All Forum Posts by: Greg Scott

I know a long-time syndicator currently offering 10%.  I don't know if he is getting any traction.  I suspect he needs the cash to shore-up a problem property.  His note seemed to indicate it was an unsecured line of credit so I wouldn't touch that with a 10-foot pole.

The short answer is: everything is negotiable.  It will depend on the amount of security you are offering, the attractiveness of the interest rate, and your ability to raise cash, among other things.

Your first deal always seem scary, so people gravitate towards a partnership. It feels less scary to have someone on the journey with you.

However, a partnership can create more problems than it solves.  It is even worse given your situation.  How will it work if your partner wants to sell and you do not want to move?  Who pays the bill if the AC goes out on your unit?  Would it be the same answer if your partner felt the AC broke because you did not change the filter?

I could give example after example of potential areas of irritation between you and your partner.  If you can do the deal yourself safely, with reserves to cover unexpected issues, it is a lot cleaner.

Do you need to partner on the deal?  For me the best-case scenario would be to pay him some cash to assign the deal, and then you take it over 100%.

If you have no cash, then it becomes a question of who has the greatest position of strength. He has cash, but you have a VA loan and are willing to do that sort of deal. Hard to tell where the chips might fall. Everything is negotiable.

I had a long conversation with an attorney that sets up SDIRAs. In his opinion the best setup to minimize taxes was a checkbook LLC in an SDIRA. However, it was obvious that if you are any good at investing you often will pay more tax by investing in real estate through an SDIRA. (Roth's being an exception.)

CPA Tom Wheelwright has a chapter on this in his book Tax Free Wealth and agrees with what I just noted.

Your question has some built-in assumptions. 100% financing by itself is not necessarily a good or bad thing.

Many people pursue 100% financing because they don't have cash. That scenario definitely has more risk, mostly because the buyer has nothing to fall back on.  Lenders don't like borrowers without reserves.

Is it risky if the property cashflows well at 100% financing, in an appreciating area, and you have plenty of cash in the bank to cover any problems?  Probably not.  If you are in this situation and have a good relationship with a lender, you may be able to get financed 100%.

I got a $2M umbrella policy out of my homeowners policy.  That covered not only the liability from my property to me but also the liability from me to the properties.

The umbrella insurers want to be insurance of last resort so will have you beef up liability on your rent properties. They made me move mine to $500,000, so I had a total of $2.5M coverage.  Umbrella insurance is pretty cheap in the scheme of things

Warranty Deed - No

Quit Claim Deed - You could do this, but there are many good reasons not to do so. I've also heard some lawyers argue that having the deed in the LLC but the mortgage in your name pierces the corporate veil. If that were true, the LLC is invalidated.

You may want to explore better insurance first.

Hold an open house.  Make it a short window when you know several prospects will come.  Competition creates FoMO.

"If all projections are met" is the critical phrase.  What you can be 100% sure of is that projections will not be met.  Some will be over-achieved and some will be under-achieved.

I don't put much credence in the published returns.  To answer your question, 10% seems to be on the low end of what I typically see.  

In my experience, you can consistently generate outsized returns once you can gauge which syndications are stretching to show a high projected return.  Typically those don't have much chance of achieving their revenue growth or profit targets.  In contrast, I've been in deals that sandbagged on their projections and they start hitting proforma rents in month 1.  Those deals generate massive returns.

If you have only had one inquiry in 3 weeks, it is because you are asking for too much rent given the condition of the property or you have poor marketing.  Solve those and your property will get rented.

I've had many Section 8 residents.  Generally, I'm not a fan of the program for too many reasons to go into right now.