Pekin, IL · Member since 2013 · 33 posts · 0 votes
If im looking to invest with an out of state flipper,what are some good things to know? Ive done some research on a few investors and found one that I think i like,nothings in stone yet.Would it be ok to ask for contact information on other money lenders that they have worked with before.I want to make sure all business was good business.Also anything else I should know or do would be much appreciated.
I'd be VERY careful investing money with out of state "real estate investors" - there have been many scams and ponzi schemes in this area and it's highly risky!
A few things to consider...
1. If you get sideways with them and need to sue, you'll likely have to sue in THEIR state not yours, causing added expense.
2. If you want to physically check up on them, you'll have to hire someone local or fly out there yourself.
3. You won't be a part of the community there are in - making it more difficult to know their reputation
4. It will be easier for them to deceive you.
If none of that deterred you, then the rules for investing money with an out of state investor are the same as for someone local...
1. Do a background check and check their credit.
2. Do a TON of reference checks. Be very thorough here. Ask the references for references. It's easy to get 2-3 people to lie for you, its really tough to get 10 people to do the same. Home sellers, home buyers, lenders, title company, lawyers, etc. Get a good cross-section of people.
3. The only thing that matters is past performance. Promises count for nothing. Examine the last 10 deals someone has done - and if they ALL come up roses, dig deeper. Nobody bats a thousand in real estate and a stand-up investor should be able to show you all their deals, not just the great ones.
4. Insist on control. How is your investment protected? Are you on the title? Do you have a lien on other assets? What happens if this person decides to skip town - what is your recourse?
5. Absolutely you should ask for all previous lenders - then call them and ask probing questions.
I'd be VERY careful investing money with out of state "real estate investors" - there have been many scams and ponzi schemes in this area and it's highly risky!
A few things to consider...
1. If you get sideways with them and need to sue, you'll likely have to sue in THEIR state not yours, causing added expense.
2. If you want to physically check up on them, you'll have to hire someone local or fly out there yourself.
3. You won't be a part of the community there are in - making it more difficult to know their reputation
4. It will be easier for them to deceive you.
If none of that deterred you, then the rules for investing money with an out of state investor are the same as for someone local...
1. Do a background check and check their credit.
2. Do a TON of reference checks. Be very thorough here. Ask the references for references. It's easy to get 2-3 people to lie for you, its really tough to get 10 people to do the same. Home sellers, home buyers, lenders, title company, lawyers, etc. Get a good cross-section of people.
3. The only thing that matters is past performance. Promises count for nothing. Examine the last 10 deals someone has done - and if they ALL come up roses, dig deeper. Nobody bats a thousand in real estate and a stand-up investor should be able to show you all their deals, not just the great ones.
4. Insist on control. How is your investment protected? Are you on the title? Do you have a lien on other assets? What happens if this person decides to skip town - what is your recourse?
5. Absolutely you should ask for all previous lenders - then call them and ask probing questions.
Laurence Bealer Investing capitol as a private lender.Im looking to partner up with a experienced house flipper.But im in no hurry to invest right away. Im doing some research on a few house flippers as of now,all of which are out of state.
Honestly, Shane Little, I concur with Jeremy Brandt, above, and can’t think of a more dangerous way to invest in real estate.
We get very comfortable with our borrowers spending time with them, visiting their properties, driving the areas, and getting to know them before we loan. No matter how many previous deals we’ve done with anyone, we look at every property we loan on and make sure we know other local flippers we could sell to quickly if we had to. We also use a knowledgeable lending lawyer to keep us safely within our state lending laws. If there was even the slightest doubt, we’ve gone so far as to drive to escrow or title companies to make sure they exist. These, amongst others, are the advantages of lending locally.
In our opinion, the quality and character of whom you loan to far outweighs all other criteria. How will you establish that from out of state?
What will be your exit criteria if a deal goes bad?
Will these be judicial or non-judicial foreclosure states?
Do you know any brokers or attorneys in the area?
I’m not suggesting you avoid any club that would have you as a member, but if these are experienced flippers, why can’t they get their money locally? Are you giving your money away at cut-rate prices? Or, conversely, are you trying to make a percent or two greater by running all the risks implied above?
Does northern Illinois not have an abundance of flipping opportunities you could drive to and loan on?
Lot’s of rhetorical questions for you to answer. I guess I'd only ask you to answer the last question here.
Laurence Bealer, Im currentley looking to be a private lender,then start up my real estate investing company.Ive been reading about notes but as of now im focusing on one thing at a time.
Some of the questions you just asked me I never thought of.From what ive heard the market is not that great in northern Illinois.I guess its not as easy as lending money and making a great return on the investment.I know there are many things to take into consideration,but definitely going to do some more research