All Forum Posts by: Scott Lewis

Another option is to set up an LLC and a SEP/SOLO 401k (I forget which one, talk to a broker, I use Fidelity) and roll your IRA into the new account. You should then be able to give yourself a loan of 50% the total balance up to $50k. So with your current IRA, you could probably get around $37k or so. Not a ton, but might be enough to get you started, plus keep some money in the market.

If you have a 401k through your W2 position, you can do the same thing. If you search the forums you'll get a couple schools of thought. One that says no way, dont touch your 401k/IRA and another that says absolutely. I tapped my 401k for my first deal. Pulled out $42k, put back $42k in six months plus a bunch more in my cash account.

We get this all the time and your best bet is to be honest. Our standard response is we use a collection of internet based public resources. And we always tell them we know they're late on their taxes and then quickly follow up with how we can help.

Remember when "competing" with other properties you need to look at both the tangible and intangible benefits. While the other homes are new, most likely they will be more expensive per sqft than your home (and if they arent, and the level of finishes are the same, you truly are over priced.) What about location? Would you be willing to throw in some furniture or paint for them? What other intangible benefits can you think to throw in that would enable you to keep your price high. The key here is to negotiate with items of unequal value.

Would you consider seller financing the property? If you were to seller finance it you could offer more attractive terms to potential buyers not to mention a much easier approval process (you only you need to approve them.)

Also, depending on your current mortgage, if there is an assumption clause and you have a favorable rate, you could offer to allow a buyer to assume your mortgage which could lower their closing costs. That being said, you'll need lender approval.

There are lots of nuances to both options I presented above, so if either sound attractive, you'll need to dig deeper into them before moving forward. Also, in the seller financing case, you'll want an attorney or closing company to help you with the documentation so you're covered and can foreclose in the case of a default.

You're right about CO being a super hot market. That being said, there are always situations out there that are unique opportunities that most investors will pass up. 

For instance, we're working with a seller who is the majority heir, but there are four other heirs. We've been working for months to get everyone lined up, as well as working with our tax office and utilities to get her bills reduced. Because of our willingness to work a tough deal, we're buying 30% below market. 

And we're executing our mission to improve lives through real estate.

Each deal is different based on the profit in the deal. We do deals like this all the time and the equity split varies based on a variety of conditions. I will say that if we're only contributing sweat equity (the marketing costs are nothing compared to project costs) than we usually take a 30% position. 

We have one deal we're working now between a seller, us, and our contractor. The seller is putting up the property, the contractor is putting up the cash and doing the rehab, and we're managing the whole deal. For this one, we're taking a 20% position, giving the owner a 30% position with a slightly lower property valuation, and the contractor gets 50%. 

At the end of the day my advice is this. Sit down with all parties involved, find out what they need to get out of the deal, and find a way to make it work.

We use Freedom Bank of Virginia and City First has been recommended to us but we have not used them yet. 

Hi Kaylee,

Are you able to speak to the bank? The reason I ask is you need to find out what is important to the bank. JP Morgan may or may not care about a cash offer over asking price. There may be far more valuable things for them, like a good news story for selling an REO property that is going to be someone's first home, etc.

A good negotiation technique is to trade items of unequal value, which is why cash investors often beat out normal folks who are offering more (cash for investors not huge, but time and a guaranteed sale for the sellers are.)

Every bank is different in their process for selling REO properties so you'll need to feel them out.

I agree with everything Karen has said (as well as the others.) Karen is spot on with the fact that jumping from a cosmetic reno to a multi-million raw development sounds like a potential trip to the bankruptcy court. 

My advice is to be incremental here. Find a SFH that needs a complete gut or tear down (to the foundation.) That will enable you to learn to deal with all of the utilities, architects, regulatory folks, and develop a relationship with a builder without betting the farm on a single project.

Once you're successful with the complete gut, then develop raw land into SFH, and move on from there. This is what my group has done, our first project was an easy gut and flip row house, then a tear down, then new development, and condo conversion.

As far as the money goes, we don't do private equity AT ALL. Instead, we put deals together and just take a small equity stake (usually 15-30%) for putting the deal together, managing the project, and getting the property/properties sold. This limits our exposure and allows us to give really good returns to our investors.

My partners and I only buy where we have direct boots on the ground. A lot of folks will say we're missing opportunities and they're right, but that's our strategy. 

Neighborhoods can differ street by street and we feel the only way to garner the intimate knowledge of those neighborhoods is to be there, boots on the ground. 

A case in point. Of the founding partners in my company, two lived on the same street in DC. One of them moved to Seattle six months ago and was back in town last weekend. Since he's left, three major projects have started one street over and will completely change the demographics of that street. When he arrived, he couldnt believe how fast the projects started and their current progress. 

I already knew this because I walk the streets everyday, I speak with the neighbors, and I'm constantly plugged in to community events.

My partners and I just paid $5750 for a 2001 Ford Ranger with 74k miles. We wanted something inexpensive we could use for our real estate business. 

We've had it for 4 months and it runs great, plus its a huge help for the RE business.