All Forum Posts by: Sue Hough

Hello Stephanie,

@Tim Herman is spot on with the financials, but I don’t think a fix and flip will work either.  Having done quite a few fix and flips you left out quite a few expenses which will diminish your profit to the point you may loose money.  Please don’t forget to include these expenses in your calculations, as they will add up to quite a bit of money;

Closing costs to sell - attorney’s fees, title expenses, realtor fees, pro-rated taxes and transfer stamps,  On a $300,000 sale in my home state (Illinois), I would calculate approximately $18,000 - $20,000

Next you have carrying costs - debt service (mortgage payments), utilities, insurance, HOA (if applicable). Plan on holding your property for at least 6 months. Even at very conservative interest, you will be at $2,500 per month minimum. Totaling $15,000 for 6 months.

If just one unexpected item arises in construction, you could be in financial trouble.

If you haven’t already purchased, please reconsider this project, as there will be better opportunities in the future.  As a rule of thumb, on a fix and flip, unless you are sure you can flip in a very short amount of time for very little investment, make sure you can net at least 10% of the sale price  with 20% being comfortable.

Good Luck,

Sue Hough

@Allen L.,

This pictures are not the best, but it does look good.  I will give you a few pointers on how to spot good siding for the future;

The seams are staggered, meaning they do not line up, which is good because you don’t want it to look like a vertical line.

The seams are “topped” in the same direction. Which translates to; the under piece is to the left and the overlapping piece is to the right.  It can be reversed, as long as they are the same throughout one side of the house. 

The j-channel is done properly around all windows and other penetrations.  

The siding is level above all windows.  Considering most older homes have settled the siding installer has to accommodate for this to make sure it looks level.

On the corners of the home the siding matches from one side to the other.

All of these have been done on your home.  Your siding installer gets a thumbs up based on the pics you provided.

Good luck,

Sue Hough

I am very excited to be part of the event, thank you @Brie Schmidt and @John Casmon for putting together a fantastic venue.

Looking forward to attending your great new MeetUp!

@Lynn Schneider,

Good morning.  I have been a General Contractor for 18 years and have done many new home constructions.  You can not compare prices of a multi-unit to single family home across the board, there are too many variables.  

The single largest expense in new construction is excavation and foundation.  A single family home has a disproportionately larger expense in this one line item than multi-family because multi-family are usually stacked on top of each other and spread out sharing the foundation.  The next variable is utility and infrastructure, again more expensive (per unit) for a single family home vs. multi-family.  Finally there are different framing and fire safety measures which go into each and can not be compared equally.

Good luck,

Sue Hough

Kelsie,

Most of the hard money lenders you are speaking of usually fall into any combination of 13%-16% annual interest only; 2-5 points at the closing table to process the loan and 3/4 -1.5 points a month interest only.

Please double check your lenders’ criteria, they may have restrictions regarding second liens during construction, meaning they prohibit anyone placing a second lien on the home during the construction process. Also, I am not aware of any hard money lenders taking second lien positions, perhaps you can secure a personal line of credit or partner with another investor. 

Good Luck

Sue HOugh

Stacey,

Great advise here!  I have partnered on many deals with various investors and no two were the same. I have arranged a partnership where the split was 50/50 and I did not bring money into the deal but the leg work was mine.  And I have partnered 60/40 with 60% being my share under similar terms.

You have to be confident your knowledge to create a profitable investment is extremely worthy.  Most financial investors are looking for individuals like yourself.  Keep in mind there are three necessary and valuable (meaning worth money) components to every investment; Time/sweat equity, knowledge and finances.  It sounds as if you possess two of the three and are in a good position to negotiate confidently.

Good Luck

Sue Hough

Daniel,

Congratulations to you!  Success stories are great.  Your post is a comment rather than a question, did you have any questions for the Forum?

Sue

John,

I agree with @Cassi Justiz. Conventional provides you with options the FHA loan does not. The loan processing, documentations and the bank inspection is very detailed and time consuming.

FHA is a great opportunity under specific circumstances so keep the opportunity for an FHA loan available to you for future use - you can only have one FHA loan at any given moment. It may be a good opportunity for your next home while you rent out your current two flat.

Good Luck

Sue Hough

Good morning @Justin Purvis!   Great advise from @Brian G.. I would also like to add; be very wary of any real estate investment educational service offering you their products for thousands and thousands of dollars.  Most of these organizations prey on newbies and do not deliver valuable content.  You can learn everything you need from networking groups, podcasts, YouTube and a few hands on training events, which are affordable.

Good Luck,

Sue Hough