Make 4 25K loans...... :)
Make 4 25K loans...... :)
But wouldn't you have all kinds of legal issues? It could cost many thousands in attorney fees to set up a lending practice and become licensed, secure bonding insurance, create multiple entities, and all that comes with becoming a lender. Then of course, how do you solicit your borrowers?
Hopefully Bill will share with us, how we can do this w/o spending a bundle on legal. Seriously, I would like to know.
Don't worry about all that you're not trying to be a LENDER; you're just looking to be an investor. You should be looking to partner with someone that has experience and a proven track record of getting a solid ROI for their investors. You provide all the cash, they do all the work, and you split profits.
What type of measures would you take to hedge against scammers and cheaters, if working with people outside of your circle.
That is tough to answer when you live in San Fransisco. Down here in South Florida you can do a lot with 100K, but in San Fran I don't know that to be true. If you are looking to just do a quick flip, you need to just start looking online using the MLS if you have access or if you're not a licensee, use Realtor.com. The way I got into Real Estate investing was by doing A LOT of research and investigating. Learn your area by using the maps function in Trulia, Realtor, Zillow.com etc. Drive around and check out what you see and think is a good deal. Zillow allows you to see what has recently sold, what has recently rented, and what is on the market now. Once you get an idea of prices in the areas you like, I would say continue to search in the areas you prefer. For instance, in South Florida the beach and downtown areas are the best for rentals; but the family neighborhoods out West have better school districts and are more appealing to families. If you want to create residual income, I have found that studio apartments generate a lot of money if they are in a great downtown area. If you could get into a duplex, triplex or four-plex; you would still be dealing with residential and you could create a money making machine if you get the right deal. Do you want to build a portfolio of property which brings in income every month and cash out later on in life or the best market condition? Or do you want to just do a deal and make some sweat equity? My portfolio is built on long term rentals that bring in decent monthly income; but you may want to just make a quick buck? Honestly, this is a really open ended question and you have to figure out what works best for you. Sounds like you should do a lot of networking with people in the area and get some ideas. Don't talk dollars, meaning don't run around saying you have 100K to burn; just start asking the right people the right questions in your area. I would highly recommend finding out what book the local Real Estate licensee testing center uses, buy it used and READ IT! If you are already educated in Real Estate, have a bachelors in Real Estate or have your license than you're good to go. But if not, take the time to learn what you're doing before you spend all of your savings. Just my two cents, you asked for it =)
Chris
There was a similar thread recently:
http://www.biggerpockets.com/forums/48/topics/75085-how-would-you-invest-100k-if-you-were-me-that-is
And Gerald didn't ask: "What kind of investing should I do with 100K cash?"
He asked: "What would you do - how would you invest your 100K cash?"
Bill Gulley simply answered the question.
And Jeff S., I can answer some of your questions, but they will be very different answers than those that Bill Gulley would give, because we focus on different aspects, from what I can tell.
If you want some of my answers, send me a PM, a time that works for you to talk, and a phone number. Phone is easier than endless email. Understanding we are 3 hours apart.
Hopefully Bill will share with us, how we can do this w/o spending a bundle on legal. Seriously, I would like to know.
LOL, that's cute, yes it may cost that 100K for some to open the doors, but not me, I already checked, just for grins, it would cost me about as much to go back and renew my RE Brokers license! I don't need no attorney...LOL (No disrespect to attorneys guys, just say'n). I can use many of my old docs anyway it only takes one entity for that 100K. :)
Tell some Realtors you're willing to help as a hard money guy and to call you.....they will call you, you don't look for borrowers. You could make that one loan for a 100K, making several puts you in the business. :)
Ann- I agree with how you see the question, but typically when people ask questions on a forum it's to find out ideas for their own decisions making.
OP- There's a lot of websites with info on hard lending, it probably differs from state to state. With 100k right now I would probably buy a couple Section 8 houses in downtown Delray Beach Florida In areas that have been designated for future change under the Community Redevelopment Agency. Or try to purchase another beach house and stage as a posh seasonal rental. Again, it's really what works in the area you live in. Best of luck, and watch out for vultures :)
Christopher Russell there are some BMV houses that are in a area that is planned for redevelopment im looking into, the only thing is they redevelopment is expected to be completed in 2036 lol.
Bill Gulley Have you approached realtors as a lender? care to share some of your experiences i've never heard of anything like this. What type of returns did you see? Time Frame? conditions of lending?
Ok, what I would do is lend it out to other real estate investors doing rehabs - those who do it as a business, not the onesy twosey's that are considered residential. since $25K here in MA and NH doesn't get you anywhere, I wouldn't do four $25K loans - too much work, even though it spreads the risk. And a $25K loan here is probably downpayment money, which I also don't do.
I think Bill Gulley was licensed and would lend money on residential deals, hence the only leads you would need would be from real estate agents.
But I'm sure he'll jump in and correct me if I'm off base. :-)
I can tell you what we are doing with 114k in Indiana.
I would forget the stock market until after the election, you could always ladder some bonds not a great return on that though
in our case
we are in the process of buying 2 rental properties one is a duplex with an accepted offer 87k with rental income of 1400 per month and the rest is being put down on a triplex with an accepted offer of 65k with income of 1350 per month. I'm not a fan of the 4 25k loans, I have a few friends that went that way before, only to get bitten when renters moved out plus I'm a little more conservative in my investing approach
good luck
I guess it would help if i read all the posts----- I thought Bill was talking about leveraging , which in my opinion is not a good idea. - but oooh I like the hard money loan idea 4 25k loans at 6% = yummy
I agree with Darron, multi family buildings are the way to go if you are savy enough to do your own maintenance and management. Learn how to figure out the Net Operating Income AKA NOI and see how much you'll make at the end of the month after all expenses.
@Gerald- Was that the Cities Master Plan lol. There is actually a million dollar downtown expansion going on right now which is extending the downtown boarders West to I95 and East to A1A. This means that when you exit the highway you will see indications of entering downtown in the form of art work, new storefronts for commercial buildings, new landscaping etc. People don't really take City Planning into consideration with their investments, but don't get it twisted, investment firms do! And I thought my degree in City Planning was worthless since I chose not to work in the government sector! :)
The loans sounds like a good idea, but what if you need access to that money? If you provide loans with your $100k, you are tied up for the term right? Shoot if that what you want to do, go to a bunch of local "buy here pay here" car lots and ask what type of rates they offer for you being a hard lender on their car deals. Then you collect money monthly and if they default you take the car back! You don't need a license to make far loans, at least in Florida I'm pretty certain you don't. Unless the guys I know are doing it illegally. Good luck!
Okay, sorry I'm late, I see I was summoned, LOL
I was a "hard money" lender and a residential secondary market broker/originator then banker meaning that we funded at the table and sold the mortgages...pretty quickly most of the time.
We also did commercial brokerage and funidng on smaller deals, 100K to 2M. Also did some leasing and floor planning for inventory.
Residential loans are primarily done on sales transactions until the public is aware that you exist and the refis come in, refis also come from your own past originations. I already explained the origination of seller financed deals, loan servicing of installment contracts and notes which ultimately turn into refis or purchase money deals as well.
Marketing is done directly to all real estate offices, lenders provided "Rate Sheets" (now and also on line) to real estate offices. You go in and pass out rate sheets, talk about your programs and have some face to face time with Realtors. This is where your originations come from. Just a few good Realtors can keep you busy.
For any real estate lender, residential or small commercial deals, Realtors start your business.
Many of you may be surprised to know that alot ofbusiness also comes from other lenders. I had a brokerage or origination arrangement with a few banks. While I did take a few deals their way, they brought deals my way as well.
I did alot of jumbo loans for a local regional bank as they did not do jumbos. If they had, say a doctor as a banking customer, they did not want to tell them to go someplace else and they simply explained that due to the nature and importnace of that loan that they would have their mortgage originated by an affiliated broker to ensure they got the best deal....(yes marketing) but what it was was the fact that I did not compete with them with checking, savings, trust banking or other services, just loans. In return I would also explain that we (the bank and I work together on special loans and would act more like I was originating for the bank, which I really was). Anyway, point being that while you may think banks and brokers may be cutting each other's throats, they may also be working together. DId basically the same thing with commercial loans, in whole or participations, moving the papaer after closing.
That's the nuts and bolts, short version.
Your reputation is what carries the lending business, who can "make" the loan, who can get it done, who can work out the problems and who has solutions or alternatives. I was pretty creative and very good at getting deals done, the fact that other lenders send you business was a two edge sword too, you get the business and more grateful clients and Realtors, but sometimes they were a pain and could have done two deals for the time spent, but it really meant less coffee drinking time.....LOL
Right now is a hotter time than in the 90s for refis. A lender can simply open a file and see who will benefit from the refi. I'd call them and have a five minute conversation and they would be in my office. The premiums were often so much that I could pay some or even all of the closing costs (getting a deal on those costs) and refi them. Rates changed so quickly and drasticly that I would close one loan and immediately refi it at the closing table with the same mortgage banker on brokered loans. (BTW, that was the birth of seasoning requirements as quick refis backed up the pipeline upstream). Today, a no cash out refi can still be done pretty quickly, but there is no real savings, so they are not as active as the old days.
Then, originating seller financed transactions (working FSBO by my originators) as well as attorneys who referred services in a limited and liability free manner (LOL) these deals could be purchased, so there was the aspect of buying notes. That's how it started and by making contacts with estate attorneys, bankruptcies and government services we would be contacted about purchasing obligations.
I also did a few seminars for Realtors and would meet with attorneys, CPAs and Stock Brokers building relationships with them. I never had to run a TV or radio ad. I used some newspapers for a short period and never again. So, I really didn't do conventional advertising, being the Loan Arranger as some called me. (I'm sure others have used that name, LOL, but "they" nicknamed me). People would say they never heard of me (the public) and my response was..."I'm very busy and doing my best to keep it a secret"! And actually, kinda sorta did by never advertising. You'd be amazed at the power of word of mouth in RE!
I guess I could say that my 25K loan in this thread could have been for transactional closings and getting my money back with end loan financing, churning my money at least 4 or 5/6 times in a year, that's roughly an additional 3,000 bucks on 25K plus interest. I seriously doubt any landlord could keep up with a loan porfolio of short term notes.
As to financing personal property, if you are in the business of lending, you will need a license in all states, if you make the loan to a car dealer, that would be commercial and many states don't require registration unless your are "in the business of lending". Making 'A" loan is usually not a problem, making ten probably will be.
There is a little insight to lending, the marketing and building a portfolio. Good luck.......
Very informational! Sounds like a great way to diversify that's for sure. I guess it's all where your knowledge is and what you feel comfortable with, or what your willing to learn. For myself, I was a Project Manager in construction for 10 years, Real Estate Licensee and have a degree in City Planning; so I have learned property acquisition, build/rehab and lease/sell. If you were a mortgage broker with a degree in finance, I would understand where your knowledge came from and why you play in your playground :)
As far as which one is better, well that all depends on the market conditions people are diving into. In Delray Beach I have seen short sales that were sold for $150K 2 years ago appraise at $400K today. Now that is attributed to many factors, bought bottom barrel low, international investors driving South Florida markets high, income generating properties thriving due to increased rental market, Delray being rated most fun small city in America etc etc.
What do you guys think about buying property tax certificates in good areas? Apparently you can get up to 15% return on your investment, and possibly end up with the deed if you push for foreclosure. Anyone have knowledge of these? I LOVE THIS SITE BTW!!
Christopher, good to have a planner aboard! Lending was my primary business only half way through my RE background, won't go into it here, (profile) If you go waaay back, I began I guess in construction working for a home builder. Tax liens can be profitable, interest here is limited to ten per cent if redeemed and if not you'll get a tax deed without warranty and pay a premium for title insurance, but allin all, not a bad way to go if you can search property liens and title.
My comment about the return wasn't meant to be competitive, as I'm getting off my Olympic high.....LOL, I'd have to say that in all my years and varied experiences, you can hit a good lick on almost any aspect of RE investing under the right circumstances and opportunities, but probably the easiest, most consistant and for the time involved the most profitable is purchasing notes at a discount and refinancing them. A 100K note at 65K purchase and refi it at 95K in 45 days shoots the yield in orbit. Development of a Sec. 42 tax credit program is second on my list for the developer. While I picked up a few tax sales, I don't have a track record, but they were decent, could be very good if enough were done. But they are few and far between here and there are those that redeem them for the owners at a fee as well cutting you out. These are all short term investments.
Unless you continue doing short term transactions, I'd say multi family landlording for the long run is also very good, gotta keep them up too and it's a life long job or as long as you need to be for the best returns.
It's all good, but I'd do 4 loans and roll them over. 100K isn't really enough to lend, but enough to start for sure.... :)
Christopher Russell if they are expanding the highway, maybe you should start looking for gas stations foreclosure/auctions. It only make sense to look at the local redevelopment agency's plans. My parents bought their quad-plex for 200k in 86, the city developed the neighborhood and now its worth over 900k and rent is 2300 for a 2 bdr 1 bath.
When i was 21 I was actually buying and selling cars, made a decent amount, in 09 approached a friend of mine who had a dealership. My friend approached me to become a hard lender with 15k. I told him to give me a good return and i will invest more, couple weeks later he purchased a mpv, sienna, and some sort of Sion. Economy was slow so i didnt bother him and they just sat in the lot. It took a year before they could sell the cars. The economy is a lot healthier so that is a possibility.
Bill Gulley Thanks bill for the long write. if you guys were lending a couple 200k-2mil deals you must have had a hefty sized pool of hard cash. o.O
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@Bill- Sounds intriguing! I would love to learn more about it, based on what you've told me so far I will start reading more! I have always said, the dumbest guy in the room is the one who won't take anyone's advice except for his own; the smartest guy in the room gathers any info he can and applies it the best way he knows how! If you have any informational sources and wouldn't mind sending me a PM it would be much appreciated. One thing I completely agree with you on is that much hard work goes into maintaining the portfolio if you manage it yourself! Hiring a management company is an option, but as youve read in one of today's articles (assuming you read it) they charge around 15% of your Effective Gross Income. I have found the way to make the most money in this business is to do anything you possibly can yourself, presuming it makes sense. Thanks for the knowledge!
Leverage, use of cash, credit lines and affiliate lenders all play a role along with willing investors. It does take cash on hand to fund at the table and to guarantee or advance payments under servicing.... :)
No matter what you do, you'll be better off earning a dollar instead of paying one for something you can do. You will get to a point when it's cheaper to pay others, but that means you're earning more than they are.
I have years in the business and been around the block so to speak, there is no written how to so much, sorry, I've been threatning to write it all out.....I know a few are interested, but it take more than a few and I don't mean to be a guru type about it, I'd want it dirt cheap, just a few bucks for expenses and time, I've thought about doing some stuff and putting the profits to Habitat For Humanity, since I was on the Board of Directors here....anyway, not at this time.
Specific question can always be asked.....