All Forum Posts by: Steven Stokes

To be very honest, you should talk to a good real estate attorney and tax professional about your specific situation. What makes sense for me or anyone on here may not make sense for your situation or for where you live. For some umbrella insurance is enough, for others an LLC is the right move and for other a trust is the best route. But just like a good doctor would not diagnose your condition over the internet, giving you specific advice about your personal situation is just as bad.

It's good to know what your options are when you do talk to a professional on your team (I'm assuming you are building a team). 

But this should not delay or slow down your investing plans. 

I hope this helped. Good luck.

Stephen

I would recommend you speak to a good real estate attorney to put this deal together. 

But your deal from the little I can read from it seems like you can get transactional to put this deal together. 

I really hate these kinds of seminars!!!!

However, I still go to many of them just in case one of these so-called "gurus" accidentally and completely by mistake stumbles onto something that resembles a new idea. I've been investing in real estate for the better part of 15 years now and other than assumable mortgages disappearing like the dinosaurs, there is really nothing new under the sun. 99% of all the information you need is somewhere on the internet. And it's usually better and more detailed than what these "gurus" are selling. 

On the other hand, there is a lot of bad, unhelpful and false information. But that comes from gurus and the internet. 

 Here's the truth, investing in real estate is hard. It takes persistence, patience, hard work and some luck. I think the main reason most people do not succeed is because they fail to be persistent and learn and keep trying. 

IMO, when I buy real estate, I put it in a trust. There are several reasons why I trust up my properties but the reason why I do it may not be right for you. Learn everything you can about how to title a property and do what is best for you. 

But don't let title questions stop you or slow you down from your real estate investing. You will make enough mistake along the way, we all do. 

Good luck and I hope this helped.

Stephen

Congratulations!!!! And good luck on the flip. This is where the real work begins. haha

There are several reasons why a HML should be closer to the bottom of your real estate investing plan.

1. Hard money lender is going to be expensive - I don't have to tell you this but being new I don't know if you realize how expensive they will be and it could literally mean the difference between a profitable deal and you pulling money out of your pocket. Cheaper money is better especially when you are starting out. Right now, you do even know what you don't know. So you need to walk carefully through your first few deals to get some experience under your belt.

2. Hard money lenders do not care if you succeed or fail. Hard money lenders only care if they succeed or fail. They are not doing you any favors when they lend you money. When a HML lends you money it means the risk to their money is so low, even if you screw everything up they will still make money.

3. Hard money lenders could slow down your deal thereby making it even more expensive. Depending on the HML they might not give you the money in one lump sum. It's more likely they will want to inspect your work before releasing the next round of funding. Every day it's costing you money to be sitting on this investment (and expensive money). If each inspection takes a week or more, it adds up and not in your favor.

4. Before you begin your real estate investing journey, put together a plan, put together a team (I mean your accountant, attorney, investors, real estate agent), line up your possible financing options.

I know most people on here do not have rich uncles or millions of dollars in the bank. I wish this site focused more on financing sometimes. But that's another subject. What you need to do is go where investors go, join clubs and groups in your area, get your name out that you're an investor. Ask other "serious" investors what kind of deals they invest in and ask if you can exchange contact information if you have some questions. DO NOT TRY TO PITCH THEM YOUR REAL ESTATE DEAL. Find out the deals they love to do, and keep in contact with them while you're doing this kind of deal, ask them for advice, build a relationship with them. Then when you get stuck on the financing part they will either give you advice where to find the money or help you out. But build a relationship. This one secret I'm sharing with you right now has been why I've never needed to use a HML in more than seven years.

Obviously, I could write more but I hope this helps.

Good luck and don't give up. Real estate investing isn't what it used to be but it's still one of the best vehicles for the average person to gain wealth and financial independence. Please don't give up.

Best

Stephen

Hey Michaela, 

What you are describing is one of the main reasons why I no longer use hard money lenders. There are so many hoops you have to jump through for hard money lenders that getting the money from them is almost as hard as getting a deal from the seller. 

My advice, for now, is start calling other hard money lenders in your area, explain the situation that you are in with this hard money lender and see if they will be able to put together a deal that will pay the lender off and fund the rest of your deal. If you have a good enough deal, you should be able to get funding.

In the future, find your own investors. Hard money lender, get money from investors. You can save money in interest payments and have much less red tape by putting together your own team of investors.  

Finding investors is not rocket science it just takes some persistence and networking in the beginning. 

I hope this helps.

Good luck.

You have to look at real estate investing as a business. And as a business you want the maximum liability protection for yourself, your family and your partners. And you simple cannot do that as a sole proprietorship or even joint venture. 

There are too many things that can go wrong one year, two years or ten years down the road that will make you wish you took set up your business correctly in the beginning. 

In my opinion, you should always set your business up as an LLC or S-Corp and the reasons for doing this far out-weighs why you would not want to do it.

The worse part about having an LLC is that it does take a little more paperwork and it's a little more formalized but that's a good thing - not a bad thing for you and your investors.

I hope this helps. Good luck  

A lot depends on your potential investors level of financial knowledge and investing experience. Some investors will be very knowledgeable about  self-directed IRAs, term sheets, private placement memorandums and basic risk analysis, others will have no idea and may be scared away if you use this kind of terminology too soon. 

What I usually do is in the first meeting, get to know them and their investment history. 

What they are comfortable with and what they are looking for? 

I rarely do more than a few minutes about my investment offer in the first meeting because it's more about knowing what their goals and objectives and experience is rather than the investment I'm looking to raise funds for.

This is also a time to get a feel for if you both fit, in terms of temperament and personality. A lot of time we get so caught up in raising money that it's all we consider and then 6 - 12 months down the road we find ourselves in a deal from hell because we borrowed money from Satan (haha just kidding but you know what I mean).

Once you learn what they are comfortable with, their level of experience and you feel they would be a good fit then you should have another meeting with them to discuss your offer in more detail, and make sure you cover their points of concern as well as what makes them excited  and cover it in a sandwich style, meaning excitement, excitement, risk, excitement. 

Always be completely transparent, be conservative and be open and accessible and you will raise the money you need. 

It's not easy, especially getting started but it gets easier. 

As far as the contracts and term sheets, once you and you investor have agreed on the outline, have your attorney handle the rest. I hope you have the best attorney you can afford because there's a reason why the best attorneys cost more, because they will save you move in time and headaches. 

But that's my advice. I hope it's useful. 

Best of luck! 

Please listen to me when I say, do NOT invest a penny with your friends or family. Not unless your back is against the wall, creditors are banging your door down and your local loan shark isn't answering your calls. 

But if you have other options -- use them. Use all of them. But this is not the option you want to use. Investing with friends and family is like getting engaged, everyone is happy, upbeat, believe we can beat the odds and live happily ever after. 

Then comes the business (marriage). It can be complicated, touchy, hard, difficult and MOST do not work out well. Because when things go wrong and you're dealing with an outside investor, you go to your family parties and get togethers and don't think anything about it, right? But when the investors are your family, those nice family get togethers become this uncomfortable situations where you know they're looking at you and thinking about the money.

When everything is sweet. It's sweet. But when it's not, having your family as your partners makes it multiples worse. 

So there's a slightly better upside dealing with family because you know and trust them but the downside is long, cold and deep. If you don't have to do it, don't.

Just my opinion from plenty of examples and experience. 

I'm in Cali and I haven't invested in this market in years. Yes, it's possible to make some money here but the market is super hot, a lot of investors here have extremely deep pockets and the demand is out stripping supply by a wide margin. This summer was crazy here, so I invest anywhere but here. 

Not saying people can't make money here but why buy one SFH for 700k+ here when you can buy two or three somewhere else.

But that's just my opinion.