All Forum Posts by: Fredrick Hock

This question is about microlending.  As a first time lender, I wanted to ask other experienced private lenders: how do you structure your deals?

With debt financing: how do you determine your interest rate? Is equity financing an option, and if so how do you determine the ownership % you expect to receive in exchange for your money? How can I protect my interests (e.g. things to look out for, avoid, include in contracts, etc)?

My friend needs $50K to rehab his property. I am thinking of offering to lend him the capital. I am interested in investing in real estate, and figure this could be a way to get started. 

My friend is in a sticky situation, and I was wondering if anyone can offer any sound advice? What would you do in this situation?

Last year, my friend and her husband bought a new duplex using a mortgage (their plan was to house hack). They were a single income household as her husband worked a six-figure job while she stayed at home to care for their baby.

Fast forward to a year later, and they are now going through a messy divorce. The husband lost his job, got arrested, and is currently in police custody. Because of this, he is unable to make the mortgage payments.

My friend got a new job, which brings in enough income to cover her living and childcare expenses, however it is not enough to also cover the mortgage as well.

What options does my friend have when it comes to her mortgage payments?

Hello,

What do you think of investing in private companies via Debt Financing (or even Equity Financing)?

I am looking for buy-and-hold investments that produce cash flow (other than rental properties), as opposed to capital gains. That said, I'm considering investing in some private companies via Debt Financing because they would pay a quarterly distribution if all goes well.

I understand it can be risky (some of the private companies have a fraught history, with CEO's that were accused of fraud & bankruptcy; while other companies have a cleaner track record). The riskier companies offer a higher interest rate (17% - 18% annually for a 36 month bond), while the safer companies have a lower rate (6% for a 12 month bond, or 10% for an 18 month bond). Minimum investment is generally $5K - $10K.

I have never done this kind of investment before. What do you think of it? What questions would you ask the private companies before deciding to invest? Would you recommend this route, or would you rather invest in more established public companies that offer dividend stocks (even though the average return of 8.8% is slightly lower than private company bonds)?

@John Corey, thank you for insight. Perhaps I should clarify that I am okay putting in some work hours with my investments - e.g. if I have rental properties, I am okay working 5-10 hours each week to manage them. I would much rather do that than continue working 40+ each week hours in my current profession.

With that in mind, I currently work in the entertainment industry. Unfortunately many of the job requirements cannot be outsourced or redeployed as I have to be present in order to perform the job. In hindsight, perhaps this is not the best profession to be in when it comes to passive income (although I do receive "residual" checks for some productions... so there is some passive income involved).

At this point, it looks like my most feasible path to $5K/month passive income would be to scale a RE portfolio, and have some diversification in my investments as well.

@Bryan Blankenship, so true! I definitely like rentals for the relative stability & consistency of monthly cash flow.

I am already sold on real estate being a great investment, and was curious as to what other investments the BP community would recommend (to diversify my portfolio). I have been researching other investment options (outside of real estate) to see what else is available.

FOR EXAMPLE: I saw an ad for 'My Constant' (www.myconstant.com) P2P lending service that claimed at least a 10% ROI with secured returns for investors. According to their website - "if borrowers default, collateral is sold to refund the investor. If collateral falls in value, it is sold at a threshold. It's all automated by an unstoppable smart contract - investors will always get their principal and profit."

I will do more research into other investment options (outside of real estate) and diversify accordingly.

P.S. Another option I am considering is Real Estate Crowdfunding. I read an article by Financial Samurai, who gave positive reviews for Fundrise & RealtyMogul... however I also read discussions on the BP forum where people advised against crowdfunding.

Hello!

How would you recommend creating a passive income stream of at least $5K per month, in the shortest amount of time? What would your strategy be (and how much capital would be needed)? For example, would you recommend Buy-and-hold rentals, Crowdfunding (e.g. YieldStreet), Bonds, CD's, P2P Lending, etc?

I am a freelancer approaching my mid-30's, and am getting weary of trading my time for money (along with the uncertainty of freelancing). My current plan is to purchase rental properties, and wanted to see what other options are available to diversify my passive income stream & live a comfortable life as I get older.

What do you recommend?  Please HELP! 

@Jill F. and @Greg M., the state is Illinois.  

Honestly, I'm not sure how landlord friendly IL is, or if evictions are quick & painless (or if they are long & drawn out).  I will definitely bring this up with my attorney first thing in the morning though!

@James Niemeyer It is 2 tenants living in a 2BR/1BA apartment (so just one unit).  

It seems like they have lived together in previous locations (perhaps they are related, although their surnames are different from each other), however they both have records of eviction... so maybe this is something they do on the regular.

@Zachary Bellinghausen okay, thank you so much!!  I will bring these options up with my attorney.

Hello,

I just put a rental property under contract. It cash flows quite well, however it comes with 2 tenants who have a history of evictions (I just found this out today, after I had already put the property under contract). How would you handle the situation? I still have a few days to get out of contract via the Attorney Review Contingency.

The backstory...

The property cash flows quite well (about 12% with a property manager, or about 20% if I manage it myself), HOWEVER...

There are 2 existing tenants who will be coming with the property, and they both have a history of evictions. The tenants just moved into the property earlier this month (March 2019) & signed a lease to live in the property until next year (March 2020). This was already arranged by the seller by the time I had put the property under contract.

My attorney just did a search on the tenants today and told me "they both have been sued a couple of times for evictions. It looks like one of the suits was dismissed (probably because the landlord couldn’t serve them and they probably moved out), but a couple of the suits went all the way to judgment".

That said, how would you proceed? Would you get out of contract ASAP (via one of the contingencies)? Or would you still close on the property and somehow replace the tenants (if so, how?)?

Is there any way I can still buy the property & protect my interests? Especially considering that it cash flows decently?