All Forum Posts by: Jeff Greenberg

Kevin,

Make sure that you are aware of SEC regulations on a general solicitation. If you do not have a significant previous relationship with these investors you will loose the Reg D exemption, I assume you plan on working under. If this information is totally foreign to you, I suggest you google reg D and the definition of a security.

Just hoping to keep you out of jail.

Jeff

Edita, cap rates are not usually used with sfh. They are valued with comps.

Bring in a partner with a net worth equal or higher than the loan and liquity around 10% of the loan. That should help you get a better LTV 70-80%. They will need to sign on the loan and it will be a recourse loan. These requirements vary with lenders.

I give a great deal of praise to those that are able to invest in SFH beyond driving distance. Either you are spending a large chunk of your profit on management and/or one bad tenant or vacancy can eat up all of your profit plus some.

I feel much more comfortable with medium to large MF properties that can afford professional management. That is not to say that the PM doesn't need to be watched, but a few vacancies are not going to put you in the red.

If you have limited time, then here are a few suggestions.

1. Partner up with someone that has the time, but may not have the money.

2. Loan out your money to an HML.

3. Invest in notes, tax liens.

4. Invest in a syndicated investment of a large property.

How ever you invest, check them out make sure that they have experience and can be trusted.

If you are happy with a $250/month return on a 90K investment, you can do much better with any of the with fewer headaches.

You must do your due diligence.

I have read many of the mentioned books. Add this to the list. There is a lot newbies and oldbies can learn from some very creative people.
Trump Strategies for Real Estate: Billionaire Lessons for the Small Investor by George Ross

BP is a great place to start.

Sale of shares or units in an LLC as previously described is considered sale of a security. You can sell your security without a license, but don't sell someone else's security. Your investors can sell their shares after a one year hold, but within the PPM it states that there may not be a market.

You do need to have a significant pre-existing relationship with the investors before you discuss an investment opportunity. Even with friends and relatives you need to know that they are suitable for the investment being offered. Using Uncle Bob's 100,000 life savings on a high risk investment would not be viewed favorable by the SEC if the deal goes bad.

Steven Hamilton II

I guess I will stay away from tax questions on short term investments since I deal with longer term investments.

Steven, thanks for clarifying.

Jon Holdman

I guess we can let the CPA's clear up the details, but I think we agree on the SEC issue.

Each of the passive investors should consult their own CPA for advice on the tax treatment.

If you enter into an agreement where one or more persons put in their money and the success or failure depends mainly on the active member, then you are most likely in SEC territory. If the project fails or the results are not as promised, the investors can demand their money back and the SEC can prosecute for selling an unregistered security.

Jon Holdman,

The passive investor investing in an LLC is not investing in RE even though the LLC is. This would not be considered ordinary income. In our LLC's the returns to the investors are considered return of capital and is not taxed until initial capital is returned and then it would be taxed as dividend income, at a lower rate.

In Donald Trumps book The Art of the Deal he talks about buying Air rights from adjacent buildings to be allowed to build his tower taller than any of the other buildings. Similar to what you are talking about with a different twist since he was not building directly above their property.