Anyone Invest/Develop Real Estate Here? (House Flippers) (1 Viewer)

[fantasycurse42]

Not really talking about developing for rentals or being a landlord, mainly finding properties that need to be gutted and completely redone.

In the context I am speaking of, I'm specifically talking about brownstones that range between $2-$3M and would need roughly $500-$750k of renovations.

I unfortunately cannot finance this on my own, so this is really where I am looking for any advice. I have the the proper contracting connections, the capabilities to locate and negotiate the properties and some free cash on hand, but not enough to tackle a project like this.

Lets say I gather 4 other investors and we all contribute $300k and form an LLC that has a total of $1.5MM in assets and high earning/solid credit individuals as partners.

With the money we have, plus credit, how do we go about financing? What are realistic LTV values we could obtain on our first endeavor? What type of rates would we be looking at? Also, who would be the lender? Even though we would be investing in a residential property, this would be a business venture by an LLC and I assume a residential lender is not the proper lender...

Not really looking for any shtick in here and I assume there are only a small handful on this board that can answer these questions. For those that have either been involved or have a thorough understanding, any information is highly appreciated.

 

[Quez]

It probably wouldn't be worth it to form an LLC to flip one property.

 

[shady inc]

go on shark tank

 

[Cjw_55106]

It probably wouldn't be worth it to form an LLC to flip one property.

Im sure the plan is to start with one.

 

[DocHolliday]

Too bad you can't start smaller.

 

[eoMMan]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

 

[Tiger Fan]

dot

 

[johnnycakes]

With the money we have, plus credit, how do we go about financing?

PM chet.

 

[nirad3]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

Agree 100%. The last thing I'd want to do is consort with others on real estate in this fashion. Recipe for disaster unless you'd have clearly-defined roles (ie, you manage rehab, you handle design, etc.)

If I had 300k to play with I'd just invest it myself and run the show soup to nuts.

 

[fantasycurse42]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

 

[avoiding injuries]

At least here, it's a saturated market. Everyone wants to flip houses, which drives up the cost of the fixer upper and eats into the profit. Money can still be made, but it's a lot less.

 

[Cjw_55106]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

 

[fantasycurse42]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

 

[Cjw_55106]

Yep, thats hideous.

 

[johnnycakes]

If you've never flipped a house before, why not start a little smaller? Less risk... roll a few of those and you might have enough to make the down payment on the big houses. Or roll a few and don't make a lot... maybe saved yourself a lot of grief taking on a big project?

 

[Bonfire]

If you've never flipped a house before, why not start a little smaller? Less risk... roll a few of those and you might have enough to make the down payment on the big houses. Or roll a few and don't make a lot... maybe saved yourself a lot of grief taking on a big project?

Because that wouldn't have quite the same 'Look at Me!' value this thread was designed for?

 

[humpback]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

And the reason all of the experienced, successful real estate guys have left this killer opportunity for a newbie is?

 

[Quez]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

And the reason all of the experienced, successful real estate guys have left this killer opportunity for a newbie is?

many of the flippers are flipping for foreign investors. If there was money to be made, then they would be buying these things up & doing it on a larger scale than just 1.

I'm sure you can turn a profit, but there has to be an enormous carrying cost on a place like that. You could have a bunch of unexpected delays too, like waiting on permits, getting up to new code, etc.

The way to make $$$ flipping houses is either do it on a large scale, or by yourself and live there.

Large scale operations can have construction crews on hand to work on all the properties. Then you can have an entire leasing operation, and manage properties for investors.

If you were really handy, you could make a nice profit rehabbing homes while you live in them.

 

[Buttonhook]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

And the reason all of the experienced, successful real estate guys have left this killer opportunity for a newbie is?

A significant price drop occurred just one day ago, and it's only been on the market for 70 days. It's a bit premature to assume those "successful real estate guys" are avoiding it.

 

[Buttonhook]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

Are you sure you can get the renovate the whole place for ~ $200/sf? That seems low for your area.

 

[ChiefD]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

And the reason all of the experienced, successful real estate guys have left this killer opportunity for a newbie is?

A significant price drop occurred just one day ago, and it's only been on the market for 70 days. It's a bit premature to assume those "successful real estate guys" are avoiding it.

If that house has been on the market for 70 days and it's a rehab, then there is an issue.

I used to flip houses for a living and got out right before the market turned bad before the recession. NO WAY I'm getting in with 3 other people.

 

[Bucky86]

Who would be cash flowing the repairs/remodel? Who is cash flowing the mortgage/insurance every month? Who is marketing this to sell? Are you splitting the realtor fees evenly? Is somebody going to have to personally guarantee a loan? What are you going to do if a house doesn't appraise for as much as you'd like andk you're at a net-loss? What if somebody can't afford to split an unforeseen expense?

This sounds like a ####### headache.

 

[fantasycurse42]

If you've never flipped a house before, why not start a little smaller? Less risk... roll a few of those and you might have enough to make the down payment on the big houses. Or roll a few and don't make a lot... maybe saved yourself a lot of grief taking on a big project?

Because that wouldn't have quite the same 'Look at Me!' value this thread was designed for?

Or searching for advice/info that isn't easy to find.

A good chunk of developers are born into money - Money tends to be a serious barrier to entry

I'll walk by this place in 2 months and there will be scaffolding all over the ####er, someone will make money, I'm trying to identify how it can be done.

 

[Bucky86]

But seriously, in my experience the house-flippers at this level are already big time players and have revolving lines of credit with a bank. Probably have plenty of investments with them, so a $10,000,000+ line of credit is nothing and they can use it to buy and fix up homes without touching their own money.

 

[Judge Smails]

When people start posting isn't that the sign that the optimal time to do it has passed? The real run was from 2007 until about 2012, correct? Lots more risk now?

 

[johnnycakes]

If you've never flipped a house before, why not start a little smaller? Less risk... roll a few of those and you might have enough to make the down payment on the big houses. Or roll a few and don't make a lot... maybe saved yourself a lot of grief taking on a big project?

Because that wouldn't have quite the same 'Look at Me!' value this thread was designed for?

Or searching for advice/info that isn't easy to find.

A good chunk of developers are born into money - Money tends to be a serious barrier to entry

I'll walk by this place in 2 months and there will be scaffolding all over the ####er, someone will make money, I'm trying to identify how it can be done.

Just put the money part of it aside... some GC who already has all his subs lined up will be making money on that rehab. You try to do it on your own and you're costs are going to be higher for every sub you hire just for starters.. then you have the scheduling hassles, of which there will be many, every one of them making the project more expensive. The guy who won't be making money on this is the guy who had a great idea but no resources - financial or trade connections - to see it through.

 

[Dan Lambskin]

 

[Cliff Clavin]

Do it

 

[bagger]

Not really talking about developing for rentals or being a landlord, mainly finding properties that need to be gutted and completely redone.

In the context I am speaking of, I'm specifically talking about brownstones that range between $2-$3M and would need roughly $500-$750k of renovations.

I unfortunately cannot finance this on my own, so this is really where I am looking for any advice. I have the the proper contracting connections, the capabilities to locate and negotiate the properties and some free cash on hand, but not enough to tackle a project like this.

Lets say I gather 4 other investors and we all contribute $300k and form an LLC that has a total of $1.5MM in assets and high earning/solid credit individuals as partners.

With the money we have, plus credit, how do we go about financing? What are realistic LTV values we could obtain on our first endeavor? What type of rates would we be looking at? Also, who would be the lender? Even though we would be investing in a residential property, this would be a business venture by an LLC and I assume a residential lender is not the proper lender...

Not really looking for any shtick in here and I assume there are only a small handful on this board that can answer these questions. For those that have either been involved or have a thorough understanding, any information is highly appreciated.

forming an LLC is easy to do.most non bank lenders in the space are in the 8%-12% range, depending on where you are looking to do this I can PM you some time referrals if it's more west coast in nature. Ltv probably around 65%.

You may be able to get a commercial loc from a traditional lender that uses the properties as assets on a borrowing base that you can draw from but you'll have to sign recourse (probably will regardless). Whoever is your bank you may want to roll into the branch and see what they can do.

You're going to need one of the partners who has significant experience in this niche. 4 random dudes with no experience won't even be approved by non bank lenders.

 

[humpback]

I would rather take the 300k and buy a supersmall property myself.

The hell with partners.

The areas I'm familiar with, this just isn't a reality unfortunately.

http://streeteasy.com/for-sale/nyc/area:306,305,321,322,328?sort_by=price_asc

Those houses need a half million dollars worth of work?

This is just every listing in those neighborhoods. You need to weed through them to find the gems.

For example:

http://streeteasy.com/building/45-2-place-brooklyn/house

This is an amazing block, great schools, and an awesome brownstone. It needs a total gut renovation, but here is what I see:

Big front yard, backyard, and side yard - these things are all rare in this neighborhood.

You get an offer accepted at $2.4M - $600k renovating the entire thing inside, outside, and yard. Turn it into two duplexes at $1,500 a foot (which for a fully done apt is market value) and you have $4.6M off of your $3-$3.3M invested.

And the reason all of the experienced, successful real estate guys have left this killer opportunity for a newbie is?

A significant price drop occurred just one day ago, and it's only been on the market for 70 days. It's a bit premature to assume those "successful real estate guys" are avoiding it.

Even at the inflated original asking price, according to his "math" there is ~$1MM in profit just sitting there. Either they are all fools for passing it up, or the guy who has never done it before in his life has made an error somewhere in his projections.

 

[fantasycurse42]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

 

[Bucky86]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

 

[Vanilla Guerrilla]

Lets say I gather 4 other investors and we all contribute $300k and form an LLC that has a total of $1.5MM in assets and high earning/solid credit individuals as partners.

With the money we have, plus credit, how do we go about financing? What are realistic LTV values we could obtain on our first endeavor? What type of rates would we be looking at? Also, who would be the lender? Even though we would be investing in a residential property, this would be a business venture by an LLC and I assume a residential lender is not the proper lender...

Not really looking for any shtick in here and I assume there are only a small handful on this board that can answer these questions. For those that have either been involved or have a thorough understanding, any information is highly appreciated.

If you have that kind of cash available for investment, do you have either a banker or investment guy that you work with and trust (as much as you can anyway)? Ask them what they can do for you and what kind of rates/terms. A large conservative bank might require you to have at least 40% equity and no idea what rates you'd get quoted as a new flipper, or what other covenants they'd require. I would think a smaller community bank that you have a relationship with that believes you're a fine upstanding citizen might be willing to work better with you. If you keep all your cash in a mattress and live off of the grid, it might be tougher.

 

[shady inc]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

or 1 phone call

 

[RUSF18]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

What falls under the typical inspection in this scenario?

 

[Bucky86]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

or 1 phone call

There goes my plan, jackass!!!

 

[johnnycakes]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

or 1 phone call

https://www.youtube.com/watch?v=26wrvblgGP0

 

[bagger]

http://streeteasy.com/building/115-willow-street-brooklyn/6c

Something like this is interesting. It is easily a $900k apartment for $500k.

Tenant in her mid 60's, rent stabilized, not leaving... You're getting a great deal, but her rent only covers the maintenance and you're responsible for the mortgage on a monthly basis, which will prob be in the $2k range.

Your hope, unfortunately is for this woman to die.

That could be 20 years of waiting...

yeah, op may want to run some irr models.No shtick, op would be better off taking his $300k and investing in one of the funds that lends to fix and flippers. 8-10% preferred return with upside while holding a fund of first trust deeds secured by real estate. Nothing to do but sit back and collect a check.

Probably equal or close to same returns he is looking at with less risk and less headache.

 

[fantasycurse42]

Like a REIT fund?

 

[bagger]

Like a REIT fund?

no, you can invest in a privately held fund that has a business model of lending capital out to fix and flippers. In essence you would be an investor in the lender. These lenders focus on preservation of capital more than maximizing yield but even so investors get a nice pref and overall yields probably around 10-12%.Usually money is locked up for one year; depends on the PPM.

 

[johnnycakes]

Like a REIT fund?

Bah. That'll only spread your risk around multiple properties. Much better to stack everything into one property so if that property is a big hit, it doesn't get eaten up by losses from other properties.

 

[Tiger Fan]

Like a REIT fund?

no, you can invest in a privately held fund that has a business model of lending capital out to fix and flippers. In essence you would be an investor in the lender. These lenders focus on preservation of capital more than maximizing yield but even so investors get a nice pref and overall yields probably around 10-12%.Usually money is locked up for one year; depends on the PPM.

What institutions typically provide these?

 

[eoMMan]

Just take that $300k and buy a nice house in FL.

 

[fantasycurse42]

So I'm meeting with an agent and a tenant in a rent stabilized unit. The unit is currently a gigantic ####hole (location, size, and building are a grand slam) - The apartment needs $100-$150k worth of work and it is easily $1.1-$1.2M on the open market. The owner is looking for around $500k for the apartment.

What I've done is locate a nicer apartment about 10 blocks away, with another owner who would put her in a stabilized lease that is $300 more per month than what she is currently paying. He wants $50k under the table to put her in the unit.

So the hard costs are:

$50k for new landlord to let her in a stabilized unit

$500k for the apartment

$150k renovations

??? What to offer this woman to move. Supposedly she is nuts, has a few cats, and isn't very reasonable. I'm at $700k in hard costs and a lot of room between here and market value, although there needs to be enough to make it worthwhile.

I'm thinking of offering to cover her new rent for 4 years (I'll start my offer at 2 years). 4 years would equal roughly $81k.

I figure on top of the $80k to her, I'll need another $10k for a RE lawyer and another $20k for closing and misc costs. This still leaves over $250k in profit or if I chose, I might just move into this apartment once completed and live there for a few years.

Currently a lot of moving pieces here and it is def a long shot.

Anyone have any experience with this stuff?

 

[ChiefD]

Paying money under the table in a real estate transaction is always a good deal. Go for it.

 

[RUSF18]

She's not moving out. If the woman would leave for $80K in rent being covered, the owner would have offered her $100K to move out a long time ago and instantly seen his/her property value go up.

 

[Cliff Clavin]

Do it

Winning plan here. No reason not to do it.

 

[fantasycurse42]

She's not moving out. If the woman would leave for $80K in rent being covered, the owner would have offered her $100K to move out a long time ago and instantly seen his/her property value go up.

She'd be moving into a nicer apartment that is also stabilized, free of charge for 4 years. I'm sure her main concern is having cheap rent, and I've checked that box off.

This is prob where the current owner is struggling. Finding these apartments isn't easy.

 

[eoMMan]

Wait...she's currently renting? Who currently owns it then?

 

[fantasycurse42]

Wait...she's currently renting? Who currently owns it then?

An owner, property records show he owns since the 80's, she is a rent stabilized tenant for about 25 years. The apartment is worth a #### ton less bc rent stabilized tenants are impossible to get rid of. So getting her into another rent stabilized unit is a large piece of the puzzle that I do have solved.