All Forum Posts by: Brian Levredge

I'm about to get into this myself and have been networking hard which has lead to getting some future meetings set up with some private equity people. I am employing two different strategies.

The first is utilizing people's IRA accounts. A self directed IRA can act as a bank. You can structure the deal how you like as long as both parties are in agreement on the terms. I use a three to five year exit strategy of buy and hold for cash flow with an eventual sale. I buy well below market so that LTV, including repairs and closing costs, is in the neighborhood of 50%-60% which is a pretty safe risk. I try not to pay too much over market in terms of interest rates so that I have a good cash flow and then when I sell, I cut them in for a percentage on the back end. When annualized together it works out to about a 15% ROI for the debt holder.

The second strategy is to approach high net worth individuals who I find out about through my CPA or attorney or through friends who are in that field. They generally know or handle people with that kind of money. These are people who often invest in muni bonds because they are considered to be a safe haven. However, with the financial issues most municipalities and states are facing, they no longer are risk free. I sell against that because in essence, they would be investing in an asset that is worth twice the loan amount and I structure the return the same as the above scenario.

It really all depends on you and how aggressive you want to be and what type of terms you want to offer. I don't want to be too greedy and at the same time show the investor some success so they will be more comfortable going into bigger deals down the line.

Don't use the CC for the down payment. You will only end up hurting yourself even more in the end. You leave out some details as well. You mention you don't have the cash for the down payment. What is more important from the lenders standpoint if it's a conforming loan is if you have 6 months reserves in the bank for every property you own including your primary residence. Without that it really won't matter if you can come up with the down payment or not.

Assuming you do have reserves you may want to look into hard money, as was mentioned, especially if the property needs rehab. If you are buying far enough below market you can get into a property with very little out of your own pocket. There can be seasoning issues to contend with and hard money loans are for a pretty short period (6 months) and cost a fair amount in points and interest, so you want to make sure you can refinance out of it before you get into one.

Going that route will eat up a good chunk of equity because they charge a lot of fees between the two loans but it is a good strategy to use if you have limited finances. Just make sure you are getting the property well below market and do your homework.

It depends on how well you've maintained it the last few years. Have you been filing tax returns under the LLC? If you haven't, odds are it may have already been seized by the IRS or suspended by the State you registered it in. If that isn't the case, there are companies out there that maintain corporate compliance for businesses for a fee. They can go back several years and get you caught up with the required documentation you would need. Depending on how bad things are, this could run you up to a few grand though. If that is the case, it might just make more sense to set up a new LLC, especially if you are going to be paying cash for your investments. You can still have a corp compliance service maintain your paperwork for the first year for a fee. I did that and learned what needed to be done, which saved me the money of doing it the following year. And as mentioned, it is always wise to talk to an attorney before doing anything.

I've been thinking about doing this myself and in my research have come across the same answers. Some lenders are okay with it, others are not. Something to consider that wasn't mentioned is let the loan season for awhile in your own name. Once you have established a good payment history (12 months) then the lender would be more likely to be amenable to transfer to the LLC. You would still be responsible for the note however.

My wife and I were the coaching program for both real estate and business although we focused more on real estate (my decision). We had read a bunch of RK's books but never attended any seminars. Yes, it was expensive and no, there was no magic answer. For us, it was nice to have an outsider take a look at your situation. It opened our eyes to a world (opportunity) that we really hadn't seen before.

The bottom line in the whole thing was I learned some valuable things but mainly it was stuff I already knew to a degree. I did learn about identifying markets, which was great and took away a bit more info as well. Most importantly, it gave me the reassurance to take the first steps (I've since bought two rental properties) that I might not have taken as quickly otherwise.

You can absolutely get all the info they teach elsewhere if you know where to look for it but sometimes it's nice to get a kick in the right direction.

Originally posted by Dick Green:

Hi Brian,

Welcome to the site! I'm sure that the CA residential market will eventually correct. When, is the real question. How's the multi-family market in Long Beach?

There's some value in the 2-4 units but cash flow is still tight without a big down payment or 1031. We looked into some stuff locally when we first got into investing but there just isn't that much that makes sense. People have been investing for appreciation for so long that things probably need to come down another 30% or so for it to make sense again.

Originally posted by Justin Scarborough:

Welcome to BP. There is loads of helpful information on this site.

How long have you been a contractor?

Tennessee is a very nice place to live. Do you know what part of the state you would like to live in?

I've been a Contractor for 12 years. It's a fun business and I got into it to give me a baseline for RE. In TN, we are looking at either Chattanooga or Nashville. Our preference is Chattanooga but it's harder for my wife to find a job down that way. We'll see.

My name is Brian. I just joined the forum the other day after surfing the web and finding this site. I love the fact there are so many like minded people here and look forward to chatting and sharing ideas with others.

I'm a General Contractor looking to transition full time into REI. My wife and I currently own a couple of SFD's in Memphis. We are looking to expand on this as much as possible by utilizing private money and hope to be able to start knocking out 3 to 4 deals a month. Long term, we want to get into apartments and are not opposed to owning multiple properties in multiple markets as long as we have a good team in place first.

We are hoping to relocate to Tennessee in the not to distant future as CA has and is circling the drain. I look forward to talking to you and thanks for having me.