All Forum Posts by: Account Closed

So my dad and I co-own an LLC that we use to buy property. We don't have a ton of money to put down on a large multifamily but I have been thinking about this idea.

If we buy a $2M property at a 13% cap rate, which luckily is a possibility in our area, we would need $500k to put down. Say we bring in a 3rd partner to the LLC which is there to provide capital. We would offer him an 8% return on his money for 5 years.

Purchase Price: $2M
Cap Rate: 13%
NOI: $260,000

Bank Loan: $1,500,000
Annual Loan Amount: $108,000 (30-year @ 6% APR)

NOI - Annual Loan Amount = $152,000

Now time to repay the investor that provided the down payment money: He would bring $500k to the table and we would set up a loan to give him an 8% return for 5 years. This comes out to $10,140 a month ($121,680 a year)

$152,000 - $121,680 = $30,320

This would leave us with only $30,320 a year which would mostly be spent on extra maintenance.

We have time to spend to manage the property but we also work full time and this would be extra income so we wouldn’t mind making next to nothing off it for 5 years if after we own a $2M that brings us $152k a year. The five year wait would totally seem worth it once the investor is paid off. If bringing him in is the only way we could obtain the building it doesn’t seem so bad.

Those of you in California or something may not think this will work because of the high cap rate but 13% cap rates really do exist in our area, they are just a little tricky to find. They obviously aren’t listed so I would spend a lot of time digging one up.

I know on conventional residential loans the bank will give you a hard time for having another party provide the down payment but on a commercial deal where all three parties are members of the LLC that is obtaining the property I've hear it wouldn't be a problem.

Is this something that could work or am I missing something?

I have been thinking about getting licensed as a loan officer, not really for the career aspect but the knowledge and experience. If I plan to buy more rental property over the years and financing is always the biggest barrier I might as well take the time to learn as much as I can about it. It only takes a week or two to get licensed so I don't see why not. Plus, I plan on looking for some seller financing deals and I would gain more trust and look more credible if I was licensed for originating loans.

I have my RE license and a lot of RE brokerages are open to holding it even if you aren't going to be very active. Mortgage brokerages don't seem to be as lenient though. Do you guys have any advise on this or know if they would even consider holding my license?

Anyone else watching the news right now with the Boston bomber stuff? They are about to set off the controlled explosion in the kid's apartment. Since its a terrorist related incident I'm pretty sure that won't be covered under the building owner's insurance policy. He will have to go through a process to get reimbursed from the government which is never fun. If he doesn't have adequate reserves that could really put him under. Hopefully its really controlled.

You know you are addicted to real estate when this is what goes through your head haha

One of the harder parts of wholesaling that I dont see people talking about much is keeping track of the leads and knowing who to follow up with and when.

There are often times where someone calls in and you can tell they aren't a deal yet (maybe they aren't motivated enough to sell at the right price, maybe they don't want to sell quite yet, etc). How are you guys keeping track of them?

Do you keep an excel sheet where you type in each person, their situation and when to call?

I usually put a calendar reminder to go off in a month or so to call them but I think it's also very important to have a running list of all the possible future deals. How do you organize your list? And some leads are much warmer than others. Do you do anything to indicate that on your list?

Jerry Puckett Thats awesome info! Thank you so much! I drew this out in excel. Does this look right?

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How many per month do you send? And even more specifically, how many of those are to new people and how many are repeats?

Do you structure it like this?:

Month 1:
3,000 to Group 1

Month 2:
3,000 to Group 1 again
3,000 to Group 2

Month 3:
3,000 to Group 1 again
3,000 to Group 2 again
3,000 to group 3

etc., etc... Until 6 months when you drop off Group 1 and start on a new list.

Or am I way off? haha if so, how do you structure it?

He didn't really say much other than he just doesn't think direct mail is as great of a lead source as most people think since most people just throw it away.

He believes a lot in calling and talking to people that seem like they are in financial trouble. He actually hired me as a bird dog to do this since his time is mostly tied up in managing his properties.

I've been working with him for a few months now. I'm fairly limited on the amount of mailers I send out and I spend most of my time calling people. So far it hasn't been that successful. I've gotten two deals in the past 3.5 months. One for 5k and one for 9k.

He has small property management team for his buy & holds (around 170 units). I believe his property manager deals with all incoming calls but I'm not certain. From hearing him talk about it, he is pretty adamant on having someone answer right when they call instead of letting it go to an automated voicemail.

Here was his response:

"We sent a letter and it was by zip code to people 65 and older and who had lived in (or owned) their house for 20+ years."

I just e-mailed him asking what filters he used on his list and what was said on the postcard. I'll update you guys when I hear back.

To my knowledge, he gots some responses and calls off it but nothing ended up resulting in a deal. All were tire-kickers or people not motivated enough to sell at a wholesale price.