All Forum Posts by: Ann Bellamy

I agree that 50% of your 50% is too high. I agree with Jason D and Jim Stardust - a small residual or 2 points max is appropriate.

Welcome, Fabrice, and congratulations on your full time status in REI.

Mostly there is a WHOLE LOT OF LOVE here, but sometimes there is a little flaming too. Keeps things interesting, and real.

With all due respect to all the great lawyers I know, there are enough attorneys who do stuff like this just because they can. They have no legal costs to tie you up in court over it, and they know exactly how to do it.

The damage was caused by weather, not by your negligence. Two weeks is very timely. You are acting properly, so I'd push back and nicely explain that it's inconvenient for everyone, but in no way is it your fault. Just be prepared for him to push back even harder.

PS: one of my rules is that I never rent to attorneys. They are not a protected class and you can discriminate against them. :-)

$12K is not much to start with considering that you are not local. And if you don't have reserves on top of that, you can get in trouble.

Here are three possibilities

1. Buy tax liens online, but only if you find a contact in the area where you are buying to do the due diligence boots-on-the-ground.
2. Contact me for a teacher (Moderator: not an affliate, just a referral) who teaches you to buy at tax sales, usually 5K-25K all in. This is for cash flow only, the properties are unlikely to appreciate. But to do it effectively, you need to be boots on the ground again, so this is probably not your best option.
3. Find a hard money lender who will lend out your money as part of a fund.

It may or may not be expensive, but you really won't know until you get competing quotes. I work with an insurance agent who specializes in insurance for investors. His name is Tim Norris, and you can get a quote here: http://www.nreinsurance.com/wp/request-a-proposal/
(Note to Jon, this is not an affiliate link)

You should also get a third quote, probably from a local independent, since rates vary considerably by location.

James, I'm not sure, but I think you should create a new post for your question so as to not hijack this post. I'm not the rules police, I make mistakes regularly, but I think it's forum etiquette.

Philip, Jon is right when he emphasizes local lenders. In my discussions with lenders around the US, I find that rates vary by location, as do customs and practices. Local laws will also dictate some of these differences.

Don't assume 10 points. I do know a hard money guy who charges 18% interest and 10 points, but he does the deals that most hard money people won't. Which is to say that he takes on the riskiest projects.

Factors that influence your ability to get a hard money loan include the following, not in any particular order:
1. Your experience level, not just with the construction, but with the ability to acquire at the right price, evaluate the end selling price and to price it to sell quickly.
2. The LTV relative to after repaired value
3. The amount of skin in the game (this can be cash or cross collateralization)
4. The location of the property
5. And sad, but sometimes true: The degree to which the lender would like to own the property if you default.

This last point is not always the case, but you should be aware of it. Most lenders do not "loan to own" but some do, and some deals by their nature attract that sort of lending.

Ask around at your local REIA and ask other investors in your area. You will find the people who have good reputations and who conduct business in an ethical and transparent manner. Always ask about "back end fees" because some lenders will tack on fees and points due at payoff, and you don't find out about them until you are sitting at the closing table.

If a lender is not clear about costs and fees upfront, find someone else.

For your first deal you will find yourself paying more for your inexperience, but over time you will find more lenders and will have more negotiating power. But don't be so fee-conscious that you ignore the relationship. More and more, hard money and private lenders are valuing the relationship with their borrowers who deliver, and you should value the relationship with the lenders you can depend on.

Hope this is helpful.

I started a REIA in the Boston Area, which very quickly became the largest in Eastern Massachusetts, and from feedback from our members, they wanted:
1. plenty of people to network with (size)
2. current topics, with an emphasis on local topics
3. Not too many selling speakers, but if we had them they had better have quality information

So I think you should start with REIA's in your immediate area and visit them during monthly meetings. It's not too expensive to attend a meeting as a non-member. Then when you are there, ask the attendees about which REIA's are the best. Believe me, people are very vocal about their feelings. Your best source of information is referrals.

if there is a membership that includes multiple groups, that is usually your best value, because then you can pick and choose your topic.

Everything Jon says is spot on, so I won't rehash the numbers.

Definitely condense your proposal - bullet points would work. I didn't read past paragraph 2, and no one else will either, as Jon says.

One of the major requirements of the SAFE act that is largely ignore is that ALL lenders be licensed if they make even 1 residential loan. No longer are private lenders allowed to make a few residential loans per year without licensing. Licensing is expensitve and restrictive. And many states are on witch hunts. So private lenders in general have avoided residential loans. In NH, I haven't been able to find even 1 licensed private lender. In MA, I have found 1. I don't do residential lending, but I like to be able to refer people like yourself to someone that can help them.

Now, part of the reason that private lenders have avoided residential is the degree of uncertainty regarding compliance with the new laws. As states refine and clarify their positions, this uncertainty will go away, and there will be more private residential lending within each state's laws.

Some attorneys advise that a lender can make a residential loan if they use the services of a licensed originator or broker, but many lenders feel it's no longer worth the hassle.

By the way, these restrictions apply to owner financing - investors are now regulated when they sell their own properties to homeowners with seller financing. Unless the investor lived in the property. Again, states are beginning to revise these laws,but there is lots of conflicting information out there.

So the above is going to make your task even harder.

So condense your proposal, and then start making calls to ask for a licensed private lender. If you can find a mortgage broker (broker numbers has been reduced by up to 90% in some states) you might find one that has a licensed private lender, or he might have a lender willing to lend with the broker handling the appropriate paperwork.

Good luck, you definitely have an uphill climb. You also don't provide your state, that would be helpful.

PS - "throwing the idea out to see if anyone is interested" is doomed to failure. Business people want concrete proposals: specific and brief.

Tim, there are many lists of REIA's: Try nationalreia.com,[REMOVED]. Try meetup.com.

Then, if you still can't find one close to you, go to the one closest to you, show up early, and network with people to ask if they know of a group nearer to you.

The problem with being mentored by a real estate agent who is investor friendly, is that they have a tendancy to convince you that a property will be worth more when finished than it really is, because their motivation is to get you to buy it in the first place. They also probably have a stable of experienced investors just waiting for pocket deals. This is not always the case, but frequently is.

Do NOT pay the big money for courses from Whitney, Trump, Kiyosaki, Allen, etc. You may or may not get good information, but it won't be local and is guaranteed to be overpriced. I used to run a REIA in Boston and am very familiar with the guru business model.

First, read all the books you can get your hands on. Go to as many free or low priced meetings as you can. Sometimes you can get courses from lending libraries at the larger REIA's (you'll have to drive). Read online including old posts and blogs. Get free ebooks.

Then, if you find an experienced investor not too far from you, first make sure he is what he says he is. There are plenty of scammers hanging out at REIA's - I've banned a few from my REIA but you can't always tell right away. Ask around for references. Once you have struck up a relationship with someone experienced who you trust, offer to work for free. Be open with him about what your intentions are, that you are trying to learn to do deals for yourself. But that doesn't mean he might not be willing to help in exchange for your labor. If that doesn't work, you may have to pay him. But don't be in a hurry to do that.

I had someone offer to work for free for me, and I was very open about giving them as much information as possible. So about half of their time was spent on doing work for me that I didn't want to do myself (grunt work), and the other half they spent learning and listening. I wish I had another person like that, and would happily take one on.

A week is too short a time to be looking to pay someone. Take the free options first. And take your time in finding reputable people.

I think the answer hinges on what they could get for the condos if converted, so it's pretty difficult to advise without having some idea of that potential value.

But I would definitely buy out the family member who wants out. Get an appraisal, and pay him 1/5 of the appraised value less the real estate commission.

Also, if market management fees are 8-10%, then it would reduce friction between the partners if they reduced their fee to market rate. Certainly it would be seen as unfairly siphoning off funds.

If they are that confident of their ability to convert to condos and resell, then once they have bought out the one partner, they will have 2/5 of the project and in a great position to capitalize on their experience.