All Forum Posts by: Mike Kehoe

I would say be cautious, when you have cash on hand and you mix it with the excitement that all investors get when starting out, it's easy to get into bad deals and bad partnerships. There are always people who will look to take advantage of your inexperience and your money.

It sounds like you are already headed in the right direction. You may want to think about diversifying both your money and your education across a few different deals and with a few different sponsors. In my experience it has been very beneficial to see how a number of people operate.

Spread your time out by adding value to two or three different individuals.
Spread your money out by partnering or investing in two or three different deals with two or three different deal sponsors.

This is definitely a longer term process, but with the 5 year mindset that you mentioned you have, this is a realistic strategy to equip yourself in the right way in order to move yourself to where you want to be five years from now.

Excellent advice. I think my intuition was leading me in that direction. I just need to listen to it.

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@kevindean excellent advice. I think my intuition was leading me in that direction. I just need to listen to it.

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My five-year goal is to have a portfolio of mid to large multiunit properties. What should I do to prepare myself now to get into these types of deals in the future? I've found a mentor that does single family and small multi-unit fix and flips and am in the middle of my first deals with him. In return for his guidance, other than providing cash, I'm helping him grow his/our business. Is this the right starting point?

What would you do?

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Hello!

My partner and I are looking to take this deal on. We're paying $330k for the property and putting $70k in rehab. We're financing through hard money for a total of $400k. However, in the calculator, it shows that I'm coming out of pocket for the $70k construction. Does anyone know how to put the $70k into the borrowed amount?

Also, I'd love to get opinions on the deal as a whole.

Thanks in advance!

Mike

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Originally posted by @Account Closed:

I have an associate in Chicago that has LOCs for real estate investing. It will build your business credit (do you have a DNB #) . One purpose is for rehabbing/paying contractors. It is based on your personal credit but it will build your business credit.

Hi Barbee!

I know this forum post was two years ago, but do you still have the LOC connection in Chicago?

Thanks in advance!

Mike

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Originally posted by @Ryan Zomorodi:

Some flips I've structured with my cash partners look like this,

-They put up 85% of the total investment in cash.

-I put up 15% (Often raised by friends/family in exchange for profit % or interest rate).

-We both get 7% preferred return on our capital.

-Split profits 50/50

For the 15%, I'll offer 10-12% annualized interest or 50% of my side of profits to the capital source.

Thanks, Ryan! Have you ever used four cash partners to equally make up the total investment in cash? 25% of the total cash needed per investor? Each investor would be offered 10-12% annualized interest? Just curious as I'm beginning to raise capital and many of my potential providers don't have enough cash to fund 85% of the deal but could do something like 25%. Of course, they could be the 15% partner that you discussed in your example, but in this instance, I'm thinking about how to move forward with these smaller cash partners while we're hunting for a larger cash partner that can put up 85% on future deals.

Hope this makes sense. Thanks again for your help.

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Originally posted by @Greg Dickerson:

I agree with Ed. Just use Investor cash to fund the entire deal and pay simple interest at the back end when you sell or refi.

Also you never want to use investor’s cash as a second or for equity when you are using hard money. that’s a dangerous situation to put your investor in. Hard money is unforgiving.

Thanks, Greg! Your help is much appreciated.

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Originally posted by @Ed Matson:

For funding flips with private lenders, I think the simplest and a very equitable structure is to simply do it with debt. Since your partner is experienced, going with private money may well be an option vs. hard money loans. Typically a private lender will be looking for a return of about 8% and he will want to be in first position. After several loans from a private lender, you all may want to expand the relationship by making him an equity partner. That structure is much more complicated. How much should the equity partner get? What is their proportionate contribution to the success of the project?

Thanks, Ed! This is very helpful. 8% APR or 8% for the length of the project (about 4 months in our case)?

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Hi all!

I've recently become a full-time investor and am new to Bigger Pockets. I've partnered with a deal provider that's been investing for over a decade and has always used his own money/credit lines. The deals I've done so far are with my own money as well.

My partner wholesales, flips, and also BRRRs single family and small multi-units in Chicago. He does a substantial amount of deals with his own money, but I've come on to help grow the business by connecting us with cash partners. He has four full-time GC's that only work for him, so we have sufficient workforce to do more deals. To do so, we need more capital.

I'm currently reading Raising Private Capital by Matt Faircloth, and have gotten great information from it, but I wanted to throw these questions out to the BP community as we are soon meeting with potential cash partners:

How should we structure deals with our cash partners? Our projects will be less than six months.

Do we give equity on each deal and allocate 20% of net to the cash provider?

Or should we offer an APR on their money and keep rolling profits and initial investment over into the next deal? What APR would you give? How have you structured that before?

Do we offer more if they are in second position, only providing the downpayment for the hard money loan? What are examples that you're doing?

Thank you so much in advance! Please excuse my ignorance if I've posed some of these questions and scenarios wrong. I'm learning!

- Mike

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Congrats, Michael! I've learned 100x more in the "real world" than I ever did in college.

My advice is to continue to educate yourself on your trade, but also emotional intelligence. Also, keep the partying to a minimum. Much of my early 20's were wasted because I was hungover a lot of the time. Take care of your mind, body, and spirit. Make sure to carve out time to recharge (gym, therapy, whatever works for you) on a regular basis.

Good luck!

Mike

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All Forum Posts by: Mike Kehoe

Mike Kehoe has started 9 posts and replied 80 times.

Post: What would you do if you're just starting out?

Post: What would you do if you're just starting out?

Post: What would you do if you're just starting out?

Post: [Calc Review] Help me analyze this deal

Post: Credit Line??

Post: Cash Partner Deal Structure

Post: Cash Partner Deal Structure

Post: Cash Partner Deal Structure

Post: Cash Partner Deal Structure

Post: I dropped out of college last week.