Rookie Reply: The Seller Hasn’t Responded…What Do I Do?

Ashley:
This is Real Estate Rookie episode 312.

Tony:
When I first got started investing as well, I had my first deal under contract and then a deal that I had offered on months before, the seller finally came back to me and said, “We’d like to accept your offer.” I was like, “What the heck? I went from zero deals to two in the span of a couple of weeks,” and it was a little nerve wracking. So what I did was I partnered with someone else to help me get approved for that second mortgage and just bear the burden of managing the second property. So don’t be afraid of getting too many deals under contract at once. That’s a good problem to have.

Ashley:
My name is Ashley Care and I am sitting here next to my wonderful co-host, Tony Robinson.

Tony:
And welcome to the Real Estate Rookie podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And like Ashley said, we’re sitting here in our new studio, well, not ours, I guess mine, but Ashley’s here hanging out with me. But my wife and I… If you guys know, Sarah’s pregnant and my studio at the house is being converted into a nursery. So we either had to buy a bigger house or get an office and getting an office seemed like the more sensible thing to do. So we’re sitting on the studio side right now. My office side is over there and Ashley was here helping me put up lights and we got some fake plants to make sure everything was ready for today’s Rookie episode. So I appreciate you coming out to SoCal and hanging out with me for a few days, Ash.

Ashley:
Yeah, thank you so much for having me, Tony. My options were either staying with all of my producers in an Airbnb [inaudible] the other podcast host, or me and Sarah having a girl sleepover. So I chose to stay at Sarah’s house.

Tony:
Yeah.

Ashley:
[inaudible].

Tony:
[inaudible] she said, “Sarah’s house,” not, “Tony’s house.”

Ashley:
Tony will be there.

Tony:
I’ll be there.

Ashley:
Or actually he’ll probably still be in his studio working.

Tony:
Probably, I’ll still be here working.

Ashley:
[inaudible] be back there. But yeah, so I’m excited to be here and we also have something really exciting, coming up tomorrow. We have received a special invitation to actually record a podcast at the Spotify Studios in L.A.

Tony:
Yeah, and we’re actually going to be talking about this beautiful book, Real Estate Partnerships, is a book that Ashley and I co-authored. Ashley’s second book under the BiggerPockets brand, my first book with BiggerPockets. So just in a really cool thing for us to experience. But yeah, we’re going to be talking with Dave and Rob from the Real Estate Podcast about this book.

Tony:
If you guys haven’t checked it out yet, make sure you get on the wait list. We got a bunch of cool bonuses for people to sign up, but the book is launching on August 10th. If you head over to biggerpockets.com/partnerships, that’ll take you to a landing page where you can learn more about the book, and then enter for a chance to… Drum roll, please. Be a guest on this podcast. Yes, that’s right. One lucky person who purchased the Real Estate Partnership books will have a chance to be a guest on the Real Estate Rookie podcast. Who knows, maybe you can be sitting on this couch right here, in between me and Ashley. But that’s what we’re looking for guys, is someone with a great story to come talk about their partnerships and things like that. So again, biggerpockets.com/partnerships to learn a bit more.

Ashley:
And if you want to go back and listen to our Spotify episode, if you guys missed it, we have recorded episode 310, so you just have to go back to last week and you can take a listen to it.

Tony:
All right, so we got a few amazing, as always, questions from the Rookie audience today. We’re going to be talking about LLCs and whether or not you really need them. We’ll be talking about single-family versus multi-family and which one makes the most sense. We’ll be talking about private money lending, and how do you set that up the right way, and how do you protect yourself, and what are the options? And we also talk about how long should you let your offers sit with the seller before you pull it. So lots of great content for us to dive into today.

Tony:
But before we do that, I just want to give a quick shout out to someone that left us a five star rating and review on Apple Podcasts. This person goes by the name of Awesome-er Dude. This person says, “All five stars,” in capitals, “I’m a rookie in real estate, but I feel confident that this podcast has given me enough ideas to start. I plan on using this knowledge to really help my family.” So Awesome-er Dude, we hope that you can use this content to help your family because that’s what we’re all about, here at the Rookie Podcast. So if you are listening, if you’re a part of the Rookie audience, and you have not yet taken the time to leave us an honest rating and review, please do. The more reviews we get, the more folks we’re able to reach, the more folks we can reach, the more folks we can help. Just like Awesome-er Dude. And that’s what we’re all about here at the Rookie podcast. So again, just a few minutes to leave that rating review, we would appreciate it.

Ashley:
Plus tomorrow, we are seeing David and Rob from the OG podcast and we really do want to say that we truly are the number one BiggerPockets podcast.

Tony:
Absolutely, right?

Ashley:
So this week I want to give an Instagram shout out to Mindy Templeton. Her Instagram is @investinginyourwealth. And Mindy reached financial freedom at the age of 37 with real estate, and she shares deals that she has done, but also a lot of educational tips and advice that she takes the time to post about. So go give @investinginyourwealth a follow.

Ashley:
Okay, so our first question today is from Shannon Kay. Question, there’s a nice home listed at 130,000, it’s been on the market for five months, I offered 110,000. This would be a personal, primary residence. How long would you wait for a response or counter-offer before rescinding? I guess it depends on if another deal comes up or not. So you might as well be patient and wait.

Tony:
Mm-hmm.

Ashley:
If you don’t have any other properties you’re putting offers on and need to have a decision, then I would say let them take their time.

Tony:
I’ve personally never rescinded an offer before. I submit a lot of offers and I just let them sit, basically, until I get a response. So don’t feel like you need to put something… Or you need to pull it back. If the seller wants to take their time, let them take their time. I think the longer your offer is sitting in front of them, as the days and weeks go by, maybe the more motivated they become to actually sell to you. And I’ve shared on the podcast before, one of our recent flips, we ended up getting it for $100,000 less than what it was originally listed for. I didn’t rescind my offer. I submitted my offer that was low to them originally, they denied that offer. They came back to me a few months later and said, “Hey, will you take this number?” I said, “No, my offer is this.” And we went back and forth a few times and eventually they agreed to my initial number.

Tony:
So I think whatever your number is, it works for you. Put that number in there. I know what a concern might be is like, well, what happens if they come back and they say, “Yes,” but I’ve already moved on to another deal. So that exact thing happened to me when I first got started investing as well. I had my first deal under contract and then a deal that I had offered on months before, the seller finally came back to me and said, “Hey, we’d like to accept your offer,” but I was like, “What the heck? I went from zero deals to two in the span of a couple of weeks.” And it was a little nerve wracking. So what I did was I partnered with someone else to help me get approved for that second mortgage and just bear the burden of managing the second property, and it end up being in the beginning of a long partnership. So don’t be afraid of getting too many deals under contract at once. That’s a good problem to have, to have too many good deals under contract because you can always find ways to disposition those.

Ashley:
I have seen it where investors, or even people trying to go after a primary residence, have put a expiration date and time on their offer as a scare tactic in a sense, as to, okay, this offer is going away if you don’t accept it. So for example, you put in your offer and say, “This offer is good for 48 hours. If it’s not accepted, I’m moving on to another deal.” Because when sellers are reviewing offers, oftentimes they take one offer, but then they’ll say, “Well, I have these other two backup offers, so if this first one falls through, I know I have these two other ones.” Or they may feel panicked as to, well, we might as well take this deal because after 48 hours we’re not going to get this deal, and what if we don’t get any other offer?

Ashley:
So there is some game that can be played in putting that into your offer, but I think if you have no reason to do that, as to there’s no other property you’re trying to offer on and you can only buy one at this time, and especially with it being your primary residence, you might as well let your offer sit with them. I would have your agent follow up with their agent and just say, “Hey, what’s going on? Have they discussed it? Have they looked at it?” Even find out maybe they’re out of town or something, and that’s the reason they haven’t sat down to discuss your offer. So there may be reasons that they haven’t responded yet. So if you are doing this off-market, you could always just ask the seller directly and say, “Hey, I was just wondering if you had a time to look at my offer, would you like to sit down together and we can review my offer?” And that opens up the conversation to even negotiate or find out the reasons they are hesitant to accept your offer.

Tony:
Last thing, do you use DocuSign to send your offers?

Ashley:
No.

Tony:
You don’t, what do you use?

Ashley:
No. I sit down… Well, I email it to them first.

Tony:
Uh-huh.

Ashley:
Just email it to them and then I go and the next day, so within 24 hours, sometimes 48 hours, I will schedule a meeting with them, in person.

Tony:
Interesting.

Ashley:
So I’ll send it to them by email so they have time to review it, and then I go and sit down with them in person and go over the contract ,and then have them sign that.

Tony:
That’s pretty cool. I don’t-

Ashley:
Yeah, but I’m also doing deals in my market too, where it’s not anything far away from me too.

Tony:
I don’t think I’ve ever… Actually, the only time I met the seller from one of my investments was my first deal and I flew into Louisiana to be at the closing table, and we were just sitting across the table signing papers from each other. Outside of that, I’ve never met a single one of my sellers before.

Ashley:
[inaudible] is this for off-market, you’re talking about?

Tony:
Off-market and… Oh, yeah.

Ashley:
Yeah.

Tony:
Yeah, yeah. I guess off-market-

Ashley:
That’s what I was saying. But for on-market, yes, it’s all DocuSign or whatever.

Tony:
I was just thinking, it might be cool, DocuSign if you’re listening, when you send your offer on… I don’t know, those infomercials where it’s got the countdown timer.

Ashley:
Mm-hmm.

Tony:
Imagine if you could send your offer, but have a little countdown timer inside of it. So it’s like counting down.

Ashley:
That expiration [inaudible].

Tony:
Yeah.

Ashley:
Yeah, yeah.

Tony:
Anyway, DocuSign, if you’re listening, that’d be a nice little feature to add.

Ashley:
Okay. So our next question is from PJ Aurora. As a newbie, do you suggest going with a single-family home or multi-family for your first investment? So Tony, your first was single-family.

Tony:
Single-family.

Ashley:
And my first was a duplex.

Tony:
Okay.

Ashley:
So do you want to advocate for each one?

Tony:
Yeah, so I went single-family, and honestly I was looking. I was looking for both single-family and multi, but just the specific loan product that I was using to buy my first deal, it required that I buy a house or property where the purchase price and the cost of rehab was no more than 72.5% of the purchase price. I’m sorry, of the ARV. And I had a hard time finding multi-family in that city that met that criteria. So I was forced into buying single-families. So PJ, that’s one thing to consider, is what are the constraints of your situation? For me, my loan product made it a little bit more difficult to go into multi-family to begin with, and I had to focus on single-family. So I think both are good deals, really just comes down to your unique situation and personal preference. Why’d you go duplex?

Ashley:
So for me, it was because I was working as a property manager and it was only multi-family deals that this investor was doing. And so my thought process was, more units under one roof equals less overhead. So if I have one unit vacant, there’s at least another unit that is being rented out. So it’s not like I’m at 0% occupancy just because my one tenant in a single-family has moved out.

Ashley:
I think Tony brought up really great points about what are your constraints, but also what are your opportunities too? So are there more multi-family? So in Buffalo, you’ll go down certain streets where every single house is a duplex. You’ll go to other areas where there’s hardly any multi-family. So think about what the market conditions are too, that you’re investing in, and where are those advantages and opportunities for you, as far as going single-family or multi-family.

Ashley:
Another thing to consider is, are you going to be self-managing or are you going to be using a property management company? So if you are going to go small multi-family, two to four units, having four different families or four different households living under one roof and you’re self-managing, can cause some issues that may arise, that you may not want to deal with. So maybe single-family is a better option for you because you don’t want to deal with the headaches of tenants all living together. Because we have this one situation right now where a resident keeps putting in a work order that she hears water running in the walls, and all it is when the tenant above her flushes the toilet.

Tony:
Flushes the toilet.

Ashley:
So water going down the pipes, there’s literally nothing wrong and nothing we could do about this.

Tony:
There’s water in the walls.

Ashley:
But those are things you have to think about if you are going to go multi-family, is tenant issues between tenants that will come up. Another thing that Tony touched on was the funding, the financing. What kind of financing are you getting and are you eligible to buy multi-family or it does it have to be single-family too.

Tony:
One of the other things, because you have both multi-family and single-family, do you notice that you have more turnover in the multi-families versus the single-family homes?

Ashley:
Yes. My two single-family homes, one I’ve had since… This was actually my old house, so I think I moved into it maybe 2010, maybe it was. And that house has had the same tenant in it since we built our new house in 2016. So since 2016 it’s had the same family living there. And then my other single-family, the first tenants to move into it, when I bought it in I think maybe 2017 I think it, was maybe 2018, and those tenants lived there for, I think, three years and they ended up building a house. And they moved out and it was actually their daughter’s sister-in-law, or something, that was ready to move in right away, and we’ve had that same tenant in there since then. So we’ve only had that one turnover. But yeah, that’s a great point. There’s a lot more turnover in the small multi-family.

Tony:
Yeah, so there’s pluses and minuses to both, PJ. I think it’s all about what strategy makes the most sense for you. Here’s what I learned about real estate investing, people can make a ton of money with every single strategy. It literally does not matter. If you want to flip land, if you want to do small multi-family, if you want to do large multi-family, if you want to wholesale, if you want to flip, you want to do Airbnbs, whatever strategy it is that you choose, if you just commit to getting really good at that thing, you’re going to be successful at it. It’s just more so which one speaks to you, which one aligns with your strengths, with who you are as a person, and I think that’s what you should focus on more so.

Ashley:
Yeah, and I think one other thing to look at too, is what your exit strategies are.

Tony:
Mm-hmm.

Ashley:
So for a single-family home, that may be easier to sell. If you decide you don’t want it as a rental anymore, it’s now not only being sold as an investment property, but also it can be sold as a single-family home as somebody’s primary residence, which may be easier to sell than a triplex in your area-

Tony:
That’s true.

Ashley:
… because families want the single-family, so they sell a lot better than multi-family does, in your area.

Tony:
Yeah, that’s a good point.

Ashley:
Okay, the next question is from Brett Lebish. Starting out, do I get an LLC to buy a property or can that wait? Very common question.

Tony:
Yeah. First, I just wanted to give you props for pronouncing that last name. I thought you were going to pass that one on to me, but I love the flare there. So yeah, LLCs, let’s just take a trip down memory lane. When you got your very first property, did you set up an LLC first?

Ashley:
I did because I had a business partner, so that’s why I did. And anything that I bought for me personally without a partner, I put into my name and then I eventually put it into an LLC. But starting out, anything I purchased myself with no partner, was in my personal name.

Tony:
Yeah, my very first deal, I bought in my personal name. Our first multiple deals was all in my personal name. Part of that was because the kind of debt we were using didn’t allow for LLCs to hold the debt, so we were forced into doing it that way. But we just did an episode… Gosh, we’re recording this without our producers, so they’re not here in the background feeding us all this information, but we’ll put it in the show notes. We recently did an episode where we interviewed some folks from insurance companies and they give a really fantastic breakdown about the difference and the purpose of insurance versus an LLC. So your insurance, in addition to protecting the actual physical property itself, it also serves to give you liability protection. In a lot of ways, very similar and sometimes above and beyond what a traditional LLC might be able to give you. And in that episode they talk about how, in a lot of situations, your corporate veil can be pierced with your LLC.

Tony:
So I’m saying all that to say that you don’t necessarily need to start an LLC in order to buy your first property. If your goal for the LLC is asset protection or liability protection, you can get increased home coverage, you can get an umbrella policy. If your goal for the LLC is tax benefits, you can reap all of the tax benefits without having the LLC created as well. So I think just ask yourself if the juice is worth the squeeze in that first deal. You see some investors that maybe wait until they have a few properties under contract, where they feel that there is a little bit more risk there, and then they’ll go ahead and drop everything into an LLC. But I would say for that first deal, it’s definitely not absolutely necessary. But again, I’m not an attorney nor do I play one on the podcast. So talk to your own attorney, understand your unique situations, but that’s just my 2 cents.

Ashley:
I’ve decided to pick up the producer’s job, and I looked it up and it was episode 307.

Tony:
There you go. Episode 307.

Ashley:
[inaudible] look at it. Another thing to consider is your own personal net worth. So if you have a lot of assets already, that if you were sued personally, you’ve had a lot of equity and things that could be sold to pay off whatever the lawsuit is, then it might entice somebody to go after you more if you have a very high net worth, because you have things that they can take from you. If you have nothing to lose, then, really, what are you protecting yourself from losing, in a sense? And if you rent an apartment, you don’t own a car, you have a bike, or maybe your car is leveraged to the hill, you don’t really have any equity in it, you don’t have really any savings, you don’t have any stock investments or anything like that, then you’re not really opening yourself up to too big of a lawsuit, because you can’t get sued for that much beyond what your insurance is going to cover, because you just don’t have anything to give, more than that.

Tony:
Yeah.

Ashley:
Okay, and our last question today is from Matt Hammond. How does one become a private lender? What paperwork steps needed to be completed when making a deal? So I’ve only been a private lender once or twice and it was just to friends and was very much-

Tony:
Like back of a napkin-type, yeah.

Ashley:
Yeah. Yeah, we had a note payable agreement, but as far as lending to a complete stranger, maybe somebody you meet over the internet, what are some of the things your private moneylenders have asked you for?

Tony:
Yeah, for sure. So I’ve never been the private moneylender, but I’ve definitely received funds from private moneylenders, and there’s a couple things and a couple of different ways you can do it. But firstly, I just want to say Matt, he posted this in the Real Estate Rookie Facebook group. I can almost guarantee, after he posted that, he became the most popular person in that group saying, “How do I become a private moneylender?” But it just goes to show, even for our rookies that are listening, there are people out there who have money that they want to put to work but don’t have the time, desire, or ability to do it themselves. Funny enough, we actually just got an email, Ash, on maybe two days ago for one of our older private moneylenders, and we’ve slowed down on our flips and he reached out to us and said, “Hey guys, I’ve got $200,000 that I’m just sitting on, help me put this to work.”

Tony:
He literally reached out to us. So that’s what happens when you connect with the right people is that they don’t want to see their $200,000 just sitting in the bank, losing money to inflation. They want to put it to work and get a good return. So for our rookies that are listening, it’s a big mindset shift, and one that was not difficult, but it was just a very eyeopening experience for me, that people had several hundred thousand dollars just laying around that they wanted to just hand off to someone else to put to work. And once you realize that, I think it really opens up your mind about what’s possible with private money lending.

Tony:
But to answer your question, Matt, in terms of the documents that we use, we have two important ones. We have our mortgage security document and we have our promissory note. The mortgage security document has a different name, depending on what state you’re in, but for us here in California it’s called a deed of trust. And then we have the promissory note. So each one serves a slightly different purpose. So the promissory note is the agreement between the lender and the borrower, and it states all of the terms of that loan. So it talks about the term, right, so how long is this note going to be in place? The interest rate, the principle, if the interest is due over the life of the loan, if it’s one balloon payment at the end. So it just details all of the nuances of that agreement between the lender and the borrower. Same thing you would see if you’re getting a loan from Bank of America just with way less pages, but it just details the note itself. With that promissory note, the borrower signs that note and then you mail that, or send it however you want to send it, to the actual lender. So that’s the promissory notes, the agreements between the lender and the borrower. Now the mortgage security documents, that is the paper that ties the promissory note to the property.

Tony:
So let’s say that Ashley comes to me for a loan on 123 Main Street. Ash, and I agree to a note. Ashley signs a promissory note, she sends that over to me, and then Ashley also signs the mortgage security documents and gets it notarized, and then that gets filed during the closing process, with the county or whatever local city the property’s in. So now if someone goes to look up the records for 123 Main Street, Ashley will be listed as the owner on the deeded, but I will be listed as the lender on the property, with a lien for whatever amount Ashley and I agreed to. And the reason that’s important is if for whatever reason Ashley defaults on her payments, and we’re not able to come to an agreement, and say I want to foreclose on the property. In order for me to be able to do that, I have to prove that I have a lien against this property, and that’s what the deed of trust does or the mortgage security document does. It shows that I have a lien against this property.

Tony:
The second reason why it’s important to file it with the county is because, say that Ashley does a really good job, say that it was a flip that her and I agreed to, and she goes out and she sells that flip for a super handsome profit. When that deed of trust is recorded, before escrow will release any funds to Ashley, they’ll see my lien first. They’ll reach out to me and say, “Hey, just so you know, Ashley’s selling 123 Main Street. Based on the promissory note that you guys signed, here’s the principle and entrance that’s due back to you.” When escrow collects the money from the buyer of 123 Main Street, they pay me first and then Ashley gets a check for the balance. So that’s the documents that we use and that’s how they play with each other.

Ashley:
Yeah, so if you’ve ever sold a property before, that had a mortgage on it, you don’t even see the money that is owed to the bank. They, right at the closing table, your attorney takes that and pays off the mortgage on the property.

Tony:
As nice of a person as you might be, they do not trust you with several hundred thousand dollars just to hand that back to whoever [inaudible].

Ashley:
Yeah, to drive it to the local bank and pay off-

Tony:
And deposit it.

Ashley:
… your loan on your own.

Tony:
Yeah.

Ashley:
Yeah. So what’s really important there is that you have the promissory note, but also that the property is the collateral and you get that lien position on the property. So you can contact an attorney that can help you set it up. If you are… Where you are lending on the property, so maybe you live in California, but you’re lending on a property in New York, I would use a New York state attorney since that is where the closing is happening.

Tony:
Mm-hmm.

Ashley:
So have you done that before for your Tennessee properties? Do you use a lawyer in Tennessee?

Tony:
All of our flips, all of our private money transactions, were here in California.

Ashley:
Okay, yeah.

Tony:
Mm-hmm, but I would agree with that too. I think whatever state the property is in is where you’d want to draw those up. I think the only other thing that I’d add to that, and I’ve seen other friends of ours who flip that do it this way, where, say that they’re volume flippers, where that’s their main bread and butter. Instead of going through the steps in the process of drafting up new documents every single time, they will just raise private money without having any properties, even under contract. Almost like a fund where they’ll say, “Hey, I have three private moneylenders and each of them gives me, whatever, $500,000. So I have $1.5 million to work with. I’m going to pay them interest payments every quarter. There is no promissory… Or there is a promissory note, but there’s no deeded of trust, because this isn’t tied to any specific property.”

Tony:
The benefit to you, as the borrower, is that there’s less paperwork, you don’t have to worry about trying to get all this signed up for every single property. But obviously there’s a little bit more riskier that if you were to default, now that private moneylender doesn’t have their money tied to a specific property that they can go and foreclose and try and take away from you. So usually you see that when you’ve built a relationship with those private moneylenders and you’ve maybe already done a few deals together, you guys know each other, and that’s how they handle it that way. So I think how, initially explaining it, is good for the first go round, which sounds like what you’re getting into, Matt, but then just know if you want to go down the road where you just get quarterly payments every month, that’s an option as well.

Ashley:
Yeah, I would just lead a word of caution as to making sure that you are vetting the deals that this flipper is doing, because we have seen such a drastic change-

Tony:
Totally.

Ashley:
… in the market, where maybe you were getting such a great return and then, especially during 2022, the [inaudible] flipper wasn’t making what they were, and then now they can’t pay you. So just be cautious that, just because somebody has had a great track record, doesn’t mean that they always will. There’s going to be bad deals once in a while, and it’s really important to know that who you’re lending that money to. If you’re not going to hold the property as a collateral, asking them what almost their exit strategy is to pay you, if they do end up defaulting on the loan.

Tony:
Yeah.

Ashley:
What other options do they have to pay you?

Tony:
Mm-hmm.

Ashley:
There’s a lot of investors that have tons of money in reserves and they don’t use their own money to buy deals. So worst case scenario, they’re tapping into their own savings to go ahead and pay you.

Tony:
We literally just had that happen in our business, and I shared one of the other episodes, but it was actually two properties. I shared on one. We had two properties that this happened to, but we had to write a very big check to pay off our private moneylenders. But that was our commitment to them like, “Hey guys, we had an agreement. We want to make sure that we protect this relationship more than anything. So even if it means we have to lose money, we’re going to make sure that we make things right.” So yeah, great point.

Ashley:
Yeah.

Tony:
You want to vet the deal, but also vet the financial standing of that person. And maybe it’s not necessarily like, “Hey, show me your bank accounts,” right? But just say, “Hey, if things were to go south, are you liquid enough, or do you have access to enough cash to still make sure that this note gets paid in full?”

Ashley:
Which that really isn’t something that you couldn’t ask for, is their tax returns, their bank statements, making sure that their own personal finances have a strong foundation, so that if they literally have nothing and they over withdraw their own personal checking account, maybe they can’t manage their own money. How are they going to manage-

Tony:
Yours.

Ashley:
… yeah, yours? Another thing too is to think about, is with how Tony mentioned that he took his own money to pay back that private moneylender to make it right. Think about different circumstances where, if you are either the private moneylender or you’re actually a partner, where you’re bringing in the capital, and in that sense, if this person was your partner on the deal, then would you have had to pay them anything or that was more of a risk for them to do that?

Tony:
Yeah. That’s actually a great call out, right. So in our book, Real Estate Partnerships, there’s… Zoom in on that guys. But in that book, one of the chapters, we talk about the differences between equity and debt-based partnerships. So you can be a private moneylender in the traditional sense, where it’s an actual note and you have that set up. But what you said, Ash, is I’m the money partner in an equity partnership.

Ashley:
Yeah.

Tony:
Right, so you can bring the capital for, say it’s a flip, so you put up all the money for the flip, the partner manages it, and then instead of you getting a fixed percentage return on your investment, you get a percentage of the profits. So the downside is a little bit higher, right? Because if, say the deal goes badly, you’re not going to get a fixed return, but the upside is there as well, right? So say this person just crushes it on the flip, instead of you getting a 10% return, maybe you get a 50% return. So that’s another thing to consider as well, is that you can be a private moneylender, technically, inside of an equity partnership as well.

Ashley:
Well, thank you guys so much for joining us for this week’s Rookie Reply. I’m Ashley, @wealthfromrentals, and he’s Tony, @tonyjrobinson, and we will be back on Wednesday with a guest.

Speaker 3:
(singing).