BiggerPockets

Hello Everyone at BP.

I have been reading, researching real estate investments and strategies for many years. For the past few months, I've been hooked on BP. The thing I like the most on this forum is people helping people to succeed. This is Unprecedented. Especially from people who are already successfull but still helping others.

I am a business owner. Over the years I've made some bad decisions and guess still making em, I.e. investing in stocks, over the board lifestyle, kids going to private schools, big house, expensive cars etc.

I just turned 40 and all of sudden I realized that I don't have significant savings, what if something goes wrong and I cannot continue working or suffer a huge loss.

I had to set a goal for myself and my goal is to earn atleast $25K/month passive Income in next 4-5 years. I just need a comprehensive plan.

1)Traditional savings methods such as Treasuries, saving accounts, term deposits don't offer good returns.

2) Fix/Flip don't have enough potential to reach my goals and its not passive.

3) I've researched companies like Prosper and Lending Club but their stats and no-collateral is discouraging.

4) I like the idea of owning a large multi-family complex debt free. NOI without the debt services will give me enough to reach/exceed my goals. With a Professional Managment Company, I won't have to manage day to day operations.

I have 1M tied up in various things which I cannot tap for next couple of years.

I have $300K in saving account earning 0.85% and can save additional 15k/month. In 4 years that would be over 1M. If this money is invested elsewhere it can grow much faster than 0.85%. The problem is that I don't have much time to spare so no rehab/flip.

I've also been researching transactional funding, Hard Money lending but am worried about usury laws, compliance with state/federal regulations, dealing with brokers, title companies, attorneys, CPA's and the due diligence on the property to fund. Maybe I am over cautious. Again sparing time is another issue.

What do you guys think of companies like Norris Group. Norris offers deed investing and rated A+ with BBB. Has anyone worked with them?

Any other ideas?

Sorry for a very long post.

Norris Group has a solid and professional reputation. I have worked with them a lot (as a borrower).

How much time do you have to allocate to making investment decisions? To me it sounds like you need to do something pretty passive?

Ozzy,
What you are describing with Norris Group is Hard money lending, with Norris Group doing the due diligence and marketing for you. Many hard money lending companies do something similar.

If you want to work with a similar business model, but in your local market, find the hard money companies that are local to you, or at least in Texas. Call them and ask about how they work with investors, and what their business model is. If you like what you hear, ask them for lender/investor references. They should be able to provide you with a bunch of happy campers.

Then, go to the local Real Estate Investor Assn meetings, and start asking around of the attendees what they know about xyz company. Or if they have borrowed money from them, and what their experience was. And if they recommend another company. Then call that company and ask about their business model.

You sound as if you want to invest your money in a hard money company local to you. That is smarter than trying to understand the California market from Texas. No disrespect to Norris group or any other company. But knowledge of local conditions is a much better indicator than an appraisal, since appraisals are easily manipulated by simply choosing different comps. Not that anyone is intentionally doing this, and I am not suggesting anything like that at all. But real estate investing at the scale you are considering in amounts your are talking about is fraught with traps for the uninformed.

For example, if you take your 1 million and buy a large complex and hire a property management company, how will you know if you are buying a good cash flowing property if you don't know anything about multifamily analysis. And if you hire a property management company, how will you know if they are sucking you dry if you don't know how to manage property.

Just a couple of points to ponder. Real estate investing is seldom hands off if you want to protect your capital.

I also agree with Eric that transactional funding is almost gone except for the 30 day hold model, which is something else entirely.

If you want me to elaborate on any of these comments, let me know.

Oz:

I can't offer any information on the listed organizations. However, if I could give you an alternative option about your plans (which alternative may or may not work for you... but you would do well to consult a local qualified professional to discuss this with)....

Being debt free may not be the best way to go. Every deal should have positive cash flow on closing. If you have positive cash flow carrying a debt there can be many benefits. For example, what if you can get owner financing on a complex? Hint, hint - do your best to accomplisyh this. Carry the debt load and write off the debt as a business expense. Pay off your debt and guess what - you pay more in taxes. In fact, when you get low on debt load - borrow more money, make capital improvements, raise the rent, increase your cash flow, continue to get tax savings. Another benefit is that debt acts as a disincentive for predator plaintiffs. There are plenty of people just looking for someone with money/assets. They find some excuse to sue, and they hope to collect a nuisance tax - either an insurance company or the defendant pays some money to make the person go away, because even though they did nothing wrong it will cost more money to show they did nothing wrong. However, before an attorney will even represent a plaintiff in a case like this the attorney will look to see how collectible the victi.. er, defendant is.... If you have assets tied up with debt then you are not very attractive. In your personal finances it may be more valuable to be debt free, but in business, the right type of debt can really be a money maker.... Please don't misuderstand me - none of these ideas are shady, these are all legitimate and justified business practices to keep your business going. You should always satisfy your obligations and you should always do what is right, but why not do things right in a way that also is to your benefit?

Oz:
One option you may want to consider for a completely passive investment is to invest with a private syndication that invests in multifamily. I have invested with one here in Omaha that has a 20+ year track record and half a billion under management that will give you about 7-8% tax free return. They are a limited partnership so retain the tax advantage, but, are highly illiquid. The advantage is you have no management concerns as it is totally passive.
Dennis

Ozzy,

as mentioned above look for reputable hard money lenders in your own area and many lenders offer what Norris group does. at the end of the day with any investment you want to be very low risk and high margin.

Most people look at real estate as high risk, high reward and I am very anti that, with every investment comes risk, now it all depends how you want to handle that risk, either by pass it(don't even invest into it) or simply minimize it by making sure its very low risk.

Real estate investments are NOT passive at all unless you just hand over your money to someone and let them do every thing and make sure they pay you back plus interest and there is recourse, you also want to look into as if you ever needed to liquidate how fast can you be out and how much control can you have over it.