Join venture scam?? Investing investors

[Helen Ramirez]

Hello BP community,

So I am new to this and I came across an investor who works on rehabs and also knows lendors. I met up with them (two individuals) who are partners. One guy does the financial and the other guy does everything else. They said they like to teach newbies the rope but of course they (newbies) has to put in the deal. I told him i have no capital but i do have good credit. They told me they work with helping getting funds and know a lot of people such as banks, hard money lenders so forth. He said with my credit i can get a loan out, i will be using some of it in the deal say i get $80,000, i will have to put say $15-20,000 down. they will be doing the rest. They told me they have the GC buyers and so forth. They said i can of course go to the bank with them and see what im approved with. They said the profit will be split 4 ways 25% each, 25% ONE GUY, 25% HIS PARTNER (Which i met as well) 25% myself and 25% back to the bank. My question is how can i know for sure i am not getting scammed? They showed me a HUD-1 sheet of what they closed on to explain how it works. To me they seem legit but you just never know. What is it to them to help someone new and not get a lot of profit? They did send over a Joint-venture agreement to look at. They haven't put pressure on me either.

[Barry H.]

HELEN - There are all different kinds of investors who pose as wholesalers - and they kinda are- if they can find the deals.  They are Bird-Dogging the deals just like you are, but UNLIKE you, they have no $$$.  That is a red flag (in my mind, since I am a Private Money Lender).  That said, I recently bought a condo from a woman who basically made an offer to buy the condo, had no money, no means, no nothin. In the end, she was just the Assignor of the deal (middleman, Bird-dogger, call it whatever).  She found the deal and got it into my hands as a Buyer and made like $8K for doing nothing.  

What you are describing sounds similar. The "construction" guy probably does have good rehab experience and the other guy is (presumably) a guy who knows his way around banks, finding HMLs (like me) when the deal is solid. They are offering a JV agreement and that shows some legitimacy. I am NOT endorsing their behavior or vouching for what they are doing in your situation - I am just saying there is believability in what they are "claiming" to be.

If you feel you have the ability to find deals, you don't need these people.  HMLs will fund 100% of your acquisition AND rehab costs - but it might be nice to have that construction guy around when it is time to rehab.  :-)    I guess if you feel these guys can help you find deals and you get pre-approved for conventional funding, that's a bonus.  Personally, I would never pay a "Finder's Fee" (aka the Financial guy in this Triad Partnership) a 25% share - maybe 5% max.  The Rehab guys is also not going to do the actual work for a 25% share (unless it is a really light rehab).  He is gonna want 25% on top of hard costs.  

In the end, if you work with this "team," you are gonna have to buy stuf at 30-40% of market in order to pay everyone their "cut."  If they can find that kinda stuff - more power to them.  In the end, you will learn how to find deals and work with banks or HMLs which fit your investment objectives.