All Forum Posts by: Geo Gondzur

yes. The ROBS is the best entity to use for an active operating business. I use it to flip houses, do development and valu-add apartment complexes. Works great.

@Samantha Miller if you did rent out a room I'm quite sure your Lender wouldn't pursue it as a violation, assuming they're receiving their payments on time. To pursue it would cost money.

@Jay Hinrichs were you leveraged on SFR's or multi-family? It would seem that in a recession most people would have to revert to living cheaper, which would give the owners of apartment complexes a leg up. Although I'm not speaking from experience (I was in oil and gas in 2008), if your leverage had been in apartment complexes would you have had as many problems getting tenants to pay? If leverage is available, is it not less risky to do so for multifamily than for SFR's?

@Josh Calcanis A waterfall setup would work. You just need to program that into your company agreement. In my opinion, things can get a little complex in keeping tabs on your capital accounts when you're setup this way. Shouldn't hurt though.

@Josh Calcanis I think you should first decide with your investor as to how he or she would like to be involved. I always put it to my investors in the sense that they can be a "lender", therefore a "non-active" investor who is only entitled to an agreed upon percentage of interest on the their investment, or they become a "partner" and receive equity in my company. Investing as a lender comes with less risk for them carrying a note and possibly (if secured with a property) a deed of trust or mortgage (depending on your state). Every month just like a bank would, regardless of a profit or a loss, they receive they're agreed upon interest payments. That payment remains the same whether the company increases in value or not. As a partner with equity the risks are higher with payoff being greater if the company does well. With this option the investors get paid when I do. Interest doesn't usually apply to initial capital contributions. You could do it this way, but I would try to negotiate that you doing all the work, and them receiving 70% of the profit for a period of time is fair enough.  At most I would calculate what you need total for initial contributions and give your investor a note for half. Profits in their favor until it's paid off. 

Partnership is definitely not the way to go. They're easy to create but hard to get out of. With real estate, buy and hold specifically, you'll want to hold title in an LLC. I'd suggest using a series LLC. Consult an attorney in your state on how they work. Basically, if you're going to be buying multiple properties, you'll want to isolate each from the other assets in the company. The series LLC allows for this by placing a liability barrier between series Cell and assets therein. The series LLC also allows for different owners and profit sharing on each separate series cell. For instance, the main parent LLC may be owned by one person who has zero ownership interest in an individual series underneath it. This is accomplished by having a separate company agreement (with separate owners) for each series. The LLC holds the title, the company agreement delineates capital contributions and percentage of profit interest. You can take it a step further and attach a JV Agreement to the company agreement that lines out each party's duties with respect to each property. JV Agreements themselves do not constitute ownership. I'm not an attorney, but I wouldn't advise putting money into a property for anything without some form of ownership in return. JV Agreement by itself won't cut it.

Originally posted by @Todd Moriarty:

I see. I understand your explanation. But if I'm coming up with 25% down in the first place, then I wouldn't need seller financing. What I'm hearing from other investors is that they're only coming up with 10% down out of pocket and the seller is financing the remainder 15% via seller carry back. These investors talk about only having 10% max out of their pocket and getting awesome COC returns.

I would suggest looking for deals priced at 50%-60% ARV and that may need minor repairs. These houses can typically be acquired with ZERO money out of pocket using hard money (quickly), then refinanced long term at a lower (portfolio lender) interest rate. These loans will be low to no-doc and will be higher than conventional rates. There will most likely be a loan modification fee depending on your lenders guidelines. However, if all of this is factored into your analysis in the beginning (when negotiating a purchase price), you should have no problem acquiring and subsequently leasing out any investment property with neither money out of pocket or seller carry back. After repairing and adding value to the house, any appreciation value (equity) can then be extracted and used at your discretion. This is similar to a 203K loan, except that one is for the owner occupant and the other is for the investor. The surest way to reduce your cash out of pocket at closing is to lengthen the gap between your purchase price and ARV.

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