All Forum Posts by: Christopher Telles

 Instead of a land contract why not just get the sellers to do a seller carry back? They're only going to get the amount you agree to for the land contract sale, but  instead of you as the buyer having exposure to the risks associated with using a land contract you'll actually take title. Holding fee simple title in the property is a more desirable approach and would then also allow you to borrow against the property for its development if you can find a lender to provide construction financing.

I've bought a property using a land contract. It was a SFR I bought back in the early 90's. Nothing went wrong in that buy because the sellers were honorable folks. It wasn't until many years after that my former partner, a land use attorney, explained to me the risks buyers take in acquiring real estate through the use of a land contract. Many of the risks can be mitigated through the contract itself. However, in many instances you as the buyer may be forced to protect or recover your interests in the property through litigation.

I would still buy property using the land contract but I would also know going in with eyes wide open what my risks are in using this purchase method. Definitely not the better Purchae method if you're planning on making significant improvements to the property.

The business these three are going to operate should be operated through a DBA if they're going to actually have a business name and they haven't formed a legal entity. Have you asked them how they plan on operating their business?

If they don't have a DBA or legal entity then maybe their not ready to begin operations and may not be a good tenant selection. It's true they could get business permits in their personal name(s) but you would think they would have preplanned this before actually negotiating for a building space.

One entity, one eviction should you need to evict. 

Hey there BP nation. First time questioner. I've been on BP for a little over a month and reading and learning a lot about fix N Flips, and also participating in the forums sharing knowledge from my experiences in real estate. 

I'm looking for some guidance from some of the more experienced California flip investors in luxury homes to see if they might use a matrix or formula to plug in a set of  rehab estimation numbers for a luxury rehab as they are initially looking into the potential of a project being an acquisition candidate before they actually walk the property.

I can typically create an estimated improvement budget for almost any commercial property in both office and industrial for proforma purposes before visiting the property, but residential is a new animal for me. 

Below I will provide an overview of a property that looks to meet most of the underwriting criteria I've established for a viable investment e.g. 75% ARV test, affluent neighborhood, great school district, strong resale market, etc., but thought this information would be useful for those who might answer. The ARV is pegged at $1,200,000 supported by nearby comps.

I'm currently underwriting a 4bd 5ba luxury home that is approximately 3,000 sf in a Southern California affluent inland neighborhood in Los Angeles County. The home was custom built in the mid 80's and is in terrific shape, but its now dated and will need a new kitchen, baths, and some walls removed to open up some of the space that buyers find more attract today. Obviously new flooring and other accoutrements will round out the improvements.

I know there is no way to know what the actual budget number 'will be' until the property is walked, but I'm curios if there are some numbers, based on the luxury rehabs more experienced rehabbers have rehabbed, they use to plug into a quick proforma review they may use while investigating a new luxury market property before walking the property. Example, price per overall square foot, kitchens X, baths y, flooring Z. 

I've estimated the rehab for more moderate priced homes but I suspect a luxury home is going to have a dynamically different rehab cost structure, and as I've stated I'm curious to know if there is a way to estimate a prototypical rehab number for a luxury home.

To your continued success!

I think it really depends on what your long terms investment goals are. Have you determined a beginning, middle, and maturity schedule for your intended real estate investments? Will you buy turnkey, value add, or opportunistic investments?

I can't help but notice the title of your question is "business plan" help so that leads me to believe you are thinking about investments for a longer term.

Not knowing your personal circumstances beyond what you've shared, the first investment should, ideally, fit into your overall business plan, although we don't live in a real estate world that is always ideal. Do you both make enough money to buy a first investment, and then soon there after may have the ability to save enough to buy another? If not, then maybe a vacation rental might serve you better.

I've not ever owned an investment rental, but living at one of the tourist beach city's in California I've considered it. They can offer a higher yield from the initial investment Vs a monthly rental on the same amount of capital. However, with a larger reward comes larger risk. There's no guarantee the populous wanting to visit your vacation area will always have the discretionary income to vacation e.g. cyclical economic conditions.

I would imagine your wife and father in-law though may have a pretty good handle on the risks associate with vacation rentals and how to minimize those risks.

Getting back to my original point, if your early business plan requires a method to raise capital and you can tolerate a little higher risk profile in your investments then buy early investments that have an intrinsic value component to allow for an increase in the equity above and beyond the ingoing cash flow.

You are asking the right questions. Now try to envision where you want to be in ten years. Then ask yourself how you're going to get there. Then build a step by step plan to bring your vision to life.

If you're the seller you would want to provide disclosures of any significant issues concerning your property to a potential buyer when they're looking at the property, if you're listing with a real estate agent/broker then you should provide instructions in the listing agreement to make such disclosure in their written or online materials for the property.

Making a disclosure of existing issues, or known potential issues that you know as fact could potentially negatively affect the property will reduce the burden of surprise during negotiations and mitigate the risks of potential future lawsuits. 

 Awesome! Thanks for sharing your lead pipelines.

We have similar lead pipelines - we still buy off the MLS, brokers email us pocket listings and we're also on every wholesalers' buyers list too. I am choosy of these wholesale deals though. So far, I bought only one house from a wholesaler this year. I want to buy more but most of the deals just don't make sense.

 Account Closed Great post here. I've been following it since it first appeared. I'm curious to know why you're finding the wholesalers deals not making sense? Is it they're pricing the deal to richly? Or are there other issues you're running into when working with Wholesalers e.g. inaccurate construction budget, contracting, etc

Thanks, and I look forward to the thread posts to come.

EDIT: I should have added that we're also just starting to reach out to wholesalers now and have some concerns in line with my questions.

There's not secret sauce to finding these properties. If you want to find them before a broker who lists properties for sale you need to be talking with building owners on a daily basis. 

Creating a marketing program to contact property owners who own the types of properties you would like to buy is the most effective way to ensure you're being exposed to property owners when they are thinking about selling.

Consistent direct mail campaigns targeting specific property types in specific areas is a good way to get the attention of potential sellers.

Another way is to subscribe to a data service that provides detailed information on properties and their owners along with telephone numbers at hit the phones cold calling property owners. Normally this is one of the primary ways commercial brokers develop relationships with sellers to list properties. If brokers can do it then committed buyers of large commercial assets too should find success in this approach.

The key to any good marketing system is consistency. 

@RichardC is absolutely correct. A principal owner can provide instructions to his broker how to handle offers that meet certain criteria, at least in CA.

Without those specific instructions a broker is obligated to present all offers received in a timely fashion.

You might ask the broker why he's withholding the offer from the seller. Baring his insolence you should expect at least an explanation. If you don't receive one then call his managing broker and explain why you're seeking his intervention.

Are you making the offer using an entity Llc, corporation, LP? If you are then make your offer "Entity and or assignee" and submit the proof of funds. Should someone question it then you can always say a new entity will be created and take title with the POF individual Involved. Remember this is just to secure the deal. After you've got it under contract you can choose to close however you'd like providing you close on the agreed to terms and schedule.

If your making the offer in your name use this same method and explanation that the entity just hasn't been formed yet which is very common in real estate investments.

 Idk your circumstances but if your looking to season an installment loan on your credit history maybe you can buy a new computer or iPad/iPhone from Apple or Dell. Let the loan season for 6-12 months and then payoff the balance. 

We used to buy dozens of laptops every year for my old business through Dell. I believe their loans are installment loans. You'd have to check Apple though because I've never bought any of their products using their financing.

And I also agree you should approach more banks chances are the bank you talked to is very conservative. There are many other lenders out there who are open to lending using different underwriting criteria. That said, lenders do look at payment history of similar type loans when underwriting for risk.