explore is Columbus Ohio, Pittsburgh PA, Indianapolis,
Post: Mortgage for an LLC?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Jacqueline Bruen:
Hi there!
I've started an LLC to buy my first residential investment property. I will be able to provide a 20% down payment through the LLC, but the question I have is: don't I need to personally guarantee the loan because the LLC does not have credit history? I've heard it is bad practice to personally guarantee a business loan.
What do you pros recommend? How can my LLC get a loan?
I recommend you move forward with guaranteeing the loan. You really have no choice.
Post: Opening a real estate brokerage with a non-broker partner
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Natalie Stanley:
Hi! I am hoping to see if anyone has advice on opening a brokerage where one owner is the broker and the other owner is an investor. I am a rental property investor and have about 35 properties. I am opening a brokerage with my long-time realtor with the goal of building out a property management side and sales side of the brokerage. We will own the company 50/50. Splitting all start up fees and go forward expenses. All of my rental properties will be going into the business on the property management side which will provide the company immediate income. What my agent and I are trying to figure out is what is a fair split for the sales side of the business as it relates to the broker doing business. What percentage of the 3% that the broker brings in from sales should go straight to the brokerage instead of as a commission to the broker? Are there other ways people have structured this that they could share? For further context, I am not taking on the role of a silent partner in the company. I am an attorney and will be very involved in the startup and go forward of the business and building out of the sales and property management sides.
In my opinion, the answer to your question lies in what you project the expenses of the sales side of the business will be. The only way to recoup those expenses is to take them out of sales commission. The 2nd part of the answer lies in what kind of revenue you want the sales side of the business to have, again said revenue also comes out of the commission. What's left after you recoup expenses and take some review is the commission for the individual agent.
The other part of my response is it depends on the business model you want to use. If you intend to recruit others to your new brokerage you may use a model like my brokerage where the owner is an investor & he has a managing broker running the business. It's a near 100% brokerage. 100% meaning I take home almost 100% of my commissions. He also has a property management company. In his business model, he has recruited over 600 agents he does not take a % of the agent's commission. He charges a flat fee for all closed transactions no matter what the size ($395 at the time I writing this) and a small fee per month to cover stuff (At the time of this writing it was less than $50 per month) along with Errors & Omissions that covers me in 2 states.
I think once you have the answer to what you expect on the expense side along with the business model you want to use then you can figure out how much of the commission should be retained by the business.
Post: I own a gutted house and I want to GC the rehab myself
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Crystal Smith:
Quote from @Anthony Theokary:
Hi all I have a few questions and hope you can help me along the way. I own a 2 story house in South Philly and it’s fully gutted. I am putting a 3rd floor on and already have my zoning permits and waiting on construction plans. I DO NOT have my GC license. I want to know what I can do as the homeowner as far as pulling permits for all the work? Do I need my license? If anyone can help me with this question please let me know.
I can't speak for the laws in Philly regarding you as the homeowner pulling permits, but what I can speak to is what we have done in the markets we've worked in. We will act as our Project Manager in place of using the term GC. As the project manager, I will either hire a GC or licensed tradespeople to do the work that requires pulling permits and passing all inspections required by code. If there's a part of the job that does not require a license and will not be inspected by the city (such as finishes) I as the project manager have the option whether or not I will give that portion of the job to the GC or farm it out.
Just some of my suggestions.
I just wanted to follow up on the portions of the scope of work that I may farm out as a Project Manager and not have it done by a GC. Once the rough-in, electrical, HVAC and plumbing are inspected and approved and it's time to close up the walls I may farm out finishing work to others. I've never had a city or village inspect finishing work like flooring, painting, cabinets, lighting,..... You get the picture. I don't do any work myself but as a realtor representing investors I have represented many who do all the finishing work themselves after the licensed contractors have finished their work.
Post: I own a gutted house and I want to GC the rehab myself
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Anthony Theokary:
Hi all I have a few questions and hope you can help me along the way. I own a 2 story house in South Philly and it’s fully gutted. I am putting a 3rd floor on and already have my zoning permits and waiting on construction plans. I DO NOT have my GC license. I want to know what I can do as the homeowner as far as pulling permits for all the work? Do I need my license? If anyone can help me with this question please let me know.
I can't speak for the laws in Philly regarding you as the homeowner pulling permits, but what I can speak to is what we have done in the markets we've worked in. We will act as our Project Manager in place of using the term GC. As the project manager, I will either hire a GC or licensed tradespeople to do the work that requires pulling permits and passing all inspections required by code. If there's a part of the job that does not require a license and will not be inspected by the city (such as finishes) I as the project manager have the option whether or not I will give that portion of the job to the GC or farm it out.
Just some of my suggestions.
Post: What are you looking for?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,750
Quote from @Sam McCormack:
Quote from @Crystal Smith:
Quote from @Sam McCormack:
Simple question, what are you looking for in a city to invest in?
Is it the potential growth an area is facing? The cash flow on hand when you buy? Your backyard?
I am curious to know what YOU are looking for in an area to invest in!
1. Diversity of opportunities & Multiple submarkets-
2. Multiple paths of progress evident
3. Cost to enter the market
I don't see those often! What markets have you found/invested in that fit this?
Chicagoland, DFW, San Antonio, Atlanta. There are others but these are the markets where we pulled the trigger in the past that met this criteria. Another criterion that I did not put in my original response was that we had to establish boots-on-the-ground partners in the market.