Join venture scam?? Investing investors

Join venture scam?? Investing investors

Miami, FL · Member since 2017 · 5 posts · 0 votes

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.

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Investor · Scottsdale, AZ · Member since 2017 · 237 posts · 78 votes
9y

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.    

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  • Investor · Scottsdale, AZ · Member since 2017 · 237 posts · 78 votes
    9y

    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.    

  • Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y
    Helen Ramirez I'm not tracking. Out of the profit, 25% goes back to the bank? How does that work? The bank makes money on a mortgage but it's time-based not profit-based. Or maybe I'm just missing something...
  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y
    Helen Ramirez Banks don't take profits from flips... What they are doing is riding on the back of your credit and scamming you. If they are taking all your money and doing all the rest they aren't showing you the ropes. And if the deal goes sour you'll be on the hook with the loan you took out. Stay away from people who want money to show you something...
  • Miami, FL · Member since 2017 · 5 posts · 0 votes
    9y

    @Andrew Johnson I believe he means the amount that I used to to put in to invest? Lets say the $20,000. 

  • Miami, FL · Member since 2017 · 5 posts · 0 votes
    9y

    @Christopher Phillips Thank you for your response. What if i'm taking the loan from my own bank and keeping it myself and just giving them the $20,000 they said they're putting in the rest of the money as well for the closing etc... I am going to meet up with them again and ask more information such as receipts, who exactly are they.. etc..They claim they're teaching me the ropes for free just that im putting in the deal with them. 

  • Miami, FL · Member since 2017 · 5 posts · 0 votes
    9y

    @Barry H. Hey Barry thank you for that. Well what i meant by the finance guy was that he helps you out either by finding a hard money lender which he says he knows a lot of, and also other solutiions for funding which in my case i didnt have the capital but had the credit. Him and his partner will be putting in the house that they will rehab, so us 3 would be putting in to the house but they said theyll put up more of it since im new to this and are showing me. In the JV contract it says we will be doing 4 houses together and i can do 2 more if i like it. They said they have all the general contractors and lots of buyers they know since they do flips. I'm going to the bank with them to get approved with a bank which he said we can go to my bank that he knows someone in there as well. I'm just scared that this some how is a scam. I researched one of the guys and found him in a lot of investing websites to network and houses he has for sales that go back since 2010 maybe. As for the other guy i cant find nothing on him but then again all i have is his name. The one guy that i find has 2 LLCs. It's a scary thing to kmow i can mess up my credit and money by this.

  • Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Helen Ramirez

    They are taking advantage of you. Receipts and paperwork are meaningless.

    When they said they would accompany you to the bank to see what you're approved for that was a red flag to back away.

    That's not how deals work.

    If they are going to show you the ropes, they would take you to see active projects and walk you through the numbers and then guide you through the search for the next project. Your money would be in a partnership and split three ways.

    If you want to learn the ropes, learn the ropes by doing it. Not by giving your money to scammers in hopes that they show you something. You can very easily find other investors in your area that have done one or two flips and would love to partner with someone that can help fund the next project in a "partnership."

  • Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Helen Ramirez I'm with @Christopher Phillips in that you really, really, REALLY need to think about downside risk.  Your credit is at risk, the mortgage is your obligation, etc.  If the GC is getting 25% of the profit and paying for the renovations?  Maybe it's you put in $20K for the $80K property. GC does $20K in renovations and you sell for $140K.  Great, you've all made $5K (I think) on paper but after closing costs, carrying costs, etc. maybe you make a couple of thousand?  

    Here's your (specific issue) downside risk: you just said you don't have the money to do it yourself.  If this goes wrong and you're stuck mid-renovation 1.) can you afford the carrying costs? 2.) can you afford to come out of pocket to finish the renovation yourself?, and 3.) can you afford to sell the property at a loss?  I'm guessing the answer to all 3 is "no" so welcome to bankruptcy.  And, by the way, that's assuming it's not a scam and things just don't go quite as well as they look on paper.

  • Investor · San Jose, CA · Member since 2017 · 453 posts · 254 votes
    9y
    Helen Ramirez this does not sound right to me. First red flag is that you ha e to put money down. I would see if you could follow Ali g the deal and see if you can put hours in and not money and get no profit. That's how it seems it works with most people. The fact the bank gets 25% of the profit is a huge red flag for me. That makes no sense since they make money on the interest. I personally would walk away from this "opportunity" politely. Hope my input helps!
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    the investing world is littered with investor just as your self who have been wiped out on a project.

    I understand your new.. and all.. and most folks on BP asking for advice are.

    but this is a highly risky business.. the business of buying and flipping.

    you based on your questions are far to Green to really know what to look for or how to protect yourself.

    If you want to flip houses and your using your own cash and credit.

    then just buy it yourself... and hire a reputable GC... ( even this has risk ) but you don't need a buinch of mouths at the trough sucking up what little profit there is and potentially leading you down a very dark hole.

    @Christopher Phillips   Heed Chris advice on this one..

    6 months from now you will be posting a HELP I have been taken post...  :) 

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