All Forum Posts by: Aaron Pfeffer

@Hagop Sandaldjian

Partner with someone. I'm an HML who has lent quite a few gap position 2nd liens, but I couldn't recommend that's a good idea at the moment. For starters you're green to real estate, and you really need to be comfortable with being prepared to take over the project and debt service the first lien if something were to go wrong. Secondly, most deals that currently demand only $50K gap are not good at the moment. The market is not ascending like that any more, and the flip deals are marginalized. So if you were to involve yourself in one, you are better off partnering with someone else as a principle who can control the project, get your hands dirty, and learn what's involved in a rehab project. In other words, don't lend that money and hope for the best...be a borrower yourself (with another partner) and earn the profit that way. Where are you going to find a partner? Either on here or at a local real estate club. Where are you going to find your own deal? Somewhere below the 10 freeway or into the Inland Empire for the price points we're talking about. And please don't just buy retail off the MLS...work a deal for a decent buy! Also, I do like what @David Dye advocates. I mean, let's say you bought a rental in Lancaster for $120,000, put in $15,000 for rehab and rented it for $1250/month. Close enough to the 1% rule. But are you managing it or will you hire a manager for 10% a month? And you should do an HML from Lending Home to do that deal by the way. 12 month term, no pre-pay, and they'll give you 80% purchase price + 100% rehab money. Then let's say the house appraises for $150,000 six months from now, you can cash out refinance it at 75% LTV after that amount of seasoning. So then you're into the deal $12,500 plus another $7,500 or so in holding costs, plus $3-5K in closing costs. So call it $25,000 you're all in on something that cash flows $300/month, you got yourself $25,000 in equity, some tax sheltered passive income, not to mention what it accrues in equity over the coming decades as you pay the principal loan done. Go forth my man!

Charlie telling it like it is...

#agreed

Barbara Goodman for the win!

Preaching to the choir.  

It's all about mindset and risk for these managers. Will you get them paid appropriately and are you worth the risk of their clients' money?  Sell them on that and maybe you'll make some headway...

You're certainly not the first to think of this Rodney, and probably won't be the last.  It's a needle in a haystack hunt for the one wealth manager who will want to play ball with you. Mostly because your referral fee and the wait for said fee won't entice them enough to steer their clients away from the other vehicles that truly get them paid.

What you, and every other investor who wants their own private money partners should do is run an MLS search of all properties in your farm area that were clearly flips in the last 24 months, then Redfin each property and look at the recorded transactions to see if deeds of trust were placed on the property when first purchased, then run a title search of those deeds to see who the beneficiaries are, then track down those beneficiaries any way you possible can...and convince them to work with you.

Good luck sir!

Good to have you Vanessa!

I was a broker for a national property management chain that also did leasing some years ago when we tried to open it up here in Los Angeles.  Didn't work for out for our market, but they have franchised elsewhere.

Renters Warehouse out of Minnesota. It may be worth your time contacting them...

Wow Nicolas, that split seems very benevolent.  Most Joint Venture or Money Partners such as yourself demand a 50/50 split plus their interest pref.  But hey...that's your business. Though it is noticeable in your scenario that no sales costs were unaccounted for.  Minor oversight.

Daniel........do some research to figure out what properties that have sold in your area in the last 18 months were flips.  Then get access to a title company website and look at transaction history of those flips and see how high they were leveraged.  If someone gave 100% of money or even did a second lien then pull the Deed of Trust and see who the beneficiary was.  Track that person down.  Introduce yourself and tell them what you are looking to do and why they should Joint Venture with you on your projects.

How about holding costs?  If you are not paying all cash for the ultimate purchase price you decide, then you will have to pay a monthly on whatever amount you financed.

Love the creativity...haven't heard of a specific structure like that.  

Regarding it being fair, the question I have is...as compared to what?  As in, you paint a scenario of what you want to accomplish for 50% ownership, but don't actually say what the alternative is.  Are you currently buying property with him now and you are both putting equal amount down payments in and equal amount monthly payments but he owns more than 50%?  More specifically, what IS your current ownership and contribution structure with this investor?

In a vacuum, if this is the only scenario you were presenting for 50% ownership, then I would hesitate to call it fair.  At the end of the day you won't have skin in the game.  You might share in the monthly payments, but it's his down payment at risk.  And then you're relying on cash flow to pay him back your portion of the down payment.  That's the interesting part.  Maybe once the full half of the 20% down payment has been paid back you should own half, but until then, maybe more of an escalating ownership scale?

Say you own 20% now for sourcing the deal and making half the monthly payments on the mortgage, then 35% when you've paid back 50% of the 10% for your portion of the down payment, and finally you get your 50% when you've paid 100% of the 10% to him.  That might be more fair.