All Forum Posts by: Shiloh Lundahl

I'm focusing on the BRRRLO strategy. It's the BRRRR with the lease option rather than just rent. I find that it produces better returns and work great to trade up and accelerate wealth building.

I am personally buying a lot in Casa Grande, Arizona. I think it is a good market with growth potential and it still has properties they can be purchased from wholesalers for around $150,000 that after you put $40,000 they are worth around $240,000.  You may need to leave about $20,000 into the property after refinancing and you may only cash flow about $150 a month, however you can create $40,000 to $50,000 of equity right up front. 

@Dennis Silver A turnkey investment will probably be much more passive than an vacation rental. However, turnkey properties tend to be a slow path to wealth and are highly dependent on appreciation and time to pay down the principle if you have a loan on it. And the longer you hold a property, the more larger repairs will need to happen and then the property will need a remodel to update it before you sell it. And right now interest rates are pretty high so cash flow and cash on cash returns are pretty low. So if you buy a turnkey property at market value right now, then the returns tend to be pretty low for a long time.

Another option that can still be pretty passive but that can create a higher return is a shorter time frame might be a partnership. Partnering up as the money partner with a successful operator who can find under market valued properties and can get them fixed up and force equity can create wealth quicker. Sometimes this strategy is called a slow flip. Rather than flipping a property quickly and paying short-term capital gains taxes and paying between 7% and 9% percent to sell the property, you could find a tenant that wants to buy the house but may need a little more time to qualify or save for a down payment. That person could become a tenant buyer and could buy the property at at future price that is set up when they move into the home. That saves the 7% to 9% closing costs, and has lower taxes at the sale. This strategy is just as passive as a turnkey property but the returns tend is much higher within a shorter period of time. In the average deal set up this way, the money partner comes in with about $35,000 to $50,000 and splits the $70,000 gain that has been created within a 3 year period of time. 

So a partnership may be another passive option other than turnkey that may produce a quicker and higher return. 

Hi @Ivan Castanon. A lot of people are giving you advice without enough context as to what you would like to do other than get a higher than 3% cash on cash return and other than only putting down 20% - 30% as a down payment.

Something that is important to know to give proper suggestions is what you want the investment to do for you and how active you want to be in the investment.

In general, the more active you are, the higher your return, the less active you are, the lower the return because you pay for others to do that work for you. Information like: Do you want to manage the property yourself, or do you want to pay a property management company to do that for you, is important to know because it will start to narrow your options.

If you want to be more of an active investor, finding the deal yourself direct from a seller, doing some of the work yourself to fix it up, and then representing yourself to sell it on your own is probably the most active you can be and will give you the highest return in the shortest amount of time. Also, co-living situations or top performing short-term rentals can produce a pretty high cash on cash return but again they are pretty active with a high turnover of tenants and guests unless you find someone else to manage them and then you are usually paying a good portion of the profits to the manager.

But let's say that you have a job and are not interested in fixing and flipping or a high turnover type of investment and you would rather be a more passive investor. If that is the case, here are some more passive, yet higher return options.

1. As@Chris Seveney suggested, being a private money lender can be pretty passive once you find the operator and asset you feel comfortable with. You can get between a 12% and 15% cash on cash return each year pretty passively. But what is really important is that you understand the terms of the loan, including the length of time and when you can expect to get the money back, how it is secured, and the process of getting it back if things don't go as planned with the investment. Vetting the operator or borrower is very important. Make sure that that person has a lot of experience, and make sure that there is at least 20% - 25% equity over and above the amount that you have lent and in your agreement it states that they can have no other liens or loans on top of yours. Also, make sure that they have money in their accounts in case things don't go as planned. You don't want to get a call 3 months into a project where you have lent money and hear the operator say that they ran out of money and need more money from you to finish the project or you will lose your investment. But if you can find a good operator and feel good about the asset, then private money lending can be an excellent way to invest passively. I have done this probably over 100 times as the borrower and it has worked out well for me and my private money lenders in that everyone has gotten paid back along with the agreed upon interest.

2. Putting your money into a fund or syndication. This is similar to being a private money lender. You need to vet the investment and the operator. In some syndications, returns may be higher than 15%, but it can be more risky in that there are usually many people involved and if the operator doesn't perform as originally explained then the process of getting your money back can be a little more tricky. I haven't personally done a syndication so I can't comment much more from experience. 

3. As @Dennis McNeely stated you could partner up with someone else on a deal or deals. For example, a buddy of mine called me the other day and told me that his accounted told him that he should buy some real estate to offset some of his taxes. I gave him some ideas of what he could do depending on if he wanted to be more passive or more active. After explaining a couple of options he told me he would rather just partner up with me and be the money partner and I would be the operating partner. So we opened up an LLC and he funded it with $100,000. I then found 3 properties from wholesalers in areas that I invest in regularly and purchased the properties with a hard money loan. We used his money as the down payment and to fix up the properties. We have stabilized 2 properties so far and we are in the middle of the refinance on the second. We will finish with the rehab on the third in about a month or 2 and then we will refinance that one as well. The cash flow won't be that high on these properties initially, but we are not planning on keeping them long term. We have placed tenant buyers in the property on lease options so we get a little higher rents and the tenant buyers take care of the property repairs. The option period is for 3 years. We set the purchase price at about 10% higher than todays value and we don't have to pay for realtor fees or closing costs when we go to sell the property. We also connect them with loan officers to help get the tenant buyers ready to purchase the property within the option time frame. Each of the properties have an estimated profit of around $70,000. So the total estimated profit is $210,000 in 3 years. So a profit of around $105,000 each in 3 years. So about a 35% cash on cash return for my buddy each year on his $100,000. Now I realize that not all situations will go exactly as planned but it is important to have a realistic plan from the beginning based on past results.

Ivan, Hopefully this post was helpful to you in that it helped you consider different options based on your personal situation and real estate investing goals. Let me know if I can be of help to you on your journey. 

@Michael Baum how many Short-term rentals do you manage this way where you are on call all the time?

@Cory Prior There are ways of doing low-money down strategies. However, I wouldn't expect to be able to do many of these deals without quite a bit of experience. At the beginning, I had to use my own money and credit lines and a HELOC. After I gained a lot of experience, I was able to do more deals using other people's money. Now most of my deals are a combination of our business money, bank money, hard money, and private money. We also try to keep a few hundred thousand in reserves.

So I would encourage you to adjust your expectations starting out and develop the discipline of saving money so that every month your net worth is higher than the month before. Then connect with a variety of investors until you find the specific type of real estate that you want to do.  Then do everything you can to study that specific real estate niche and then start to partner of some deals to help you gain experience and confidence.  This process is probably a 1-2 year process.  

@Cory Prior I would say it depends on what you want to learn. If you want to learn about note investing, then you should connect with someone experienced a note investing. If you want to learn about multi family, then connect with a multifamily investor. I teach people about buying single-family homes under market value and then selling them on a lease option. That's the strategy that I use the most and I found it to work out really well.

Hi @Kyle Kline. You are referring to "no money down" real estate. Is it possible to purchase real estate with no money down? The answer is NO! Just like there is no such thing as a free lunch, there is no such thing as free real estate. Somebody somewhere had to pay for that real estate at some point and has continued to pay for it since. However, can you buy real estate without using any of your own money? The answer is YES! But as was mentioned above, you need expertise and experience.

For the first 2-3 years of activity investing in real estate, I had to use my own money sources for down payments. Mostly from a home equity line of credit. Then, after I had experience and several wins, people were willing to partner with me on deals, or lend to me in second position for a short period of time to help with the down payment and with repairs and then I would pay them back when I would refinance. As stated above though, that method can become very risky unless you are properly capitalized, which I was. If I had not been, then I would have a lot of projects only half completed and a lot of investors very angry with me. 

Additionally, as stated above again, the projects that I was taking on were purchase well below market value. And that is where the skill comes in. In order to do this you need to have deal flow and you need to know 1) How to recognize a good, profitable deal, 2) How to put together funds quickly to buy the deal before someone else does and in such a way where you are protected and the deal is protected, 3) How to run the project so that you follow the budget and don't overspend or overbuild, 4) How to attract an end buyer or a renter and which documents to use to protect yourself and the buyer, 5) If you are going to keep the property then you need to know how to set up the property from the start to best help you in the refinance later, and 6) You need to know how you are planning on managing the property from the beginning in order to make sure it will be profitable at the end. Sometimes a deal looks great because the investor doesn't add management costs of either money or the time that it will take to manage the property. 

If you are skilled in each of the areas above, and you have enough in reserves to cover the costs of when things do not go as planned, then you can likely attract money from private money lenders who want to get a return on their money and they see lending to you as a low risk way of earning a better return than in the other passive investing options they have. 

One thing I am doing this year in line with buying real estate without my own money is I am partnering with money partners on deals. So for example, let's say a friend of mine wants to get involved in real estate but doesn't have the time, knowledge, experience, or resources to do it very well. He calls me up and says he wants to do a deal with me. So we create a partnership agreement and a new LLC and he funds the LLC account with 50k. I then find a property under market value for around $140,000. I use a hard money lender to pay $126,000 for the purchase and the money partner's money for the rest of the down payment. I also buy it at an inflated price with a rehab credit in order to help with the appraisal when I refinance it.

After the purchase I use the money parter's money to fix up the property and I get rehab draws from the hard money lender to reimburse the money used for rehab.  I then use that money to finish the project. Let's say that the rehab cost $40,000 and we were able to increase the value of the property to $240,000. With the purchase, the rehab, the closing costs and the holding costs (hard money, taxes, insurance, utilities) our all in is around $200,000, but we have created $40,000 in equity. At the refinance, I am able to get a loan for $180,000 and $20,000 of the money partner's money stays in the deal. We then lease the property on a 3-year lease with the option to buy and the tenant buyer gives us a $4000 option fee to buy the property for $260,000 within the next 3 years. We cash flow on the property about $140 a month and the tenant buyer takes care of the repairs. The money partner leaves $10,000 in the account for any incidentals and we split the profits or the losses 50/50 until we sell in within the next 3 years. The overall profit for the deal is estimated to be around $70,000 over the next 3 years, $5,000 of my 50% portion gets paid to me after the refinance. So the money partner may leave around $35,000 into the deal and may expect to get a profit of around another $35,000 over a 3-year period of time. 

That is an example of being able to continue to buy real estate without using your own money. However, in order to do this effectively, you have to have knowledge, experience, resources, and cash reserves in case things don't go exactly as planned.

Hopefully this post was helpful to you in seeing a realistic example of how to purchase real estate without using your own money.

Hey everyone. If you are a high-level investor who has over 50 properties or have done over 50 deals and have a net worth of 1 million dollars or more and would like to connect with other high-level investors, then this retreat would be great for you.  We will be staying at 3 of my properties in Costa Rica and we will be breaking down our businesses to each other and providing feedback to each other to help us all improve and grow as investors.  The retreat is limited to only 15 to 18 people.

Here is a video of some of the highlight reals from our last couple of mastermind retreats: 

Here are the places we will be staying. 

Check out the website for more details about the retreat. https://reiretreats.com/mastermind-retreats/

@V.G Jason that wasn’t my experience. I knew of a lot of people that were investing between 2010 to 2017.  The math for investing was pretty obvious to everybody that it would be hard to lose money by buying a home for 50% to 70% of the rebuild cost. But then as the home prices kept going up, they decided to get out of the market, thinking that there would either be another crash or home prices had gotten too high at that point. They then missed out on several more years of growth because they got out of the game and waited on the sidelines for things to look better.