All Forum Posts by: Raj Gandhi

I'm working with a colleague to start a RE venture.  The location is 5 hours away for me while my partner splits time in my town and the prospective location.  Here's what we each bring to the partnership:

Partner: energy and boots on the ground.  

Me: experience from having six single family rentals (six years buy-and-hold) and cash available from sale of a rental.  

The plan is for me to put up most of the start-up cash (probably 90-95%).  The partner will ~earn towards the 75/25 split by doing property management over time time (probably 3-5 years).

So, the question is how do we structure a business to get financing and allow unequal ownership (of the property) that changes with time in a pre-determined way?

With regard to financing we'd like to get simple (not commercial) financing.  Will that be possible?

Any other comments about the proposed ventures are also welcome.

@Doug Thompson

I've bought four REO homes from the bank and one short sale that all became rentals in 2010-12. Since then, my capital was tied-up and it is very hard to find bargains. In ~2011 I attended one Sheriff's sale; it wasn't exactly like I pictured. Basically it was a deputy, 3 lawyers (representing banks) and me sitting around a small table at the county courthouse. I was a new face so instead of doing their business in the published order they did the property I was interested in first. The deputy had to read the whole notice even though it was printed/published.

Aside from lack of supply, the biggest negative for me buying at Sheriff's sale is that one's capital would be tied-up for at least 6 months without taking possession of anything.  Second would be the (emotional) risk of redemption.  One could have contractors all lined-up to do work on day one but a week before the former owner could, by some miracle, achieve redemption.

Being "foreclosed on Monday" isn't specific enough information to know exactly what is going-on.  Do a google search for the property address and "foreclosure notice"; try to find a newspaper notice published with the sheriff's sale auction date.

Starting from the first missed mortgage payment, the bank can start the foreclosure process.  The main step important to you is that the sheriff's sale is scheduled 6 months in the future.  You can purchase the home at the sheriff's sale auction by out-bidding (the bank).

After the sheriff's sale, the tenant still has six months (maybe this was changed recently to 1-year)  period.  They have this amount of time to live in the home and bring the mortgage to current.  Otherwise you can have the sheriff evict them.  (The tenant can also waive some rights and leave earlier.)  I believe this is the point where you take possession.  Note, your money will have been tied-up this entire time without having access to the home.

Look-up "redemption period" to confirm some of these statements.  I may not have all the lingo and current law correct.

If/when you take possession, the banks won't (can't) cash-out refi for six months after you take title. 

Even if the home is in the foreclosure process, the best solution might be to buy the home from the bank as a Short-sale.  The existing tenant can't be included on that deal; it would just be you and the bank.

My Keyword Tsunami abated shortly after my posting.  I also logged-in to the App on my phone.  I can't say for sure what the solution was.

What is going on?  My iPhone says 911 keyword alert notifications in the last ~10 hours.  Am I getting everyone's keyword alerts?  I'm not getting the same alerts on the biggerpockets.com website.  Therefore, it looks like it is only alerts to iOS.  The problem isn't because my keywords are too short or are a wildcard.  The notifications are for keywords I didn't subscribe to (2%, rental, etc...).

BNY Mellon's Property Inquiry line (800-269-6776) says that they don't deal with the properties.  One should contact the servicer.

Bayview's site is back up and I was able to find a phone number.  The customer rep there said to visit www.bayviewreo.com for my vacant property.  If the property isn't there then they won't be able to discuss it with me because I'm not on the loan itself (due to privacy).

My vacant property isn't on the REO website. I think I'll call one of the Bayview numbers tomorrow to at least confirm that they service the loan. After that, I don't know how I'll engineer a conversation with them...

Welcome Kyle.  I'm in the East metro.  Minnetonka is lovely.  Are you going to spend all your time and money having fun on the lake? :)  

Thanks for the replies @Jai Reddy @Account Closed.  It looks like this general idea has no legs.  The effort related to S-Corp or C-Corp isn't worth the reward.

An LLC has it's place. I have a CPA but not a lawyer (just lawyer friends). I've read Rich Dad Poor Dad, it is an inspirational book, not a recipe book for business. ;)

I already contribute to 401k and am approaching the contribution limit.  Bumping up my 401k contribution might work for 2015 but it will fail in 2016 or 2017.

Along the lines of NOT simple... maybe I could form a multi-member LLC with my mom and negotiate that she "gift" me money similar to the LLC proceeds.

No worries, I found a solution to my specific problem with one IRS income limit.

@Jai Reddy thanks for the reply.  It makes sense but I should clarify my question better.  The IRS has certain magic income limits and that's what I'm trying to control.  There's no way to avoid taxes but there are deductions that are phased-out based on income.

Say, for example the magic limit is $100k and last year my combined income was $95k.  This year I'm expecting a $10k increase in salary & rental income which would put me over the limit.

Can I split myself :) so that my income is $75k in personal salary and $30k in rental business (assuming it is true)?  Further, I might take $20k in salary from the business and leave $10k as assets for the business.  That should keep my personal income under the $100k magic limit.

There's a vacant home I know of that I'd like to acquire (see my recent posts for more background).  I know that BNY Mellon has the 1st mortgage on the home and I doubt it is up-to-date with payments (possibly 4 years behind).  I do not know why it hasn't been foreclosed.  

If I call BNY Mellon with the property address, would they or could they consider selling it to me (for a discount)?  Or is dealing with a bank that big a waste of time.

There's also a 2nd mortgage and I can't locate the married owners.