All Forum Posts by: John Corey

Tristan, Taylor highlights the practical issues of sharing the decisions. Do you really want the other people helping to run things or are you only letting them have a say so you can try and avoid the SEC regulations?

Second, if you are trying to avoid the SEC regulations, be very careful that in the heat of the moment, you do not make a short term decision which flips you from being 'safe' to over the line.

Amy is specialist who is SEC and tech aware. In other words, if she feels it is a securities offering, highly likely she is correct. Lawyers who are not SEC aware can easily not realize that they are overstepping the line when stating that they have set up LLCs and it was not an issue. Think of this analogy.

I am traveling on I-5. My highly accurate speedometer tells me I am traveling at 77 miles an hour. I am being passed by people traveling at what I estimate to be 80+. No one that day received a ticket from what I can see. Does that prove the speed limit is no longer 70mph? Or, could it only prove that you know of no one who received a ticket that day?

If you go down the route of not following the SEC and state regulations, any of the investors can turn you in later when they want to force you to buy them out. Assuming one was married, they might be getting a divorce and their soon to be ex wants cash. Or, the ex is being awarded the shares and they want no part of dealing with you. Why leave yourself exposed? Even if there is no SEC issue, think about who might become your 'partner' later.

One last point. Amy has a service where you book a small time slot for a reasonable fee. She will then provide advice based on what you want to know. Consider getting in touch with her and her law firm.

Scott,

You want loan terms and rates as a 2nd home buyer when what you are trying to finance is a company. Similar to a Prosche has better performance than an F150 unless you want to haul gravel. 

I noted that you are an attorney. As you know, there are different types of law with different rates and different risk profiles. A lawyer who handles conveyancing will operate differently that a lawyer specializing in SEC filings. And I, as the customer, need to be prepared to pay different rates and expect different areas of competence.

I split my time between London and the USA. I noticed that you list Wilmington DE as your location. I am 10 miles north of there. Happy to jump on the phone or meet for a coffee. We also have another connection. I own property in the Lahaina area. A bit north of the city center.

Approaching this from a different angle.

1. Why would a developer approach you? What about what you do or what you said caused them to think you could bring cash to their deal?

2. Do you have skills, knowledge and interest to be part of a joint venture with a developer beyond fund raising? 

3. What is you longer term vision or journey? If you can raise cash legally and there is good alignment, breaking into the business from the cash side is fine.

4. BIG WARNING. As someone else pointed out, raising funding for someone else's deal is heavily regulated. Since the 1930s. It is criminal to to raise money incorrectly. Yes, that can mean jail time. And it is a risk to you if you handling things completely legally and the developer oversteps the line with a project you are involved in. They might not know the rules. 

The SEC sets the Federal rules and FL will have its rules. If any of the investors are from outside the USA, then their home country rules can apply. Tread carefully. 

 Zoe, the lenders who care about 10 loans will count her loan as 1 of the 10. Or, lenders worry about your exposure as a borrower to them so they focus more on the amount you owe them. 

As John said, you can shift to a different type of lender. They have different criteria and manage the risk differently. What this means is the LTV cap will change, the rates will be different, etc. They are spending more time underwriting the full risk so they craft a custom solution. Portfolio lenders is a term for them. They hold the loans on their books. No need for them to comply wuth the secondary marketplace (where loans are sold).

I think you should think of your aunt's cash as your war chest. You can move fast on great deals with her cash. You want to add value and then refinance out. She gets a bonus each time you do. Overall, she makes a great return. And you can jump on deals quickly. The rate or return you pay her is above average so use it on your best deals. Let the institutions fund the properties you hold. Either on purchase or as a refi when you are pulling out your war chest cash.

Just because it has to be said ...

Can you sell off any personal possessions? How about a 2nd job to build some extra savings?

The fact that you are cashflow positive at present is great. This removes the biggest pressure in terms of getting the work done.

Is the remaining work mostly labor or materials? Can you cut a deal with a contractor or a supplier where you will pay later once the refinance is done? The devil will be in the detail on this one. Careful with taking on more debt or setting too short of a fuse.

What specifically needs to be done? Could a refinance be done now with some funds held back until you complete the work? I did not look closely at the numbers to see if the ratios make sense.

Are there any local investors, from REIA type meetings, where they will agree a mini-JV. They bring in fund to complete the work and you pay them a high return in exchange after the refinance is done. Again, be careful about spending the future profits and creating terms that bite you later. This suggestion is more about creativity and reaching out to other investors in your area. If the work involves a specific trade and there is an investor with those skills, then getting them into to do the work for a profit share could make sense.

The conservative solution is to grind it out by earning some extra cash before Christmas. Being cash flow positive is a great place to be when looking at poor alternatives.

Your SFR portfolio should signal to people that you are a serious investor. Very new and naive with MFR, yet a successful investor with SFR.

Have patience when it comes to buying an MFR. You want to make it a winner and you will not know what you do not know. The SFR track record will give you confidence yet it will also make you a bit more blind to some differences. All stuff you can learn if you give yourself space to get a grip on the new task.

In terms of private lenders, you could run into issues. Hard to given lenders security if you are borrowing from 1 person at a time. If you pool the funds and offer a 2nd lien to multiple investors, you are quickly sliding down the slope to a securities offering. Even if you do not want to get into syndications, take some time to study what is best practice. It will teach you want to avoid until you make the leap.

A meth house is a toxic waste site. It needs people in protective clothing to enter it and remove all traces. This tends to mean a complete tear out down to the studs or worse. You can become ill just doing a site visit of the property.

So, the remediation is a known process. It will take time and it will be very expensive. The party with the problem is the current owner. Push the problem back on them. You will only buy if they are paying you enough to sink a chunk of your life and a lot of cash into the deal. If the current owner is a lender, they likely know how bad the situation is so push them hard for a great price. Or, just move on.

Before we come up with a solution, why are you not able to obtain a loan? Is it a temporary issue or something you believe will be forever?

In terms of partners, best to start with what you bring to the table. Then think about what you really need from someone else. Then you need to think about how you will test the fit. Do they really have what you need and will then deliver? Is there a way to start out with something small and something that will be limited in duration? To build trust. Like a first date rather than jumping straight to grandchildren.

 Cindy, I will reach out to someone I know in Philadelphia. If they can help, I will connect the two of you.

I am not sure that I use my iPhone, my iPad or Mac any differently. One is more portable. One has a better keyboard. The apps are largely the same. Much of what I do involves something in the cloud so a browser or dedicated app to access the data is key.

One place where an iPhone or iPad can be different is with apps that measure a room. I mostly use the iPhone as the iPad does not travel much. Getting a rough floor plan and some images helps when showing a property to a tenant online.