Financing Investment Deals - Important Read

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Financing Investment Deals - Important Read

Joshua D.Pro Member
BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes

On the BiggerPockets Blog, our contributor, Clint Coons - an attorney focused on asset protection - wrote an important post that anyone raising capital for their real estate investments needs to read.

Please make sure to have a look at:
Things to consider if you plan on raising money for your real estate investments.

This may save you from serious legal problems and cost . . .

Podcast Guest on Show #100
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
15y

Clint Coons also just wrote a great article on liability protection for landlords on Jeff Brown's blog.

http://www.bawldguy.com/liability-protection-for-real-estate-investors/

By the way, Jeff's Blog is excellent on a regular basis.

http://www.bawldguy.com/

Thanks Josh, for introducing the bawld guy to us.

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  • Kenneth Gain
    Commercial Lender · Anchorage, AK · Member since 2010 · 1 post · 5 votes
    15y

    Clint is right on about the importance of complying with securities laws when raising money from investors. As a former syndicator and 1982 National President of the Real Estate Securities & Syndication Institute I have personally witnessed to many horror stories of well meaning folks trying to raise money from investors without good legal advice.
    Be sure to contact a good securities attorney in your state to inquire about small capital raising exemptions which are not too difficult to comply with.
    I recently got a private letter ruling from my state allowing me to bring in one limited investor without having to file anything with the state.

    5Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    15y

    Clint Coons also just wrote a great article on liability protection for landlords on Jeff Brown's blog.

    http://www.bawldguy.com/liability-protection-for-real-estate-investors/

    By the way, Jeff's Blog is excellent on a regular basis.

    http://www.bawldguy.com/

    Thanks Josh, for introducing the bawld guy to us.

    5Reply
  • Carlos Little
    Real Estate Investor · Rochester Hills, MI · Member since 2011 · 8 posts · 3 votes
    15y

    Thanks Joshua.
    This is great information to help tie up the loose ends and protect BOTH sides of the transaction.

    2Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    Good stuff Josh and thanks to Clint, who I've spoken to starting off here, really good guy!

    A new final rule with the SEC, BTW, your investor may not include equity of the residence and the mortgage has a 90 day look back as it can be counted as a liability in determining net worth. That may play on someone refinancing a larger home to have cash to play, so vet the investors with care! :)

    1Reply
  • Michael Germinario
    Real Estate Investor · Point Pleasant Beach, NJ · Member since 2014 · 103 posts · 52 votes
    11y

    Hi @Joshua D. ,

    Thanks for bringing awareness to this important topic.  As someone who is planning to raise money with capital partners to invest in multi-family RE, I would like to understand more.  Specifically, the exemptions for investing with "friends and family."

    I think a Podcast with Clint Coons to cover the details would be super helpful.  Since I am both intrigued and confused on what all this means, I'm sure there are many other BP members who feel the same.  Thanks again!

    Happy investing,

    Mike

    3Reply
  • Jimmy MoncriefPro Member
    Chattanooga, TN · Member since 2010 · 319 posts · 100 votes
    11y

    Thanks for posting this Josh!

    Great information!

    Podcast Guest on Show #55
    1Reply
  • Greg Gaskill
    Rental Property Investor · Sedro Woolley, WA · Member since 2015 · 42 posts · 9 votes
    11y

    @Michael Germinario and @Joshua D.

     Yes, the significance of forming partnerships and the legal and tax considerations would be a great webinar. Count me in!

    2Reply
  • Richard Jeffries
    Lender · Chicago, IL · Member since 2015 · 83 posts · 13 votes
    11y

    Great Information!!!

    A lot of people don't consider the ramifications of their actions. Some times taking a step back and thinking about what you are doing and consulting with a professional can save you a lot of hassel. Coming from someone in the securities industry the perils are all too real

    0Reply
  • Max Matrin
    Montgomery, AL · Member since 2015 · 109 posts · 11 votes
    10y

    This is the great information thanks for sharing it ,. It will be very helpful to me . 

    0Reply
  • Vicki Trojnor
    self employed and currently employed at RGH Hospital · NY · Member since 2015 · 11 posts · 3 votes
    10y

    Ok newby here so what exactly is the difference between Hard money lenders and private investors 

    0Reply
  • Stuart Birdsong
    Investor · Fort Collins, CO · Member since 2015 · 304 posts · 112 votes
    10y

    @Joshua D. Great share, Thanks!

    0Reply
  • Max Matrin
    Montgomery, AL · Member since 2015 · 109 posts · 11 votes
    10y

    Thanks for sharing the great post . Your information helpful to me . 

    0Reply
  • Chris Schady
    Investor/Consultant · Minneapolis, MN · Member since 2015 · 29 posts · 6 votes
    10y

    @Joshua D.  Thanks for sharing... could save a lot of time, money and headaches in the long run.

    0Reply
  • Kyle Lane
    Rental Property Investor · Mountain Grove, MO · Member since 2016 · 44 posts · 6 votes
    10y
    I'm going to start by apologizing if I have posted my question in the wrong spot. I have entered into a partnership with a local investor in my hometown. He advises me against financing deals that can't be paid off within 10-15 years. I found a 12 unit apartment that could feasibly cash flow 1k-1.2k per month with a 20 year note and 20% down. I came to this conclusion using the BP analysis tool. I have to do more research on the deal but I think it's defiantly worth looking into. If someone could please point me to some insight on what would make a good or bad deal based on amortization periods I would appreciate it thank you.
    1Reply
  • Don Johnston
    Chula Vista, CA · Member since 2015 · 90 posts · 25 votes
    10y

    @Kyle Lane Did you ever get your question answered?

    0Reply
  • Kyle Lane
    Rental Property Investor · Mountain Grove, MO · Member since 2016 · 44 posts · 6 votes
    10y

    Not specifically. The local investor I talk to uses the strategy of paying notes off as soon as possible to gain equity quickly and pay less interest. Which is all well and good, but he has other assets so he doesn't necessarily need any cash flow from his properties. My strategy is to operate my properties as a business with an expectation of profit. He also doesn't want to invest out of the local area because he want's to be able to sent a couple guys, on maintenance calls, that are already on payroll. This is exceedingly frustrating because I have found a couple deals worth exploring that are a little ways off. 

    1Reply
  • TJ Patton
    Flushing, MI · Member since 2016 · 8 posts · 0 votes
    10y

    So what is the difference between raising funds as securities and taking out loans with friends and family? Most of my family does not meet the requirements laid out in the article to be considered an investor. Can I still take out a loan with them to use as start up capital? 

    0Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    10y
    Originally posted by @TJ Patton:

    So what is the difference between raising funds as securities and taking out loans with friends and family? Most of my family does not meet the requirements laid out in the article to be considered an investor. Can I still take out a loan with them to use as start up capital? 

     The short answer is yes.  As long as you do no general solicitation and advertising, arranging financing with those you have a pre existing relationship with should place you under the private offering exemption from securities registration.  

    Further, doing a filing to comply with Reg D, which is a safe harbor method of doing a private offering, may also not ad any practical value in your case.  However, an hour or two spent with an attorney who specializes in securities offerings, would give you a clearer understanding of what is in actuality a very murky legal area.  The majority of small private offerings never really know for sure if they are in compliance.  

    Private Mortgage Financing Partners, LLC
    WebsiteView Page
    2Reply
  • TJ Patton
    Flushing, MI · Member since 2016 · 8 posts · 0 votes
    10y

    Thanks Don Konipol 

    0Reply
  • Robart Luis
    Professional · Toronto, Ontario · Member since 2015 · 22 posts · 0 votes
    10y

    Hey Joshua, Thanks for posting this! Good stuff.

    0Reply
  • Blake King
    Investor · Seattle, WA · Member since 2016 · 156 posts · 34 votes
    9y

    Very interesting! Thank you.

    0Reply
  • Marco PadillaPro Member
    Investor · Philadelphia, PA · Member since 2017 · 100 posts · 50 votes
    8y

    Great information, I hope it still applies. Thanks

    [email protected]215-999-3005
    0Reply
  • Roberta Holland
    Involved In Real Estate · Edgewater, FL · Member since 2010 · 5 posts · 0 votes
    8y

    You can also become your own bank and finance yourself to a wealthy retirement, with a properly structured , asset-based life insurance policy with living benefits.  Covers all bases.   

    0Reply
  • Calvin Lipscomb
    Brooklyn, NY · Member since 2016 · 316 posts · 130 votes
    8y
    Originally posted by @Kyle Lane:

    Not specifically. The local investor I talk to uses the strategy of paying notes off as soon as possible to gain equity quickly and pay less interest. Which is all well and good, but he has other assets so he doesn't necessarily need any cash flow from his properties. My strategy is to operate my properties as a business with an expectation of profit. He also doesn't want to invest out of the local area because he want's to be able to sent a couple guys, on maintenance calls, that are already on payroll. This is exceedingly frustrating because I have found a couple deals worth exploring that are a little ways off. 

     What did you wind up doing.  Two years later.

    0Reply
  • Kyle Lane
    Rental Property Investor · Mountain Grove, MO · Member since 2016 · 44 posts · 6 votes
    8y

    No I never really got an answer directly. If the numbers work and it's a good area with demand for rentals then its a good deal. I have been continuing to learn about and study real estate and other financial markets. I am specifically focused on real estate investing but I took a break from that for a while and learned about stocks and the stock market. I still haven't been able to secure any private money and my credit is not good enough to borrow from a bank. I have improved it dramatically over the last year, however. I will just continue learning until I am able to do my first deal.

    1Reply
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