All Forum Posts by: Brad Pickett

I learned about Gobundance through a couple of the podcasts on BP.  They also have a program for individuals with < 1 mil net worth called M1 or march to a million. I am considering joining at 300/ month. 

Here is why I want to join:

• You become part of a mastermind circle of which you can compare ideas and get feedback, etc from very high net worth individuals
• You can surround yourself with like minded people (hard to find in my rural area)
• They help you develop your goals and more importantly hold you accountable with weekly calls
• They also do bucket list adventures like heli skiing, mountaineering, and epic travel  

Has anyone had experience with this group.  It is a substantial investment, I would appreciate any feedback or advice.  

A couple of questions..

1.  When you refinance are you refying for the amount of acquisition and repair?  Or are you pulling out profits?

2.  Are the units equal in value?

3.  Who is putting the refinance on their credit?  

4.  What is your exit strategy, when (not if) one partner wants out?  

I would recommend that the partner that is taking out the loan be at at least 60% interest rather than splitting the units. You will also need your JV to have an exit clause, most likely giving the majority owner more power.

Another option would be that you refi and pay the non mortgaged partner e.g. 30-40% of equity based on the refi appraisal and just get him/or you out.  Often times it is better to split earlier than later especially if one partner is holding the mortgage.

So this came across my desk recently:

A motivated seller contacted me recently because I have expressed interest in her buildings in the past with a bulk sale of four building that run consecutively together.  These buildings are on the on the main road in town and less the 100' from the intersection with the other main road.  It is a prime location downtown in a small rural town of about 15,000 people and and area of about 60,000 people.  These 4 buildings she is offering are two story very old (circa 1930), brick and in somewhat disrepair.  One of them has been substantially redone while the other three are mid to strong exteriors and gutted or needs gutted interior.  Roof on the one is good while on the other three has been repaired but will require more work.  They are open retail bottom floor 3600' and chopped up or residential upstairs 3600'.

The building are 120'x30' and the issue in this area is no parking.  The four buildings combined sit on a modest 12,000 sqft lot.  Currently that entire lot is taken by the building with only alley access and frontage, parking only on frontage.  

Highest and best use may very well be to tear down 3-4 of them and throw a sign up "build to suit".  My PP is likely to be 240k and potential resale from the info I have so far (dependent on strategy) would be 250-320k.  I could tear down three and redo the TEN one bedroom apartments in the top of the 4th best condition building.  Or an investor could also figure up highest and best and just buy it.  The economy here is booming and we have a housing shortage with many new factories moving in. 

The seller is comfortable with me wholesaling and making money, doesn't really want terms at this time, even though all building are free and clear.  HERE IS THE KICKER one of the buildings is going through foreclosure with the seller being the note holder.  The current owner is a deadbeat and has little to no chance of getting caught back up.  

I would LIKE to be able to contract these four buildings somehow, maybe a PSA to include the 3 properties currently owned and the note of the fourth... , so that once the foreclosure runs its course I can have and end buyer identified (maybe me).  I know the general answer is you cant do anything until the foreclosure is over, BUT I have a feeling there is a LEGAL way to do this and the people on BP would be the ones to ask.   

Normally I would probably just let this one go but this is an area of town that drastically needs to be renovated and new business' brought in.  These type of situations are the reason I am in real estate, an opportunity to use creativity to solve problems, help the community, help the seller, and make money!

I am open to all comments and ideas.  What vehicle could I use to best create an interest in this property (ability to market) while this foreclosure finishes up?  Maybe just and option listing the three properties and the note?  A PSA?           

 I am sorry but this is really lame thing to say.  Many people invest in many different ways and for you to call the people that don't invest your way "poor people and poor investors" is just ignorant.  You may have a great model but that doesn't make it "right" and other people poor... Besides the original question was how much cash flow do you as an investor like to have, so obviously this post was not intended for you.

$200 minimum is what I look for.  

If you are new I would escrow.  There should not be any extra cost or very minimal costs.  I can tell you from experience that if you don't escrow that tax and insurance payments hit you at the worst times.  On my properties, the ones that are escrowed give me peace of mind because I know that's one less check I have to cut!!  

@Scott Rist

Hey Scott,

Is his name Tim S.? :)  Hopefully you were able to take some of them down.  We were having trouble making them pencil out.

I have this rental for sale owner carry.  

http://www.zillow.com/homedetails/2000-Sessions-St-Heyburn-ID-83336/104653383_zpid/

Generally in the REI world selling on contract would mean either Contract for Deed (AKA Land Contact depending on where you are from), or owner finance. There are many more that could fit in this general terminology also (subject 2, lease option, sandwich lease, option, etc), however contract for deed and owner finance are usually what people are referring to IMHO. Both of these have great benefits for the seller:

Contract for Deed:

• seller keeps deed (it is similar to buying a car, your equity position increases with more payments)
• in the event of default foreclosure CAN BE (isn't always) easier than a traditional sale
• Reduced closing cost
• reduced tax burden 
• buyer pays taxes insurance repairs maintenance etc
• close in a coffee shop :) (non-judicial states)
• You become the bank so you can make considerable amounts in interest over the term of contract 

Owner Carry:

• Everything is the same EXCEPT the deed transfers to buyer at closing.  So this is LESS advantageous to the seller and better for the buyer.

In both of these types of transactions I would recommend a long term escrow where as a title company or other non interested 3rd party handles all payments, interest calculations, and monies.  This way in the event of a dispute the payment histories will be clear and unbiased.

Hope this helps :)  

Just a thought:  Most lenders will require your down payment to be "seasoned" and not gifted from a seller, relative, or friend.  There are a lot of different lenders doing different things but a fannie mae loan will require this.  They are trying to avoid exactly what you are doing.  

 Interesting Joe, are you familiar with the SEC and their rules on commingling funds?  Here is a quick definition:

"In law, commingling is a breach of trust in which a fiduciary mixes funds that he holds in the care of a client with his own funds, making it difficult to determine which funds belong to the fiduciary and which belong to the client."

I am no expert by any means but I know that you can get in some serious trouble if you are doing that without a Private Placement Memorandum (PPM) or other SEC approved vehicle.  I don't doubt that you know what you're doing but just a heads up.