All Forum Posts by: Jason F

When you say, "ballpark $20k in repairs". Does that mean that it needs those repairs or that is has those repairs that would indicate it's nicer than the other homes?

I was able to figure it out. The title company pretty much handle everything other than the deal points.

Pooled deals you would just treat as any other unless you are splitting them up. Then I think a Fee Agreement would take care of that.

I've heard differing opinions on this.

What happens when the property doesn't pull enough at auction? Do banks put deficency judgments on all the borrowers who's properties fail to bring in enough at auction? If it's a Foreclosure Judgment, doesn't that mean the ruling has already been made and the property is the item being sold to fulfill it.

Here in Florida it is usually some para-legal attending the auction for the attorney handling the foreclosure. If it's a institutional lender foreclosuring I would be willing to bet the person holding the file at the courthouse does not have permission to sell the property.

Now if the foreclosing party is a private lender, that might be the case.

Most of the brokers you run into that can do LOC are not always the best bet for RE investors.

These guys can get you a no doc business line of credit based on the assets you business owns, BUT the LOC will not be open for more than 3-5 years, then it is due. They are more for business that want to expand, rather than RE investors.

They will also still hit you with points (how the broker is paid) and if they are not on the front-end then you definitely aren't getting a loan longer than a couple of years.

The less collateral they have (LOCs) the more you pay.

So, if I have your 'method' correct, you must find a seller who is willing to sell at less than FMV and hold owner financing and be okay with you telling them that you are no longer buying but some guy with a 530 credit score is buying and they must be okay with seeing you make $40k at the closing table. And I'm sure you know they do see it because since you never hold any title you are never really present at the closing table so it's just the two parties looking at each other like "why do we need this guy?". And you must find a buyer before your contract runs up with the seller. Sounds like these are a lot of pieces that must come together, but if you can make it happen, more power to ya.

If your buyer brings their own financing it would be difficult because banks don't like names on the HUD that are not the seller or the buyer or the RE agent. I don't think they would be too happy loaning $40k to some line item on the HUD.

It sounds like what you do pretty similar to what a RE agent does.

As much as it probably brings down the neighborhood, it is kind of useless to try to impose this.

Think of how much money this law has cost the county tax-payers in discussions, board meetings, approvals, informing the citizens, enforcing and collecting the fines. I bet, when it's all said and one, it would equal about $400 per sagging pair of pants in the county.

Thats a good point. Private money would be much more straight forward and offer a little more security to the lender/partner. Regardless of the outcome of the investment, they are paid what they lent.

I guess on the flip-side, that would make the investment a little more riskier from your position. But, hey, that's leverage.

Yeah, I said no SEC regulation discussion because I've realized that most people have no idea about what the regulations mean, how/if/what they pertain to or even what the SEC does. Most people throw the acronym into the conversation and expect the dark cloud to surpass everything. It’s really pretty clear from their statues and history what is okay and not okay.

I have read quite a bit of the state and federal statues and it is pretty clear what the regulations are trying to prevent and trying to accomplish. You are correct, promising ‘10%’ return in a TV commercial is not okay. Selling ‘shares of a fund’ without being a licensed securities broker is not okay. Telling people you will invest their money for them and then pooling the money with other people is not okay. Advertising that the investment ‘risk free’ will also probably get you investigated if it turns out not to be true.

However, looking for equity partners on RE deals is perfectly okay. The key with these partnerships is to keep them exclusive, independent, and outlined fully from the beginning with both parties holding ownership. There's no need for me to collect money from Wheatie, Josh, Jim, Bill and then tell them I'm going to go buy properties. I would much rather present a deal to Wheatie, and if he is interested we sit down, establish and LLC and purchase it together. Everything is outlined from the beginning including CF splits, residual splits, expense responsibilities, mgt. duties, etc etc. If Wheatie's not interested then present the same to Josh.

That is more of what I’m thinking, finding people in my community that have money to invest and are interested in working together to pursue properties; rather than getting money from people and investing it.

While I've never read Cowgill, I understand that he advocates ‘private money'. Private money would take more of a debt approach rather than a partnership approach. While technically it is a little different that what I've explained above, I don't see why that wouldn't work also. There are plenty of people who would much rather make the loan than be a part of the partnership. It would probably be easier to leave the decision up to them. The similarity is that you are working with people on a more personal level and your funding source is localized rather than searching all over your state looking for a HML. I'm sure the rates might also be a little bit better.

Thanks for the input Wheatie, your responses are always very much appreciated.

Does anyone frequently utilize equity partners in their deals? Or have a group of passive investors that fund their deals?

Over the years I realize more and more that there are likely people in your community that have the cash to invest in properties but really have little to no idea about real estate or the time to search out deals and execute them. I can’t begin to count the number of times I have been talking to someone about what I do at a party and them telling me that they ‘are looking for properties to invest in’.

I have had a number of friends of friends, or parents of friends, that have the cash to invest in RE but don't have the time/know-how. Many times conversations with these people turn to the idea of me finding properties and them financing them, both of us splitting the profits.

I just wanted to see what the general consensus was on the idea of looking around for people that want to invest in real estate. Not really, ‘establishing a fund’ but simply going into deals with people in your area that have the cash but are struggling to find good investment vehicles. I’m thinking by doing a couple ads or mailing campaigns you would quickly find people interested in having their money managed for them in RE deals. (please no SEC regulation discussions)

Think about how much money is spent by investors on hard money loans, points, fees and then 13%+. Or how many deals/time is wasted trying to find a bank to lend you money at 10%? Don’t you think there might be someone in your city that would love the chance to lend money at that rate or even less? Or have the chance to get into a deal that will CF for them monthly, require no work and eventually land them a nice residual profit?

Honestly, think about where that hard money comes from anyways. It's most likely channeled from 2.5% savings accounts bank to bank to bank until it eventually ends up being marked up to RE investors by some HML. I saw an ad on TV the other night by HSBC Direct that was advertising 3.5% APY on a savings account. I'm sure people all over the country jumped on the phone and started moving funds out of their money market account. I know it's ‘secure', but 3.5%??

I really think the same would happen if you advertised terms similar to money you would pay a HML or a CF and profit share basis. It might cost just as much in the beginning, but once people realize that you will consistently generate a profit on your deals your cost of funds will decrease accordingly. With the amount of people that have expressed interest in investing in RE with me (and I'm not the sharpest tool in the shed), I am starting to think it might be the way to go. I don't know, it just seems like there are a lot of smart investors that are limited only by capital and there are a lot of smart savers that are limited only by their lack of RE knowledge. Why would they not want to find each other?

Any thoughts?