All Forum Posts by: Don Konipol

Hello everyone,

I was wondering how you all handle day-to-day tax or legal questions that come up in your real estate and business activities. Hiring a full-time CPA, tax strategist, or attorney can be quite expensive, so I’m exploring cost-effective alternatives.

I've heard that some investors subscribe to services like LegalZoom or Rocket Lawyer, but I’m curious—are these actually useful for real estate legal and tax strategy questions? Or do you have other recommendations?

Thanks

Is there a place to find Private Investors as in one person? If so, where?

Any of these real estate apps? 

In the past we dealt with one guy, we paid a little higher interest but the ease was great. 

Looking at 50% LTV currently.

Hi Community,

I have been thinking of some creative financing ideas and this one has been intrigued. Would it be legal to wholesale a family members home (est. 1M), and receive a fee for the wholesale services? 

Theoretically, I should be able to collect the funds from the deal, should my family member decide to go through with the deal. And they will get their payment from the buyer.  

I never said evil, but you can exaggerate and say that. I can say without a doubt that you've had your hands in the cookie jar on some partnerships that would be deemed as predatory, too. And because of that, you're putting a disclaimer before analyzing Shiloh's deal just to make sure the crumbs don't appear.

For the most part, you agree Shiloh's deal isn't that great. And it could fit a unique investor. And I agree, an investor that does zero diligence, doesn't value capital, and wants to find a structure that's RE related but not REITs, the debt behind it, syndications, etc. This could be perfect for them.

I still fail how to see it defeats the options that I provided, or leans towards a better passive model or even a "partnership".

I think the best suggestion in this thread is actually from @Josh Young where @Shiloh Lundahl should seek debt partners. Now that's a way to go. Secure the debt by real estate, now we're talking a great partnership deal. That way someone can have "passive" exposure through the debt, yet still have RE exposure in some form or fashion. Giving up 50% equity on a value add in today's environment is just too much to give up without a significantly better return that's not offered through almost any other asset class. 

I've owned a property for four years with a standard fixed-rate mortgage, and now I'm looking to convert it into a rental. My goal is to transfer both the deed and the mortgage to an LLC. My main concern is how to avoid activating the due-on-sale clause when transferring the deed. I'd like to keep the current fixed-rate mortgage in place and, if possible, have the debt transferred to the LLC as well. Any advice on how to navigate this?

I’d appreciate any feedback from those who can offer advice, but I’m also curious about what specific type of attorney or local resource I should reach out to for guidance.

I’ve seen references to the Garn-St. Germain Act and using a trust for subject-to approaches that may work for this kind of transfer, but I’m not sure it totally applies to my situation.

Good luck, wholesalers are the least likely to follow do not call list/related legislation. Most also work off of call lists that are incredibly outdated, so anything you do today likely won't have an impact for a while....I received a call from an idiot on Tuesday wanting to know if I would sell a piece of land. It's land where I built condos and obtained a C/O March 2022. Told them to do a drive by and call me back with an offer :)

I'd love to get some feedback and hear your thoughts on the investing model that I am planning on ramping up this year.

Let me give you some background for context and to help you understand why I am moving in this direction with investing this year. 

I have been investing in real estate for the past 15 years but more actively for the past 10 years. People started to ask me to help them learn how to invest so I started coaching new investors over the past 7 years on how to start investing in real estate. I would charge them $5,000 with the ability for them to earn back $2,500 and I'd have a call with them every other week to guide them on how to find deals and money lenders and how to get the properties fixed up and get them refinanced, etc. About 90% of my coaching students bought properties and increased their net worth on average of $100,000 the year we worked together. A mentor of mine told me that I was charging too little for the amount of value I was providing. So I increased my rate to $10,000 with the ability of my coaching students to earn back $5,000 if they completed their homework in betweeen coaching sessions that was geared towards helping them meet their real estate goals. The results of my students were about the same and they would create about $100,000 of increased net worth during the coaching program. My mentor told me I was still charging too low for the value I was providing. 

Towards the end of last year, one of my buddies contacted me and told me his accountant told him that he needed to buy some real estate to lower his tax bill. I shared with him some ideas on how to buy undervalued real estate and he basically told me that he would rather just partner with me and provide the money and have me find and manage the investment and then split the profits.  So I found and purchased 3 undervalued properties from wholesalers and we are just finishing up the 3rd one. Each property is estimated to create about $70,000 of profit over the next 3 years.  He has deposited $100,000 into the business account. That covers the down payment for the purchase, the rehab, and the $18,000 for reserves for the account, and $5,000 for me for each property for the time and work involved. That $5,000 is part of my portion of the 50% of the profits and will be deducted from my payout when the property is sold. 

The property will be rented out on a 3-year lease option and will be either sold to the tenant buyer or sold on the market if the tenant decides not to exercise the option.  

The money partner on these deals will bring in about $35,000 to $50,000 for each deal and the expected IRR is around 25%-35% each year for the 3 year period essentially doubling their money in 3-4 years.

So rather than focusing on picking up a couple of coaching clients this year, I think I am just going to focus on finding money partners to buy deals with.  I already have the knowledge, experience, and systems in place to do about 20 properties this year. So I think I am going to  shift my focus away from coaching and more towards partnering.

I'd love to get hear some of your thoughts and get some of your feedback. 

It works just fine if the operator knows what theyre doing and structures it correctly. In the example you outlined and in the case of what a lot of people are doing right now (super high LTV underlying, negative equity on wrap, 100% financing for the buyer, low note rate, etc), then no, this wont work, primarily because whomever created the wrap note is either an idiot or a fraud.

@Tracy Z. Rewey: So, if someone takes over a $375,000 mortgage using SubTo on a property worth $400,000 and turns around and sells the property for $405,000 on a Wrap mortgage with a Note of $405,000 (full value) to someone else, he now has paper, not a house. 

Let's say things go wrong down the road, any profit from the Wrap has been spent of course, the DOS gets called. How much can he sell the Wrap mortgage for to an investor?

What is the discount on the Note and how much are closing costs?

Wouldn't the Note would have to sell for nearly 100% to cover the Due On Sale? How likely is that?

@Don Konipol Any thoughts?

@Chris Seveney: Is that a note you would buy?

@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.

The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.