All Forum Posts by: Account Closed

Is that a CAR rule? Where does that come from?

As long as you are a principal (buyer or seller) in the transaction you can use any form you and the other principal agree on. I doubt you will ever change escrow's mind however. You could try another escrow office and see what they say. You don't even need a contract, escrow could (if they will) generate escrow instructions directly, both sign and move ahead. Lots of options.

Check out firsttuesday dot us, they have excellent forms...and they even let people with a license use them.

J Scott, I have a hard time doing division in my head except for the most simple, like 72/9=8, or 72/8=9, or 72/7.85 rounded to 72/8=9. If you use a calculator to do the division it's not that much more to use a calculator to do the exact formula. Having said that, I can see where the rule of 72 is easier even if you use a calculator.

Personally, I'm more of the philosophy that if you need a calculator, it's not a good deal.

Dion DePaoli, I agree with everything you said. I would just add that the formula for exact time to double is:

t = ln(2) / ln(1+i)

vs the rule of 72 formula:

t = 72 / (i*100)

where t = years to double, i = interest rate

For example, using the exact formula at 7.85% gives 9.17 years to double ( ln(2) / ln(1.0785) ).

As I'm writing this I'm thinking that since the rule of 72 was invented long before calculators, and since everybody has extremely easy access to a calculator, maybe it's time to forget about the rule of 72 and use the exact formula on your calculator ... most people would reach for their calculator to calculate the rule of 72 anyway.

I always enjoy your posts Dion.

The same loan at 7.2% (not 7.5%) will essentially double every 10 years.

The rule of 72 approximation works best at 8%, the approximation error grows as you move away (higher or lower) from 8%.

Even the worst investor can be successful in a rising market, loan to own is even less likely, not more likely. The reason there are so few hard money deals right now is because flip deals are so hard for investors to find, if fewer short term rehab deals then fewer hard money loans. Everything is being sold to owner occupied or buy and hold investors, neither of which are suitable for hard money, or should I say private money, as it now seems to be called.

I'll take you up on your invite for additional questions:

A 50/50 split I think is pretty common.

I'm assuming investor partner finds the deal and does ALL the work?

How would you structure holding, s-corp, llc, gp?

As talked about many times on this board, to achieve a partnership that avoids securities issues it's best to have all partners equal, if that's how you structure, how do you avoid deadlocks of opinion with partner?

Does money partner front closing, then parse out money as required for rehab and holding? Or does money partner fully fund a partnership bank account with 100% of what you refer to as 'all-in" money?

Taking, for example, your recent post about the $750k spread deal, would you consider that a 50/50 split with an investor(s) that put up all-in money?

I realize this can vary significantly, but could you elaborate on what you consider a fair split of the net proceeds? Also, would you recommend money partner record a mortgage to protect his interest and possibly provide some asset protection?

I was listening to a CPA speak at our local RE club the other day. She said the IRS can and is starting to demand a copy of your quickbooks file when audited.

Does anybody have any concerns about this?

Seems to me they could easily see stuff unrelated to the audit if you are not careful and try to make something out of it. They can see a complete audit trail (can not be turned off in later versions of QB) and easily conclude you were cooking the books when you were actually just fixing a mistake.

Strangely, you can still collect a commission and not have an agency relationship with anybody, but you do need a license. I have a broker's license and am able to collect a commission as a principal, I'm not sure how that would play out for a salesperson. I know other brokers that have done same, it's a well accepted practice.

Btw, because this somewhat relates to this thread, years ago, as a salesperson, I hung my license with a local broker. One day this broker calls and says I'm shutting down the business. I said why. He said I'm being sued because one of my salespeople failed to disclose significant information to a buyer and now they are suing. He was disposing of assets, the business was an asset. After that I pretty much decided to never have any salespeople under my license.

Another story. As a HML, I recently made a loan to a rehabber that was also a broker ... with a suspended license. After a long discussion it was clear he was a victim of one of his salespeople that originated a bad loan for a private lender and was being sued (brokers/salespeople are targets because the CA DRE will pay the judgement). He ran a fair size office and referred to his agents as a bunch of children, everybody was doing something to somebody and generally acting like a bunch of goofs, not to mention the legal challenges they created.

Maybe it's just CA, or maybe it's just me, but this whole concept of making you responsible for somebody else's actions rubs me the wrong way.

Oh well, enough rant.