Passive Real Estate Investing

[Jilliene H.]

Can anybody share how they are investing passively? Do you invest with a syndication or buy the property yourself and put a property manager in place?

[J Scott]

Originally posted by @George P.:

how do you set the terms? i dont have experience in that part of the business. i am used to mortgages from the banks with 25% down...

do you buy the house (cash) and mortgage to them? or they use your money along with other money to get a mortgage for themselves?

i am unclear on so many things when it comes to "lending"

It sounds like you're clear on how a regular bank mortgage/loan work:

The borrower goes to the bank, tells them he has a project and wants to borrow money for it. The bank tells the borrower what their terms are (interest rate, duration of loan, etc) and what percentage of the project they'll finance (with the borrower having to provide the rest). The bank will do some research on the borrower and the house (underwriting, appraisal, etc) and if the bank is comfortable, they'll approve the deal. When it's time to purchase the house, the bank will wire the loan money to the closing attorney (or title company), and the borrower will show up to the closing table with his down-payment, will sign a bunch of documents, and then the house is his. Of the documents the borrower signed at the closing table were a Promissory Note (the loan contract) and a Deed of Trust (the contract that ties the property to the note), so if the borrower doesn't pay, the bank can foreclose.

Now, read the paragraph above again, but this time, replace the word "borrower" with "rehabber" and replace the work "bank" with "George P."

That is essentially how it works. The main difference is when a rehabber wants to borrow more than the purchase price (money for the rehab, for example), and that needs to be sorted out. But, otherwise, you're pretty much just playing the bank in a rehab deal.

Does that make sense?