All Forum Posts by: John Corey

I am not using a journal.

Part of the purpose for using one is to gain perspective.

Consider writing down what you learned for the first time. The stuff you pick up from speaking to others (in person or here, online). You will be building a catalog of your progress. That will inspire you to find out more. When you review how far you have come, you will be surprised at the progress.

You can do the same with podcasts. Listen to one and then note what you found interesting and why.

I would start with tenant screening. Just because someone is on Section 8 does not mean they are prone to crime, etc. Be really strict. Set the rents low enough that you are flooded with good quality applicants. Be very clear what your policy is for screening and then screen them in order. Anyone who passes is accepted. 

Share the screening process details with each applicant. Many who know they will not pass will decline to apply. 

Expect HUD will mystery shop the property. Keep your process legal. No discrimination. Just focus on the right criteria (income, family size, references, what ever works and is legal for the market). Know your state and local regulations.

If the place had specific types of crime before, see if the police can advise. Is there a way to encourage them to stop by unannounced? One property I know agreed to rent a unit to a police person. They parked their cruiser outside their unit each night. The drug dealers found it was bad for business.

How do you expect to use the information you asked us to review? It will not be legal to just send it out or to use it to attract investors who you do not already have a relationship with.

In addition, you are likely pooling funds. Before you can speak about an opportunity you will need to register the offering. Have you factored that into your process?

Good call.

If you were a GP, you need to be doing something over the life of the deal rather than only around for the fund raising. And you would need to be working on the funding phase more generally rather than only the bit tied to your investors.

BTW, having conversations with investors could be a different violation. 

I do not fit the audience you are suggesting. Too much experience.

What I have observed over a very long time is new investors are worried about losses. They do not know what they do not know and the numbers are large. So, the potential loss can be large. 

They wrap fears into language which does not make that much sense when you pick it apart. 

One very common statement is 'What if I can not rent the property?"

I ask them if they believe they could rent it for $1.00 a month. They laugh and say, definitely. Then I re-phrase what they stated to be 'What if I could not rent it for enough to cover the monthly costs?'. In their mind they are worried about negative cash flow yet it gets articulated as a fear about not being able to rent at any level.

The point of the example is new people do not know what needs to be solved or focused on. They feel overwhelmed. As they should given the number of variables. Yet, people with less ability, experience and intelligence get started every day. I suggest they need to break it down and reduce the size or reduce the complexity to something they can handle. People buy homes to live in long before they master investing.

 As was mentioned, the tax implications come from two sides. What the USA (specifically, the IRS) expects and what the tax authority in the home country expect.

You mentioned investing in your company. What the cash investor puts money into can change the situation. Are they investing in a company or in a piece of real estate. Who or what will be on title? Is the deal structured as interest income, share or profit matters. Capital gain rules in the USA do not always map to the capital gain rules in the other country.  

One example. Depreciation is not a deduction allowed in other countries. 

An LLC is not a structure recognised by other countries. So, the default assumptions for what a USA investor should do is not always a good idea with foreign investors. It might make more sense to use a C-corp. I am not saying it does. Just that each situation could be different.

Though you did not ask about it, the ability to promote a deal to foreign investors could run into securities rules and regs. in the investor's home country. So, the SEC might not have concerns yet the other side's regulator may definitely have concerns if you are reaching out to investors.

Agreed.

Until you have certainty that you will be the owner (redemption is over), avoid pouring money into the property.

Technically, MFR is 5 units or more on 1 title. The stuff with fewer units is not MFR.

Owner occupiers (OO) can obtain financing for 1-4 unit properties. At 5 or more units, there is no OO financing on offer.

Grandfathered properties could be hard to finance. OK for cashflow and bad for expansion. They might be a good asset to buy if you have plans to covert them into MFR or something else. So, the regulations will drive the decision.

Speak with the attorney. I seriously doubt they can accept any payment from you. That said, if you are a real buyer, they might want to send you deals so they can get them sorted. Remember, they are working for the estate.