All Forum Posts by: Brian Larson

I think many of the answers above are great but would look at what Michael K wrote. Figure out what you want from your money.... short term gain or long term cash flow with buy and hold

Also, these are not necessarily mutually exclusive. I am currently ramping my long term buy and holds through rehabs. I.e. I buy from a motivated seller, fix up for appraisal, refit to conventional loan with little money in. I realize this didn't put any short term $ in my pocket but it did give me equity on my rental property that I can likely tap into one day.

Good luck!

Brian

Thank you both so much. I really appreciate it.

I can definitely see how this is loan fraud. I think the best approach here is one of the scenarios Brian gave. I will let him buy a house with tradional financing and I can help him fix it up and get it rented. This will be a condition for repayment on the loan.

I will also find out details on interest and what the minimums are on this loan so it is legitimate.

Thank you both so much

Ah, thank you both so much for the comments. let me clarify a bit here.

The goal of this investor is to get a SFH that is cash flow positive. My goal in this is to get an investor that loans me some seed money so that I can buy a property, fix it up and then sell it in the 'low end retail' space.

This investor does not want to pay cash for a property since he wants to have the conventional loan (tax reasons?).

So, the idea here is that he is loaning my LLC the money to go and get him an auction home (paid in cash). I will then fix it up and get it ready to rent. Once this is done, he will then buy the house via traditional means (put 25% down and fixed mortgate, etc)

At the end of it, I will still have the $100k in seed money that we wants paid back in full (without interest) in 24 months and he will have a rental property with conventional financing.

Just to be clear, the original thought was for him to loan me the money, I woudl then buy, fix, resell a home and then pay him 50% of the profits and then do it again with the same money. He says, he woudl rather let me do that game with his loan as long as I can get him a positive cashflow house as my first buy, fix, sell.

My intention is not to make any money on the sell of the property to him. That is kind of the deal in order for him to give me the 0% loan for my seed money. I agree, if he pays an extra $20k for me to flip him a house...that doesnt make sense! haha.

I hope that clears it up.

Also, there was a mention of loan fraud. Is what I explained above loan fraud or have I clarified it better?

Oh, last thing. I will still be seeing a RE attorney as I want to make sure everything is legit. I just feel that the more I know what I want to do (and what I can do) before going in will make the creation of contracts much easier.

Thank you for your time
peeklay

Hi all -

As you can see, I am a bit new to the forums and somewhat new to RE investing in general. So, after many, many posts read on this forum, I think i have a plan and I was wondering what the best way to go about this situation is. Please note that I will be consulting a Real Estate Attorney to get this setup right, but wanted to get any feedback the great people on this site might have.

So with that...here is the situation.

My investor wants to buy a foreclosure in my state (he is in another state) and he knows that I have the right connections to get this done. Instead of paying me a simple fee to find him teh right price, he wants to help me out with some seed money...so here is how i see this working. Please comment as you see fit.

1. He loans my LLC $100k to buy a property. This loan is a 24 month, no interest loan (promissory note with balloon?) wherein I will pay him back the full amount in month 25
2. I then sell this property to him via traditional financing
3. He now has his house that is cash flow positive and I have $100k (or some sub amount of that) in seed money to invest as I see fit over the next 2 years

I know this is one of those 'too good to be true ideas'...or so I hope it is, but you have to understand that the initial discussions were around me looking to find investors to loan me $$ so I could buy, fixup and then resell. The goal was to give the investor 60/40 of the profit and return the $$ in 3 months.

Because this investor wants to own a property and does not want to pay cash, he sees this as an opportunity to get a good property (I do actually have that know how) with positive cash flow while helping me out in more than a referral fee method.

Some of my questions around this are tax implications and how the 'flip' takes place. Can he simply come in with traditional financing after I buy this house for cash (through my LLC) at a trustee auction?

Is the best way to setup the loan a promissory note? If so, can I do a 0% interest note or does there have to be a minimum percentage?

I have a ton more questions, but I think this gets my basic premise out there to see if there are major holes I am missing or why this woudl not work/is not legal.

Thanks a lot for reading this. Sorry for the long post. If I missed any details let me know and I will try to fill them in (if I had thought about it...)

thanks
-peeklay