Real Estate Professional · New York City, NY · Member since 2014 · 7 posts · 0 votes
Hi, I am considering a project in another state. I am asked to lend 80% of the total fund. The return will be 10% in 2-4 months.
It sounds tempting, but here are my concerns:
1. How do i know whether they use all the fund to improve the house? The worst case scenario is they buy the house with half the fund, and just walk away with the rest of the money. I will be left with the house which is only worth half the money. Can i control the risk by asking for itemized receipts before releasing the money from the escrow account?
2. I proposed if they can't sell the house in 12 months, i will take over the ownership. But is it legally allowed?
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
I think if you do not know for sure that your contacts in that city are on the up and up, you need to do more research. With my out of state investor flips, the investor BUYS the house through a title company and the rehab funds are sent to our construction company. Sending funds to an out of state company and not owning the property? Sounds like you could get scammed to me, maybe others on the board disagree?
I provide a bid that details the work to be done. Most investors don't ask for receipts but I have scanned 50 receipts before for a CA investor who wanted to see them.
My investors always take ownership of the house from the start. It seems a lot safer for the investor to me.