All Forum Posts by: Tom Meade

I guess you can always ask about legally permitted use...my comment about your relationship in the town is more about how informally you can ask the question and avoidance of tossing anyone under the bus.

I can't speak to local customs/regs in Utah, but in Mass you can go the building department and ask to see the building jacket - this shows you all bldg permits, violations etc. Depending on the town and your relationships, you can also ask them to verify how many units of occupancy the bldg is approved for. In MA, zoning is one thing, occupancy permits are another. A bldg May be zoned for up to 4 units of occupancy, but only be legally approved for 2 or 3. If you'll be using conventional financing, the bank will almost definitely require confirmation of legally permitted use.

@Steeve Breton

you need to *at least* double those numbers. I'm working on a two-family in Quincy. Its gutted to the studs and needs all new systems - plumbing, electricity, HVAC. I do have some structural framing, but my number is going to approach $80psf.

A partner of mine is working on converting an old brick building (multipurpose, was a school at one time, I think). I'll check with him this week about his numbers, but I wouldn't be surprised if you got near $100psf.

that's not an atypical set up at all. Money partner just puts up the cash, operating partner does the rehab at cost, split profit 50/50.

As someone mentioned, he could hypothetically go get hard money and not give up any of the upside. That was a GOOD answer he have you when he said he's doing the rehab at cost. Being new, you just have to make sure that's what actually happens, with no markups or kickbacks from subs etc.

I'm on my phone, but maybe @Patrick T. could link you back to the other thread that discusses JV partnerships.

if you're getting into that level of analysis (long term DCF or IRR calcs), then you definitely need to account for major capital items. Now if you are already including an annual deposit to the replacement deserves that you think will fully fund the needs over the term, then that's all you need. But if your analysis shows a shortfall in the reserves in years with big CapEx, then you definitely need to account for that additional cash needed in those years.

Hi Marta-

One way to approach it is to create an LLC with your investor, then use the operating agreement to spell out th duties and obligations of each partner. Good operating agreements cover most what you're concerned about - especially "capital calls" when additional funding is needed, as well as who has day-to-day control over the partnership, what constitutes a "major decision" (like to sell or not to sell) and how decisions are mDe in case of an impasse.

Shoot me an email and I can send you a sample operating agreement for an LLC as a starting point.

YES! I can definitely get attached to a deal, and work and re-work my numbers until I can find a way to make it look good on paper!

DON'T DO THAT!

Do your analysis, be conservative, have a minimum return threshold, and stick to it.

to answer part of the question narrowly - when you hear about people using their life insurance to invest in RE, I have to imagine that is people borrowing against the built-up cash value of whole life policies. You'd never really use life insurance as "vehicle" to invest in real estate, like you can with a Self Directed IRA.

I may be stating the blatantly obvious here, but you just never know.

Be really careful about taking generic advice when it comes to insurance and retirement savings. Stuff like that is very much dependent on your specific case. Seek advice from a financial advisor.

Full disclosure: My wife is a financial advisor, so I'm a bit biased.

However, to use one of her analogies, I wouldn't be searching the internet looking for advice on how to do a root canal on myself....leave that to the professionals.