All Forum Posts by: Thomas Franklin

@Tyler Palmer 

I sent you a Private Message. 

@Joe S. Please see the response, from @Parker Robertson above. 

@Parker Robertson
We are forming a focused Real Estate Mastermind Group for investors who are serious about growth and developing wealth — whether you are just getting started, already have a few deals under your belt, or have much experience. The goal is to create a consistent, high-value environment where members hold each other accountable, share insights, and challenge each other to level up. No selling, no fluff — just Real Conversations and occasional Video Calls with a community focused on supporting the Knowledge Development, and the Investment Goals, of each other. Analysis of potential acquisitions, acquiring Investment Properties, etc. will also be part, of this Mastermind Group. 

  If you are committed to showing up, adding value, and being part of a long-term group of peers, we would love to connect! DM for more information; we will follow up individually to see if it is a good fit. Many of the Momentum 2025 Groups went nowhere which why we are vetting.   

@Josh R.

I would suggest that you interview several Realtors and ask them the following questions, to ascertain if they are truly Investor Friendly, or if they are throwing you a sales pitch. You can use BiggerPockets’ Resources to find multiple Realtors, in your area. You may also go to REIA Meetings and local Meet Ups to find multiple Realtors, in your area.

1. How many investors do you currently work with and how many investors have you worked with, in the past?

2. How many transactions have you closed, with investors?

3. Do you currently own any Investment Properties? If so, what type do you own?

4. Are you a member of any REIAs?

5. Would you provide me, at least three references?

@Lee Williams

You can find GCs by going to REIA Meetings, Local Investor Meet Ups, contacting your Local Building and Zoning Department, etc. I suggest that you interview, at least three General Contractors and ask the following questions. In addition, I strongly recommend that you verify all licenses and Insurance Policies.

1. How many homes have you rehabbed and/ or renovated? What was the magnitude, of your projects?

2. How many projects is your company currently undertaking?

3. Do you work with Investors that need to adhere to strict timelines and scope of work?

4. Do you have multiple Sub Contractors, for similar trade skills, such as plumbers, electricians, flooring crews, painters, etc.?

5. Would you provide a copy of your GC License, your Certificate of General Liability Insurance, and your Certificate of Workman's Compensation Insurance? 

6. Are you bonded?

NOTE:

To be “bonded” means the Contractor must purchase a Surety Bond, which serves as a form of Insurance to protect the Contractor’s Customers if he or she fails to complete the job properly or fails to pay for permits, subcontractors, or other financial obligations.

7. Are all of your Sub Contractors Licensed and have Workman's Compensation Insurance? Would your Sub Contractors be willing to provide such information, or would you be willing to sign a waiver stating "All your Sub Contractors have Workman's Compensation Insurance?"

8. Do your Sub Contractors have the ability to verbally communicate, with English Language Only Speakers?

9. Do you pull all necessary permits?

10. Do you provide a written warranty, for all labor? If so, what is the length, of the warranty? (a minimum of 1 year)

11. Do you provide all applicable warranties, for materials?

12. Who is in charge of the job site, to ensure timelines are met and the Scope of Work is properly completed?

13. How do you handle dirty work such as debris disposal and clean up?

14. Would you be willing to receive four draw payments that would correspond to four phases of the rehab project?

15. Would you provide references, from past clients?

If the General Contractor that you are interviewing does not provide you their GC License, their Certificate of General Liability Insurance, and their Certificate of Workman's Compensation Insurance, this should be a Red Flag, for you telling you to move on to another GC. 

If the General Contractor that you are interviewing does not give you specific answers, to the other questions, this should be a Red Flag, for you telling you to move on to another GC.

You should contact their Insurance Company and verify all Policy information such as, but not limited to the Policy Number, Coverage Limits, and the policies’ date of expiration. In addition, you should also visit your state’s Department Of Business And Professional Regulation and check the GC’s License that it is current and valid. You should also check, if any complaints, liens, lawsuits, etc. have been filed against their license. Vet! Vet! Vet!

@Druce Asah

Wholesaling in many states is ILLEGAL unless there is intent to purchase, i.e. a Double Closing. For Florida I refer you to Florida Statues 475.42 and 475.43. Many other states have similar language.

Link: https://www.richardhornsby.com/crimes/regulatory/unlicensed-practice-of-real-estate.html

You need to make certain whether or not this Wholesaler is assigning the contract or if there will be a Double Closing. I have been a Real Estate Investor, since 1998. Please feel free, to review my profile.

Since you are interested in fix and flips, I propose the following action plan. It is not the Fast Food Plan you want, but it is strategically methodical and highly accurate. The first step would find an Investor Friendly Realtor assuming you do not have access, to the MLS. I would suggest that you interview several Realtors and ask them the following questions, to ascertain if they are truly Investor Friendly, or if they are throwing you a sales pitch.

1. How many investors do you currently work with and how many investors have you worked with, in the past?  

2. How many transactions have you closed, with investors?  

3. Do you currently own any Investment Properties? If so, what type do you own?  

4. Are you a member of any REIAs?  

The next step would be to work with the Realtor and determine the hot markets, in your County, with the greatest number of sales over the last 90 to 120 days. Personally, I would prefer 90 days because markets are always changing. This list would contain the zip code and corresponding name of the municipality, and a breakdown of the number of SFRs. This will be your Farming Area. From this data, you can utilize a website bestplaces.net that will give you a breakdown of the percentage of homes that sold, in various price ranges, for a given zip code. This will identify the retail price ranges, in which you can list the rehabbed property and the price ranges, of distressed homes, you should target.  

You can use the Realtor to help you find deals and also use Wholesalers. If you acquire a property, from a Wholesaler, once the property is rehabbed and ready for the Retail Market, allow the Realtor that provided you the zip codes, to list the property for sale. This creates a WIN-WIN Situation and gives the Realtor incentive, to work harder on your behalf.

Since you are interested in flipping houses, I thought I would share the formula I use, for determining my Highest Offer. FIRST, never trust an ARV that is posted by a Wholesaler.    Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc.

I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything.   

ARV - Desired Profit - Closing Costs to Buy - Repairs - 10% of Repairs - Holdings Costs - Concessions - Realtor Fees - Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer).  

ARV: After repaired value or what you think it will sell for once repaired.  

Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable.    

Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees.  

Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs.  

Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, property insurance premiums, property taxes, loan payments, HOA Fees, etc.).  

Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV.  

Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV.  

Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these.  

This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling.

@Santiago Rodriguez

In my opinion and given my experience, I would walk away. There are more distressed SFRs that you can find using the BiggerPockets’ Tools and “Driving For Dollars.”

I would always recommend using a Licensed GC. Unless you have an extensive list of contractors, for drywall, plumbing, electrical, flooring, etc. you are better off going with a GC. You will pay more, but what is the price of your time? You will have to pull all permits yourself. You will have to call, for “rough” and “final” inspections. How well do you know all the Building Inspectors, to be able to ascertain the good inspectors from the bad inspectors? How much time do you have to vet all the different contractors you need checking their licenses with the DBPR (Department Of Business And Professional Regulations) as well as verifying the General Liability and Workmans Compensation Policies? These questions only you can answer.

If you do decide to use a GC, I suggest that you interview, at least three General Contractors and ask the following questions. In addition, I strongly recommend that you verify all licenses and Insurance Policies.

1. How many homes have you rehabbed and/ or renovated? What was the magnitude, of your projects?

2. How many projects is your company currently undertaking?

3. Do you work with Investors that need to adhere to strict timelines and scope of work?

4. Do you have multiple Sub Contractors, for similar trade skills, such as plumbers, electricians, flooring crews, painters, etc.?

5. Would you provide a copy of your GC License, your Certificate of General Liability Insurance, and your Certificate of Workman's Compensation Insurance?

6. Are you bonded?

NOTE:

To be “bonded” means the Contractor must purchase a Surety Bond, which serves as a form of Insurance to protect the Contractor’s Customers if he or she fails to complete the job properly or fails to pay for permits, subcontractors, or other financial obligations.

7. Are all of your Sub Contractors Licensed and have Workman's Compensation Insurance? Would your Sub Contractors be willing to provide such information, or would you be willing to sign a waiver stating "All your Sub Contractors have Workman's Compensation Insurance?"

8. Do your Sub Contractors have the ability to verbally communicate, with English Language Only Speakers?

9. Do you pull all necessary permits?

10. Do you provide a written warranty, for all labor? If so, what is the length, of the warranty? (a minimum of 1 year)

11. Do you provide all applicable warranties, for materials?

12. Who is in charge of the job site, to ensure timelines are met and the Scope of Work is properly completed?

13. How do you handle dirty work such as debris disposal and clean up?

14. Would you be willing to receive four draw payments that would correspond to four phases of the rehab project?

15. Would you provide references, from past clients?

If the General Contractor that you are interviewing does not provide you their GC License, their Certificate of General Liability Insurance, and their Certificate of Workman's Compensation Insurance, this should be a Red Flag, for you telling you to move on to another GC.

If the General Contractor that you are interviewing does not give you specific answers, to the other questions, this should be a Red Flag, for you telling you to move on to another GC.

You should contact their Insurance Company and verify all Policy information such as, but not limited to the Policy Number, Coverage Limits, and the policies’ date of expiration. In addition, you should also visit your state’s Department Of Business And Professional Regulation and check the GC’s License that it is current and valid. You should also check, if any complaints, liens, lawsuits, etc. have been filed against their license. Vet! Vet! Vet!

@Account Closed

Wholesaling in many states is ILLEGAL unless there is intent to purchase, i.e. a Double Closing. For Florida I refer you to Florida Statues 475.42 and 475.43. Many other states have similar language.

Link: https://www.richardhornsby.com/crimes/regulatory/unlicensed-... 

I have been a Real Estate Investor, since 1998. Please feel free, to review my profile. 

@Ryan G.

You are looking, for recommendations and that is fine, but why just trust a referral and not do your own research?

I suggest that you interview, at least three General Contractors and ask the following questions. In addition, I strongly recommend that you verify all licenses and Insurance Policies.

1. How many homes have you rehabbed and/ or renovated? What was the magnitude, of your projects?

2. How many projects is your company currently undertaking?

3. Do you work with Investors that need to adhere to strict timelines and scope of work?

4. Do you have multiple Sub Contractors, for similar trade skills, such as plumbers, electricians, flooring crews, painters, etc.?

5. Would you provide a copy of your GC License, your Certificate of General Liability Insurance, and your Certificate of Workman's Compensation Insurance?

6. Are you bonded?

NOTE:

To be “bonded” means the Contractor must purchase a Surety Bond, which serves as a form of Insurance to protect the Contractor’s Customers if he or she fails to complete the job properly or fails to pay for permits, subcontractors, or other financial obligations.

7. Are all of your Sub Contractors Licensed and have Workman's Compensation Insurance? Would your Sub Contractors be willing to provide such information, or would you be willing to sign a waiver stating "All your Sub Contractors have Workman's Compensation Insurance?"

8. Do your Sub Contractors have the ability to verbally communicate, with English Language Only Speakers?

9. Do you pull all necessary permits?

10. Do you provide a written warranty, for all labor? If so, what is the length, of the warranty? (a minimum of 1 year)

11. Do you provide all applicable warranties, for materials?

12. Who is in charge of the job site, to ensure timelines are met and the Scope of Work is properly completed?

13. How do you handle dirty work such as debris disposal and clean up?

14. Would you be willing to receive four draw payments that would correspond to four phases of the rehab project?

15. Would you provide references, from past clients?

If the General Contractor that you are interviewing does not provide you their GC License, their Certificate of General Liability Insurance, and their Certificate of Workman's Compensation Insurance, this should be a Red Flag, for you telling you to move on to another GC.

If the General Contractor that you are interviewing does not give you specific answers, to the other questions, this should be a Red Flag, for you telling you to move on to another GC.

You should contact their Insurance Company and verify all Policy information such as, but not limited to the Policy Number, Coverage Limits, and the policies’ date of expiration. In addition, you should also visit your state’s Department Of Business And Professional Regulation and check the GC’s License that it is current and valid. You should also check, if any complaints, liens, lawsuits, etc. have been filed against their license. Vet! Vet! Vet!

@Robert Ok

Below are some things that you might want to consider between Single Family Residences (SFRs) and Multifamily Residences (MFRs).

SFRs

If you are using a Realtor, he/ she will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. If the property requires rehab, the Realtor and/ or Mortgage Broker will suggest applying, for a FHA 203k Loan. A FHA 203k Loan is where the purchase price and rehab costs are rolled into a single loan.

Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). There are downsides:

1. Because you have less than 20% down payment, you will have to pay Principal Mortgage Insurance which will add approximately $150 extra per month, to your Mortgage Payment.

2. If you loose your tenant, you yourself will be responsible, for all Property Expenses including having Marketing and Advertising Expenses.

3. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own that is in your Personal Name. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies.

4. You have no Asset Protection.

5. The above are just a few downsides.

You may be asking yourself what can I do? Locate a Motivated Seller that will consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.

MFRs

As with SFRs, assuming you have a respectable FICO you can buy, with a FHA Loan because these properties (2-4 units) are still classified Residential Properties. Everything mentioned above is also applicable to MFRs including seeking owners willing to consider Seller Financing. For Lender Financing, Commercial Properties are six plus units and have different Lending Terms, but allow you to close in a Corporate Entity.

ANALYZING MULTI FAMILY PROPERTIES

In your analysis, you should include Management Fees (10% of the Gross Income, Attorney Fees, and Advertising/ Marketing, to your list of expenses. In addition, you want to include Capital Reserves in your list of expenses. As a general rule, your Capital Reserves should be equal to 10%, of the Property's Fair Market Value (FMV). These Capital Reserves are to cover Capital Expenditures (Cap Ex) such as Major Roof Repairs or replacement, Major Electrical Repairs, Major Plumbing Repairs, or other Big Ticket Repairs.

You want to obtain the Rent Rolls, for the past 12 months; and at a minimum, the T12 (the last 12 months of Income and Expense). I prefer 24 months. Once you have this data, look for Red Flags such as Property Insurance missing, Property Taxes missing, Management Company Fees missing (if you know one is in place), etc.


Another thing that you want to do is, if there is a Management Company in place call them and try to ascertain if there is any Deferred Maintenance, the current state of the Property’s Condition, and what are the current rents being charged. Being able, to talk with the Property Manager will give you a good feel, for what is going on with the property.

A downside is if you close personally, you loose the certain advantages, of the Federal Tax Code, by not closing in the name of a Corporation Entity plus the downsides listed under the SFR Section above.

PMI

1. Mortgage Insurance known as Principle Mortgage Insurance (PMI) is required when the Loan To Value (LTV) is greater than 80%. In other words, if the property has 20% of equity or greater, one is not required to pay PMI. Having 20% or more of equity can be a combination of a down payment and buying the property below the property's value, or you putting a 20% down payment. However, if a FHA Loan is obtained, you will have to pay PMI, for the life that you have this loan.

2. Principle Mortgage Insurance only benefits a bank.

3. Principle Mortgage Insurance will increase you monthly Mortgage Payment approximately $150+ per month.

4. Interest paid, on a mortgage is the only thing that is tax deductible. Principle Mortgage Insurance is NOT Tax Deductible meaning Principle Mortgage Insurance cannot be used, as a legitimate Business Expense.


I hope the above information helps you, to confidently move forward.