All Forum Posts by: Thomas Franklin

Howard Johnston Since you are interested in fix and flips, I propose the following action plan. 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. In addition, a breakdown of the number of SFRs, Townhouses, and Condos, with corresponding ADOM (Average Days On Market), and Median Sales Price, for each municipality. 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. You can identify the two highest retail price ranges, in greatest demand, per zip code where you can list the rehabbed property. 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.

Matthew Hudson 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.

Jason Brown How may we collaborate, to further both our REI Objectives and Goals?

Omar Gutierrez Yes, there are deals, to be found in Miami. If you feel there is a way we can collaborate and work together, please feel free to reach out and we can discuss.

William Salas What tangible Skill Sets do you bring to the table? Are you full time employed? If so how can this situation bring value, to an Experienced Investor? I am always seeking individuals, to add to my team, but such a scenario MUST be mutually beneficial.

Steven Fernandez What tangible Skill Sets do you bring to the table? Are you full time employed? If so how can this situation bring value, to an Experienced Investor? I am always seeking individuals, to add to my team, but such a scenario MUST be mutually beneficial.

@Corbin Wafford In my opinion, if you adhere my advice 20 years of REI Experience, you have three options. Seller Financing that I previously mentioned, having family members and/ or friends restructure their Retirement IRAs to Self Directed IRAs that will allow you to bring them aboard in a Joint Venture or as an Equity Partner. The third option is to find another individual that would be interested, in a Joint Venture or an Equity Partnership.

If you are soliciting funds, from friends or strangers, be certain that you are not violating SEC Rule 506 as well as your State's Securities Laws. Information which is designed or which can have the effect of arousing investor interest in a company, even if no actual mention of any securities being offered or sold is included, may in some instances be considered to be “general solicitation or advertising.” 

I hope the above information helps you, in making informed decisions regarding your REI Goals and Objectives.

Corbin Wafford I am not a fan of purchasing a Residential Multifamily Property known as "House Hacking." If you are looking to owner occupy, you may want to consider starting out, with buying a Duplex, TriPlex, or a Four Plex. Many Realtors 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). You live in one unit and let your tenants pay the mortgage and other property expenses. This will give you experience as both a Landlord and Property Manager. The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC. 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. 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. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC. One last downside, at least for me is if you are going to Self Manage. This will require you to become very familiar with Kentucky's Tenancy Laws, with respect to Lease Agreements, Tenant Notices, Eviction Proceedings, Kentucky's State Statues, the Fair Housing Act (Federal Law), etc. Do you know how to perform the necessary due diligence? Do you know what numbers to crunch, how to learn which markets are good Investment Areas and which may be questionable, etc.? If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years). This is what I am encountering, in the current Mortgage Industry. If you think you will go FHA, Conventional, FHA 203k, etc. and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days. These clauses are contained, in all Promissory Notes nowadays. Many Realtors and/ or Mortgage Brokers will not tell you this information. Many, but not ALL are only focused on the commissions he/ she will earn and not focused, on your best interests. 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.

Eddy Guernica Welcome to the community, of BiggerPockets! Be sure to check out the forums, the blogs, podcasts as well as other parts of this amazing website and like minded community. The people here have a vast amount of knowledge and are more than willing to share their experience and provide sound insight and advice. Do not hesitate, to post questions and bounce ideas around in applicable forums. I am local. I am a Rehabber as well as a Buy and Hold Investor. Please free to reach out, to me, if you feel I may be of assistance, to your Real Estate Endeavors. Much to your success!

Antoine Brown From the Realtor, you should request the following information: the Trailing 24 (the last 24 months of Actual Expenses as well as the last 24 months of Rent Rolls). DO NOT accept Pro Forma Data. You should also contact the Property's Management Company, to gain insight into whether there is Deferred Maintenance, the actual rents being paid, how the property has been managed in general as well as the age of the property, the age of the roof, the age of the major electrical system, the age of the major plumbing system, and other applicable major systems. With this information, you should call at least three Insurance Companies, to get quotes. When you crunch your numbers, you should include 10% of the Gross Monthly Income, as an expense, for Capital Expenditures. In addition, you should include 10% of the Gross Monthly Income, as an expense, for Property Management. Finally, whatever numbers you receive, from the Realtor, you should assume they are erroneous as the majority of Sellers fudge the numbers, to have the property appear it is performing better than it actually is.