If you guys want to learn about FLIPPING check out Phil Pustejovsky video on youtube. He reveals a SECRET that makes so much sense its pure genius.................


PhilS videos do an investor a lot more good than Bigger Pockets vidoes. BPs vidoes more for inspiration. Phils gives tools you can actually use.

I've been getting into REI the last year with my focus on rental properties. I'm thinking about doing a flip with my uncle since he can do most/all the work. I will put up all of the money.

What is the standard way of splitting up profits?

Pay him as a contractor.

Exactly. Never partner with your contractor, as it's too difficult to fire him if he's not doing a good job on the renovations...which is more often than you probably would expect.

My girlfriend and I who is a realtor recently bought our first rental together and met a handyman who fixed the place up and now wants to do a flip with us. His proposal is we(my gf and I)buy the property and he buys the material and does all the labor. Once we sell the property we minus the amount we each put into it then split the profits 50/50.

He seems to be a smart good contracter after working with him on the rental. I like the deal because both sides assume financial risk... I guess I'm just looking for issues that could come up. Here's a few I've brainstormed

1. Proof of funds to purchase materials
2. Contract that requires all receipts of material purchased.

Also it seems to make more sense to buy properties with mother in law suites as you can rent them along with the main house and have a much better return... not sure why everyone doesnt do this... am i missing something?

Any input would be great! Thanks

That's a complicated transaction you're on the right path but $1000 for a lawyer to draft a contract is a good idea.

Bump for anyone new who may have questions...

And just to update my experience from the original post, my team and I have now done over 400 deals (everything from flips to rentals to new construction to multi-family to lending to notes, etc) and I do a good bit of national speaking on the topic...

And for any investors out there, I've also released a third book on negotiating for real estate investors: The Book on Negotiating Real Estate.

congrats on the continued success, Aces. I followed your website since the beginning and its cool seeing you continue to grow and evolve.

Thank you!!!

Quick update to the thread... For any investors out there looking for information on navigating the economic cycle with their investing strategies/tactics, I've released a fourth book:

https://www.amazon.com/Recession-Pro...dp/1947200399/

I think i'm gonna buy your book. I have always been interested in real estate. I live in an expensive area in northern Virginia - would you suggest I do my first rental property with a friend (who also knows how to do home improvement projets) to mitigate risk, or do it solo?

As a new investor, I would only recommend partnering if one of two things is true:

1. Your partner has something that you simply can't get anywhere else. For example, if your partner brings cash that you otherwise couldn't raise, or a set of skills that you can't simply hire for.

2. Your partner compliments all your skills. In other words, he is strong in all the places where you are weak, and together you have the "full package."

Too often, I see new investors partner with other new investors who have the exact same skillset as each other. Each partner is then giving up 50% of the returns, but essentially getting nothing in return, as they can both do the same tasks equally well.

This often ends with one or both partners resenting the other, as all the stuff neither of them are good at doesn't get done, and they blame each other.

Always remember -- a good partnership is one where the partners have opposite skills.

Thanks Aces, for keeping this thread alive.
I think you mean complementary skills...

Well, I like partner who both complement me, and compliment me!

Thanks for the correction...

Aces: glad to see the thread getting bumped.

1. How are you thinking about the next, say, 18 months vis a vis flips? Seems to me like there’s a lot of macro risk that the housing market takes a dive in the near to medium term. I’m in LV for context.

2. Have you done any NPN investing? Has that market become as competitive as the flip market? Are banks still bundling and selling these? Depending on the next stimulus I think we’re likely to see a lot of movement in the CRE and residential market but curious your thoughts.

3. I guess same as 1 but for npn’s.

4. Any other areas (particularly in RE but.. whatever) you think are worth thinking thru over next 12-18mo for someone w strong business sense and background, some dry powder, reasonable ability to raise, a decent stable of contractors, and 60ish hours a week worth of available time btwn me and an extremely talented (design and DIY), hard-working, and intuitive spouse?

About markets. Just listened to excellent podcast from a real estate data aggregator.

Talks about LV and other markets.

Episode 221.

https://cashflowconnections.com/podcast/

Thx tien will definitely have a listen

1. We're seeing a tremendously inefficient market right now -- buyers are out in droves, but sellers are still uneasy about listing their houses during the virus outbreak. So, we have high demand with low supply, pushing values up in many markets.

I think that for as long as the government keeps printing $$$ and people are concerned about the virus, we're going to see the real estate market propped up in most place. Once the $$$ dry up or supply returns (when people are less concerned about getting sick), we're going to see a softening in the market. I don't like to make predictions, but if I had to make a complete guess, I'd say it happens in Q4 or Q1 of next year.

We're also see trends of people moving from big cities to more suburban and royal areas. This is partly due to covid outbreaks in big cities, partly due to people realizing they want more space, and partly due to changing corporate economics allowing people to work remotely. Long story short, I wouldn't want to own real estate in places like New York or San Francisco right now; but I think places like Florida, Las Vegas and Texas will get a bump (or at least not experience as big of a downturn) thanks to this trend.

I actually think we're going to see a decent sized recession once things get back to normal.

As for my real estate strategy, while I'm still buying flips, I'm prepared to stop and sell off my inventory at the first sign of a softening. We're not doing any long-term flips (keeping everything to 3 months or less) and staying around the median price points and in good school districts. These things will insulate us a bit if/when the market turns.

We're still buying rentals, but being conservative in our underwriting (assuming higher vacancy and lower market rents in the near future). And we just put 152 unit apartment complex under contract in Houston that we're going to be syndicating.

2. We do buy some performing and non-performing notes, but prices have been astronomical the past 12 months or so. If/when the market turns, we're hoping to pick up some good note deals. Until then, we're mostly staying away.

3. See above.

4. I'm a big fan of businesses right now (we've started one and bought one in the past 6 months). In fact, here's something I posted on Facebook a little bit ago...

LISTEN UP, ENTREPRENEURS!!!

What 2008-2011 was for real estate investors, 2020-2023 will be for business entrepreneurs.

How many current real estate investors are kicking themselves because they didn’t take advantage of the collapse of the real estate market after the great recession?

How many people look back and think to themselves, “If I had to do it all again, I’d have made millions in real estate while everyone else was too scared to come off the sidelines.”

Well, over the next few months and years, there are going to be millions of small businesses closing shop for good. Many won’t come back after the current health crisis and lock-down. Others will try to recover, but will never gain their traction back. And hundreds of thousands of business owners will likely decide that now is a great time to retire and sell off their company.

All of this is going to leave a huge void in supply for many, many industries, and an opportunity for entrepreneurs who are looking to build or buy a small business.

So, FOR ANYONE LOOKING FOR OPPORTUNITY over the next few years, my suggestion is to start getting familiar with how small businesses are run, how to buy them, how to manage them, how to grow them, how to market them, etc. And then start putting together your plan.

My bet is that the next 12 months will provide business opportunity like we’ve never seen before, and that we’ll look back in 10 years and say that the 2020s was the best time to have started/bought/grown a small business in the history of this country.

Thanks for the reply. Not ignoring, digesting... I don’t disagree with you at all.

I'm looking for input on negotiating as a seller. I have a property, vacant land with much of the clearing and landscaping done for 5-10 homesites. I have the property listed and have an offer but the offer is ridiculous. I'm looking for input from anyone on how to proceed.


1. The offer is from a development company

2. I've briefly met the guy who owns the company when he showed up unexpectedly at the property, and I know he's very interested in the property

3. The offer is for 46% of asking price

4. The property is priced at the high end but it isn't over priced and can't be replaced for what I'm asking

5. Everyone knows the offer is stupid. My agent says the buyer knows the offer is a stupid lowball but they want me to counter



I don't want to counter because it feels like I'm bidding against myself at this point. I want to simply tell them no to the offer and tell them that if they want to make a realistic offer then I'll be willing to negotiate.

My agent thinks I need to make a good faith counter offer. This seems dumb to me and would just wind up with me possibly leaving money on the table. If I counter I want to counter with something like 1-2% below my asking price.

I know they want the property, I know they know their offer is dumb. How do I extract the most $ in this spot?

I'm usually on the buyer side, so looking forward to ace's take.

How long has it been on the market? Is it your first offer?

It's been on since March. 1st offer.

Eta:

The question isn't just for Ace. I just wasn't sure the best place to put it. I welcome input from all BFI.

Just counter at 95% of list price or more.

Good faith counter? This agent is weak. That wasn't a good faith offer.

You hit the nail on the head when you said:

"I don't want to counter because it feels like I'm bidding against myself at this point. I want to simply tell them no to the offer and tell them that if they want to make a realistic offer then I'll be willing to negotiate."

As I wrote in my negotiating book, by rejecting their offer, you are sending the message that you are refusing to even engage in a negotiation until they are willing to be reasonable and act in good faith. If you were to counter an unreasonable offer, you'd be sending the message that you are either desperate or that you can be taken advantage of -- two messages you should never send during a negotiation.

Now, that said, if you ARE desperate and really need the sale, a counter-offer is the best way to keep things moving forward. But, if you go that route, you should expect that you'll be giving up more than the buyer, simply because you engaged the original low-ball offer.

Btw, if you reject the buyer's offer and they don't come back to you, now may be a good time to lower your asking price just a bit (if that's something you had previously considered). If it's a publicly listed piece of property, the buyer will see that you've lowered your price -- you're essentially indicating a willingness to come down on price, again without actively engaging the buyer's low-ball offer.

Have you ever observed a seller taking a negotiation approach where they clearly state every offer they make is their best offer? Example:

1 - My best sale price is 100
2- I'll offer 90
1 - Reject 90 offer, My best sale price is now 110
2 - Offer 100
1 - Reject 100 offer, My best sale price is 110 (could go up again)

Every sale price 1 gives is his best price, even as it changes. Any abstract negotiation theory/analysis/practice relating to this approach or milder modifications of it?