All Forum Posts by: Julie Wright

In one of the episodes I recently listened to, David mentioned that overpaying by a few thousand is insignificant when compared with the idea that the asset appreciates over time AND (assuming you've leveraged it)-- money is "cheaper" than it will be in 10-15-20 years. So being able to borrow $5-10k more  right now at a lower interest rate, before more inflation is actually a positive. 

There is a point where overpaying is not worth it. You'll have to do the math for your situation.
Additionally, assuming you were intending to buy and hold-- can you afford to keep the property if it doesn't cash flow/only breaks even?

Hey Scott,

I don't think you'll be able to minimize cash investments in your current situation. However, on a really recent episode of the podcast (Sunday, in fact!), David talked about something that might help you get started anyway. You will need to use your own cash at first, though.

I am going to re-phrase his advice so that it could possibly apply to your current situation.

Go buy a property with your own cash, stabilize the property (fix it up, get rents up, increase occupancy, etc) then you can ask a private lender for money, while SECURING the deal with the 100% equity you have in the property. So you'd put that lender in 1st lien position on the property you already own.

Not a lawyer, but I think you have a real shot in doing this if you're using your own capital. Then once you've proven yourself, you can go to potential lenders (likely private) and show them your track record.

Another similar option would be to purchase an already cash-flowing 5+ unit multi-family with a commercial loan. Just know you'll probably need at least 20% down. The banks will use the property's income when considering your application. Since I'm not a banker or lender, I am not 100% sure if you can get a commercial loan with no personal income, but its 100% worth a shot.
I hope this helps!

Best of luck to you!

-Julie

P.S. The podcast I'm referencing is Episode 585. The advice starts at 33mins. Although the caller's question was a few minutes before that point)

I am a brand new investor- and have been for almost a year haha! I just haven't been able to get past this "analysis paralysis". However, I am determined to get my first deal in the next 2 months. I finally got my RE license this month, so now it's time to actually use it!!

So, here's the background- I have a family friend who is interested in investing in real estate with me. I need some guidance for how to set up our business. We will form some sort of business (LLC?). That business entity will purchase the properties.

My questions are this--

1) Should we set it up as an LLC or Corporation? Better worded--- what have you done if you have a partner? LLC? Limited Partnership? If it helps any-- he will be mostly hands off-- really only providing cash and approving deals. His son (attorney) will likely be a member/officer as well. He oversees his father's business dealings.

2) The way I intend to set this up is to borrow an amount (say $300,000) and flip a house. He'd get 8% interest payments while his money is in the deal. Then once we sell the property, we'd split profits 50/50 (for the first few deals), and then over time his percentage would go down. Does this sound reasonable? This is what we've basically agreed to, but I want to have more "eyes" on it. 

3) I have someone I'm considering hiring. She would help me find and get quotes from vendors. So I assume I'd need to pay that person out of my portion? And his son-- he wants to give him part of his half of the profits. So would pay his son (attorney) out of his portion. Hopefully that makes sense. Is this how it would work?

4) Is there a way to set this up the business that makes it more advantageous to him for tax purposes? For example, should he "loan" the money to the business, so that the business paying him back is not considered income to him? I do plan to talk with my accountant as well, but I thought I'd see if anyone here has recommendations for/against a certain setup.

5) Assuming all goes well- should we leave the money in the business to continue doing more flips? I'd love to flip a ton of houses and then start buying others with the profits then move on to BRRRR deals and scale from there.

6) So talk to me about cash out refi. I've researched a ton, but don't feel like I get a solid answer about it-- If we buy a property, it's renovated, rented out, etc... How does a bank decide whether/how much they'll lend on the equity for a cash out refinance? Do they look at my income? His income? The property's rental income? The LLC's income? I'm going to reach out to my lender as well- but again, just looking to hear others' experiences.

Thank you all so much for your help, BP fam!

-Julie

Hi Nitesh! 

We lived in Indy for 8 years, but moved to Atlanta in Dec 2020. If you don't already have an agent, I'd like to recommend our Indy real estate agent- his team is shifting their focus to working with investors, property management, etc. He's also an investor.

Let me know if you'd like his information. Indy is a great market! 

Good luck,

Julie

My husband and I are completely new to real estate investing, but I am already hooked and ready to jump in. The BRRR method is what we'd be going after for a while. Potentially a handful of flips in the future as well since I love the project management and design aspect. (We did a 100% gut and rehab job for our restaurant a few years ago- it happened to be residential turned commercial.)

We have cash to play with, but would prefer to use someone else's money. ;) 

I have a couple of questions....

1- What kind of terms should we pitch to a lender? What rates do hard money lenders prefer? Does anyone have a great setup with an investor and can give us some insight? Do we set up a Promissory Note borrowing $XX amount with interest for XX time and that's that? 

2- This is going to sound a bit hilarious, but hear me out... we are currently unemployed for a couple more months (just sold our restaurant in Dec 2020 and are in the process of purchasing another). Is it going to be impossible to do a cash out refinance? I would assume so... But I was wondering if since we have cash, maybe the bank would just require us to keep some set aside for repairs, etc? Since it will be rented out, so the mortgage will get paid that way? I know there's always a potential for vacancies as well. We have someone who would partner with us as a co-signer, and we'd just co-own the properties under an LLC- of which we'd probably own majority, since he would be 100% passive. This is a long-time friend who is an attorney. Recommendations for or against this type of setup?

I think that's all for now. Any insight would be fabulous!

Thanks!
-Julie