All Forum Posts by: John Corey

 A bad deal is a bad deal. 

Josh,

Spend some extra time speaking with a local bank, competent mortgage brokers, and other institutions. You can even speak with the commercial real estate brokers as they will know who the lenders operating locally. If you have a friendly banker who has financed other things, ask them who they would recommend. Bankers know other bankers. More so when their firm does not offer something their clients need.

It sounds like you are in an OK place so far (extra assets, etc). Finance will be key longer term so go do your homework.

Not exactly what I was suggesting.

First, the bank will not offer a warrantee deed because they do not know the history or want to guarantee there are no issues in the past. They are effectively saying they will offer what they have without any claims about what might have happened in the past.

I am suggesting you get a title company to offer you title insurance. They will review the file and make a decision if they are able to offer a policy. Standard stuff they do with every purchase. When people buy using the normal process through an agent, the title report comes back stating what the title company has found and a quote to write a policy if the buyer moves forward. That is what you would do here. Unless you win the auction, you would not want a title policy. If you can not obtain a commitment from the title company to write a policy, you would not want to bid. You accept the title that the bank is offering if and only if you know you can buy title insurance for a price you are prepared to pay.

There are people who buy defective titles. There is a legal process to clean up a defective title. It takes about 2 years. I am not suggesting that you do this. Just stating, for completeness, that even defective titles can be cleaned up with enough time and money applied intelligently. 

Shop around and get to understand the lenders better. Cash out refinancing on a commercial property is different than SFR. They want the rent roll to season so they can see that the rents are stable at a level before they will lend on that income stream. Hence the 2 years. It is more about how consistent the rents are than exactly 2 years. Commercial lenders are really lending on the income stream and not on the structure. The structure only has value because of the current and projected income stream.

Look for a portfolio lender who can advise you on which of their products are best. They may have a loan program that will work by cross colateralizing the land and the 10 unit property. Or, they have a purchase product with a draw down facility if you complete some refurbishment. 

I would not be in a rush to buy until you have figured out your loan options. If you fail to clear the 12 month loan secured by a lot, you will face a foreclosure. That will kill any refinance on the 10 unit property.

Time to do your homework.

I have no idea where you are (other than what Google will tell me).

In terms of finding investors. If you can attend auctions, watch who bids. They are generally cash buyers.

Search the members area here for people who are in your location. See if there is a meeting or investor club which they know about.

Use your limited cash to get to meetings, have live Zoom meetings (on camera) or similar. So you can build your network. It will take time. Until you do, you are not going to be able to complete a deal.

HML will generally not cover 100% of all the costs without other collateral. In other words, why should they take all the risk that you will walk away when you have nothing in the deal? So, you are going to need some cash. You might sell a few leads to other investors. You can make a bit of money and you can get to know who the more active buyers are.

If there is a Saturday meeting, it might be worth the drive given the 95 mile distance. Use MeetUp and other sources to find local meetings or interesting meetings at a distance. You can start a group locally if you want one locally. It will be a bit of work. Less work than the drive?

If you keep having problems, be careful. It could be you are focusing on problems and not on solutions. Half full, half empty. The alternative is your life remains exactly as it is. If that is not good enough for you, expect some sacrifices until you gain momentum. Others will help if you help yourself.

Anybody and their dog can claim to be a wholesaler. Too many broke, newbie investors claim to wholesale. They do not understand the deal mechanics so they fumble a lot.

Second, some really experienced wholesalers are really just sharks. Be very cautious.

When you find a great wholesaler, keep them close and treat them well.

If the wholesaler is really experienced, they will be used to dealing with new buyers. And they will have a process that they know works for them. It is a tough business as it is very transactional with a lot of ways a deal can go off the rails. 

It is an issue. And there is a solution. You need to work with a title company. Ask them to review the title and commit to offering title insurance if you are the buyer. Once you are certain you can obtain title insurance, you are covered. Just be very clear with the title company what they are covering and what they might want to exclude. You want to know what you are signing up to and what you are not getting covered. 

REO - Real Estate Owned by the bank. The borrower has already lost title to the lender. The lender generally wants nothing to do with a lease option. They just want to sell it. Unless they can not find a buyer, they will not consider anything creative. Even then, they really want the cleanest path to a full exit. A lease option does not provide much in the way of certainty that the property will be sold. The bank will drop the price to force a sale before they are going to take on a lease option. The banking regulations are heavily biased towards banks flushing out any REOs and a lease option causes the opposite to happen (the property stays on the bank's books as the bank would still be the owner).

I would not be in a rush to partner on your first deal if you can buy something smaller. Lots you can learn on your own. One less variable to worry about if you do not need to manage a partner. 

I am not against partners. Just it will be a layer of complexity that might overcomplicate things.

As to being in Canada. Use the member area to search for Canada. People who live there, deals they have done there, etc. Also search for or post on your location, the local meetings, etc. 

Be a bit slow to commit to spending money on coaching, mentoring, etc. There are some real sharks out there. No jumping into bed with them after 1 meeting. 

Avoid the SEC? No way to do that given what you are proposing. It has nothing to do with you knowing them. It has everything to do with you being in charge. Check out the Howey test. https://www.investopedia.com/terms/h/howey-test.asp

Second, Gene Trowbridge is a lawyer who specialises in this area. He wrote a book. He is very clear in the book about the nightmare associated with being the general partner in such a structure and being the broker.  

Otherwise, what you are suggesting sounds good. You just need a major rethink about the roles, the economics and what you can legally do before you file an SEC registration. There is no good reason not to go down the SEC route other than your fear of it. That said, your post implies you will be deep into SEC territory without knowing it. Time to lawyer up.

There are a number of lawyers who specialise in this area of the law and actively participate in BP. I can find the names or you can search for topics. Someone posts on the topic daily so the lawyers drop in on a regular basis.

Good luck. Do not get discouraged. Just accept that you are moving up into the big leagues. BTW, wealthy people know what the drill looks like. If you are offering them deals where you are clearly not aware of the regulations, they will be polite and pass. Why cut yourself off from serious funds because you did not know you needed to step up your game? Now you know.

Note: Grant Cardone's lawyer is one of the people who posts on BP.