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A new career, better lifestyle and less grief via more control.
This thread is for you and I, Blue, and anyone else who is interested.
I think the combination in the heading of this thread offers each of us much more than can be dreamed of. Collaboration, LLCs or Corps by some of us partnering, regardless of geography, income. etc. or going it alone. Either way, it seems to me to be a win/win situation if we use statistical info that’s available, conservative projections, and with minimum cash layouts or maximizing leverage.
Blue, you got me started. Funny, I got a nephew started in real estate about 10-15 years ago in a Chicago suburb. Today, at about 37 or 38 he owns a 12 unit apartment building with stores on frade leverl including a bar that’s making money for him hand over fist, plus a 3 flat and his own home, which he remodeled. His net worth is probably over 3/4 of a million. He keeps his job as the #1 Super of a very large blacktop company that specializes in commercial projects. Unionized of course in the Chicago area, which means about $100,00 per year with bonuses.
So why didn’t I take my own advice to him?
We should have done this years, maybe decades, ago when we ourselves were newbies in our industry.
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I like the way your thought process develops, Sonny. I’m glad Blue brought it up. Further discussions are in order from my view. This is a great education and you are never too old to learn or use you imagination. Count me in. (and if you make some tapes, consider this a preorder of 2 each for me.)
*Thanks, Montana. I'm sort of embarrassed because the "Rental housing/renovation as a business" thead also covers the ideas of mine. I should have just picked it up there.Anyway, my thought process goes like this:Except for a couple of people here, most of us here are busting our rear ends in only one career, and worse yet, a career that demands our attention on the job,supervision them, selling them or otherwise directly involved on a continual basis.OK, that being said, there is obviously potential for profits to be made in a passive manner. Being the yype of person who continually looks at other industries for ideas, I got to thinking about the potential that real estate investing offers, but better yet, by "non-resident" owners, be it a LLC, Sub- S or C-Corp. While someone or more may live in a geographical area where real estate (RE) is depressed and expected to stay depressed for the near term future, why should that preclude those people from investing in property where the opposite or more favorable conditions exist.As an example, say one of us lives in one of those favorable areas, finds a peice of property (house, villa apt. etc.) and has the time to do the investigating as to it's petential for profit, either a quick remodel and turn it over, or for continued profits via inflation or net income as in an apartment bldg. That person could be reinbursed for his time and perhaps mgt. of that property while others of us contribute to the monies needed to make the purchase. Certainly all of the pertinent info, photos, etc. could be diseminated to the other investors for their comments, thumbs up or down, etc. Sort of like a typical stock market "club."Money talks, and more money talks louder and gets the best deals and quicker. Personally I wouldn't mind directing some of my money into an arrangement such as this. BTW, this is exactly what some of the big boys do. Form a Corp, (sometimes strictly for one one particuar piecte of property) buy the property and in their case, since we're talking about millions in one piece, they then hire someone to manage it.Back in 1981 during my 1st move here, 5 of us got together and agreed to put in "X" amount of money each month to do that. We agreed to buy whatever any of us found that could make us a buck, whether it was a house, store, or 10,000 sq/ yds of carpet that could be picked up cheap and turned around quickly for a handsome profit. Sometimes a "buyer" was located before we even shelled out the money for the purchase.The percentage of money as the whole that was put in is the same percentage as that persons ROI. For example, one person contributes $2000 and the other 4 contribute $3000 each. That's $14,000 of which the guy who contributed $2000 gets 14.3% of the profit since his $2000 represents 14.3% of that total of $14,000. The other 4 people each get 21.4% accordingly.I like the ideas of passive profits - passive as much as it can be and is when compared to how we curently get our profits from our individual businesses.
*Sonny,A gentleman that I work with (we are both financial analysts for the same large company)does just what you are proposing. He has a small group of investors that pool their money (and talents) for REI. Some of their projects include a beautiful rehab of a victorian property in a prime neighborhood outside Boston. I believe the other people int he group are in the trades while my co-worker organizes, deals with the local politics & provides some financing (as well as a whole aresenal of tools).Their current project was to take a rather large building that once was a tenement of some sort with a bar in the basement and turn it into 12 long term/temporary housing. By that I mean more than 3 weeks less than a year. With the Big Dig going on in Boston plenty of construction workers are being put up in hotels long term. These units are basically studio apartments. They will be booked primarily by the workers management companies. Solid cash flow from what I've heard.The place was purchased cheap and then outfitted with plain vanilla appliances etc. Vinyl Siding commercial grade interiors etc.From what I have been told the group functions well. It should be run like a Corp. with a definate set of bylaws to work from. The first few projects they did were rehabed then sold. I believe this one is the first where they will have a continuing cash flow from the property.Just some thoughts.SJ
*Steve, thanks for you input. I met two guys here that buy homes in an area here called Park Shore - on or within a block or two of the Gulf of Mexico. The homes they buy were owned by senior citizens who didn't upgrade for many, many years. So they might buy a house for $600K, finance and supply all materials from H. Depot and only pay the monthy payment on it. Hire tradesmen to do the work.Give a realtor a rendering of what it will look like when done and generally, they have the house remodeled with a waiting buyer. From what I understand they pick up upwards of $50K within 3 months. Not a bad ROI on maybe $70-$80 grand laid out originally. Even it it took 6 months that's over 125% annualized.Another option, here anyway, is buying a condo or house (renovate it or not) and only rent it out during our season - November to May. Condos ($120K average) rent for about $1000 per week vs. houses for about $1500 or more per week. Then the investors can use it the rest of the time.
*SonnyMy Parents own a condo in FL right on the Gulf that they rent out for most of the year. They bought it furnished for $217k in 1999. We basically have repainted everything and brought it up to our standards. Some new furniture but mostly the original stuff. The FMV on it now is $330-365k and they rent it for $3500/mo in season. The mortgage is roughly $900/mo. The mgt company in the building takes 15% of the rent. They book, clean and handle the affairs while we are all 1000 miles away.....well worth the 15% in our mind. If you figure you book the six month season you take in roughly $18k in rentals after the 15%.Many of the units including this one were held by investors originally who did little more than collect the rentals and pay the mgt fee, assc. fee etc.Real estate holdings if done correctly can be a beautiful thing.What type of REI are you considering?SJ
*Not sure yet Steve. Have to check on what type and for what purpose. Will talk to a couple of realtors in our contractor's association and our CPA to see what type is typical here, and why.
*Whooooooooooaaaaa, boy, slow down!!!!Sonny, some of the things that your are suggesting is illegal, unless you have a securities license. Offering an investment opportunity to "partners" falls under the securities and exchange act. These are more commonly known as "Blue Sky Laws". Making an offer that crosses state lines, will probably yank your exemption. Doing too many deals will make you non-exempt. Partnering is a great concept and is done everyday. These partnerships are called syndications. A REIT is a large syndication (100 minimum parnters). Two people is a syndication. Most small deals, especially if they are in the same state, will be exempt.Hiding the risks of a deal will automatically make you the loser when the court looks at it...Better do some more research....blue
*SJ, they probably are operating an LLC, or quite possible a limited partnership. The LLC is governed by an operating agreement which spells out the management structure (either manager managed or member managed). The limited partnership is useful for passive investors. The general partner calls all the shots and has the power of attorney on all the limited partners. The liability is limited to the amount that the limited partners puts in. blue
*Sonny, I'm going to be entering the condo market as soon as I land in Florida. I like thos places that are built a block or two from the ocean too. It's fairly easy to get investor loans too. Although they require 25% down, it's probably quite possible to find 100% financing. In the worst case, a hard money lender will always be happy to help out. Usually their quite interested in helping someone rehab something to raise the fmv. The returns can be quite impressive.blue
*Sonny, I can attest to the passive income and tax advantages. As I mentioned in an earlier post I have been buying a house or duplex every few years for sixteen. My wife does the books, cleaning and shows the units while I do the rehab/repairs. We have both held mid level managment positions while building this little nest egg of a business. With 9 units that are on short term loans we save about 5k a year in taxes and have a little over 1k in income a month. Unlike the horror stories that you hear landlording, while not for everyone, is not as bad as you may think. We average less than a problem call a month and have only had 2 evictions in 16 years. We have had a few leave under adverse situations and a few that left the unit less than what we had hoped but never had someone take an ax to it or steal everything. Anyway, while I am content with my situation as it stands I would offer any information that I could provide as this is an area of success for me. Just my thoughts. DanT
*Thanks, Dan, I may pick your brain in the future. In Chicago I owned three buildings, 1 - 2 flat and 3 - 3 flats, so I got my feet wet for about 9 years.Just today someone told me of a club of sorts of different people who owned/own investment property -s ome for a quick turn over, some for long term and in between. I'm going to inquire more and maybe join it. Son Pete just completed his formal training so his real estate salesman license test is scheduled in about 2-3 weeks. Many of the opportunities here never reach the public since they are snapped up by realtors or their friends/family members. I'll see what happens.
*Dan, have you ever heard Mr Landlord? His "programs" are dynamite. Try mrlandlord.comHe uses "programs" to minimize problesm, and maximize profits. For instance, new tenants select one of three house "programs": Standard, Custom, or Deluxe. You can imagine the price difference for those three items. He says most sign up for custom at a tidy profit for him.YOu gotta track his stuff down and listen to it, especially since you already have tenants.blue
*A buddy is amazing at rentals...first building..5 units bought for 2000 after a fire...fixed it up with free carpet when a big complex left all their old carpet on the curb...ten grand to fix all...made over 1000 clear monthly for ten years...sold for 60,000. Did almost the same with 2 other places...He is now taking in 200k on a million dollar piece on the lake. Puts units everywhere...garages...cellars...attics...above garages...floating...and rules...fo get bout da rules...anyway....So many ways to go at this...aj
*I've had my eye on starting a club of sorts like this for several years. I've had my RE Sales license for years, and am currently studying for my RE Brokers license. To manage rental property you must be, or work under, a licensed broker (In NY state anyway).I've been approached by a couple who live 4hrs away that are looking to invest in a rental in my town. Once they buy something, it looks like I'll be manageing it for them. My goal is to manage my own properties, and other peoples properties, to be able to quit my "regular" job.Setting up an LLC among investors is an great idea. All involved would need to have a clear understanding of risk and potential involved, and a well crafted, written agreement. Things can get ugly if the rules aren't spelled out well ahead of time.
*Blue, I heard him speak at a REI group in Columbus Ohio a few years back. Also got ahold of a set of his tapes and books too. Too cheap to buy it myself but really enjoyed and learned from his info. Great speaker. Some of his stuff is tough to use in a small community like mine (36k) but some I have used and really have profited from it. His advertising techniques really helped. DanT
*Right AJ. There are numerous ways to make money in real estate. Too many to mention. The numbers that you mention aren't that uncommon. I got real interested when my b-i-l in Florida told me his cousin bought a small multi-unit on the ocean twenty some years ago and have lived off it ever since. They never worked since and never will have too. In fact, they are now rich because of the high prices that ocean front property gets.I'm moving my IRAs into RE.blue
*Dan, I loved his "New Home Buyers Assistance Program".And the "Referral Program".The "Assist me in any way to get a tenant in Program" is great too.blue
*There are a lot of different degrees to this strategy. I've been happy with the slow burn, live in it a while, rent it out for a while, get it paid for but continue to hold it. Good return, not too glamorous, just cash.I bought my first duplex at 24, lived in it 6 years and bought another, then another. First one was owner financed for 12 years. At 36 I suddenly had an extra $700 a month. Do that ten times. I've kept and rented every house I've lived in, moving up every time.We've got friends that liked to move a little more than us. They'd buy a distressed home in a good location and move in, warts and all. They'd spend about two years there, while remodeling kitchens and baths (everyone's hot buttons), good paint and wallpaper. They'd sell at a great profit, then move and do it again. My buddy was a fireman...24 on and 48 off, which was great hours for remod work.Again, owner financing is a great tool. Greg
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A new career, better lifestyle and less grief via more control.
This thread is for you and I, Blue, and anyone else who is interested.
I think the combination in the heading of this thread offers each of us much more than can be dreamed of. Collaboration, LLCs or Corps by some of us partnering, regardless of geography, income. etc. or going it alone. Either way, it seems to me to be a win/win situation if we use statistical info that's available, conservative projections, and with minimum cash layouts or maximizing leverage.
Blue, you got me started. Funny, I got a nephew started in real estate about 10-15 years ago in a Chicago suburb. Today, at about 37 or 38 he owns a 12 unit apartment building with stores on frade leverl including a bar that's making money for him hand over fist, plus a 3 flat and his own home, which he remodeled. His net worth is probably over 3/4 of a million. He keeps his job as the #1 Super of a very large blacktop company that specializes in commercial projects. Unionized of course in the Chicago area, which means about $100,00 per year with bonuses.
So why didn't I take my own advice to him?
We should have done this years, maybe decades, ago when we ourselves were newbies in our industry.