All Forum Posts by: Samuel Riehn

Yeah, my brain has been wrapping itself around this mess ever since. Its good to get fresh eyes on it, and talk about it.  I'm just happy my first post on bigger pockets was able to bring something new. I guess adds value to know the types of schemes out there.

Absolutely agree, it could drive a wedge. But I think of it more as a gift than a loan or a lease, if he doesn't pay I'm fine with shouldering the cost myself. Actually expecting that to happen, so anything I do get will be a surprise but not an expectation. And as far as the DTI I actually would appreciate the loss to curb my LLC's tax bill.

@JD Martin

I was actually being told that I would be Guy 1# for the first round, and they would give me the 20% up front to go find a property I liked. So... yeah idk wtf was I thinking, this is crazy!

Only in  Vegas lol

I don't even like Apple! haha. Yeah you're very very likely right. Don't know why I didn't see it when I was there.  Took a few nights of sleeping on it before I realized how shady it was.

There were two ways they thought of doing this. 1) buying HUD blind auction homes (obviously nowhere near 100K I used that as an easy example) and reno them and get a HUD renter in there paying 10% of the home's purchase price every month. Or 2) Pretty sure they intended to develop properties, buy land at auction or tax lien and build. Doubling their money is probably unreasonable and unlikely, again, I used fictional numbers. But you're right, things look way to rosy, and there are way too many things that could go wrong. I'm out.

@Jassem A.

I was actually looking to try it out with my Father. He is on the edge of retirement age and just had a brain aneurysm that will likely force him into retirement. He owns 2 homes, one is under construction that probably needs $60K to finish, he has taken HELOC's out on his primary residence throughout his life to maintain liquidity in his company, so even though he's been in the home I grew up in for 26 years he still owes 130K. I had an appraiser come out and said that it was worth 200K. If I bought his home for full retail, and had him pay me low rent for the rest of his life, I can write off the losses and he will pay for my down payment thru annual $10K tax-free gifts. He would have 70K to finish construction on his second home which he can sell free and clear for easily 180K. That, along with the sale of his business assets, would be his retirement.

Meanwhile I own a $200K home that I paid no money down on, and I'm taking several hundred dollar loss on rent per month, but I'm taking care of my dad.  Plus, I wont have to pay for property management or anything to maintain the home because he always has and will still do repairs himself.   

@Jassem A. 

I haven't actually been presented a property from the group yet. I was just using the made up numbers given during our meeting. But using those values I would want at least 16-1800/month gross rent.  Based on the areas that they operate out of (Baltimore, Alaska, and parts of Florida) I think that would be possible.

Right. 

Though as a military guy I know there are wanna be investors or regular guys buying retail value homes with the VA loan for 105% LTV after they roll in that VA funding fee. I'm not necessarily afraid of buying 90% of appraisal if the rents are still cash flowing. These are A-B neighborhoods they'd be looking to buy in.

That is a new one to me, but yeah that does sound similar.  I agree, the law favors the banks in these types of situations which is why I'd rather not bother with it.  I think you're right, this strategy I don't think is intended to be a scam but instead a way to add value to the team by buying at best-case valuations, and splitting profits.  The smaller guys keep the rentals for longterm income, the bigger guy gets more to keep building.  I may have painted these guys to be scummier than they are. Like I said I've known Mike for years and don't think he's a scammer, cant speak for the other one, but for the limited times we've talked since I don't think he is capable of that.

What I cant help but keep coming back to is the slight difference between this and a cash out refinance. When cashing out in a BRRR, we always try to get that valuation as high as possible to take as much money back out as possible (at least that's what I've gathered in my 6 months reading and listening to bigger pockets). Yet the selling at highest possibility valuation to someone willing (though arms length is questionable) to pay higher is somehow very bad/illegal. Doing it wrong the latter leaves the buyer with a lower value house, while doing it wrong with the BRRR can leave ME with the lower value asset. Makes you think...

Absolutely, attorney's are the answer. But I've seen it done on Wall Street, the parent LLC just needs to hold a stake in the sub or yieldco LLC, then the money can flow back and forth pretty easily under "MSA's" and other tools. The subsidiary LLC would just need to maintain the corporate veil as a separate entity, in this case, backed by myself or Mike. We would be the ones looked into for credit checks.