JV arrangement for notes

Phoenix, AZ · Member since 2017 · 8 posts · 0 votes

Hi,

I'm new to note investing and I am considering a JV arrangement to get my feet wet and learn more about the process. Is it typical in a JV arrangement for the newbie to provide ALL the money and the experienced person to provide the know how and actually do the work (most of it anyway) for a 50/50 split? I ask because I'm a little uncomfortable that the "expert" has no real skin in the game and if it went sideways they aren't out anything but time. I'd appreciate any feedback regarding folks experience with JV agreements regarding notes. Thanks in advance!!

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Ken Hobbick:

@Jay Hinrichs I admit I increased my vocabulary looking up definition of hoary, meaning old, white or ancient... but point well put and found way to Howey test (1946) for securities is broad and can be applied to JV's, LLC and general partnerships

As such, those being a sponsor of agreements should have proper legal counsel to advise them appropriately with caution, as mentioned its all great until it doesn't go right and money is lost.

Sorry I misspelled that and sent you on a goose chase.. I for one have been called to the Mat on the Howey test.. and got a Cease and desist and a 5k fine form the state of Oregon.. they were nice to me.. but it cost me an additional 20k in legal fee's LOL.. and I was just like all these folks thinking they can JV notes.. until I was talking to someone on a note JV and that someone told an attorney and the attorney filed a complaint against me.. So there is no question in my mind all these folks that think Hey I will just help these people and let them invest with me while I do all the work.. etc.. run a huge risk.. and for what to buy some low value asset to make a few grand a year.. not sure like I said why anyone would do that.. but I suspect its taught at some of the note schools.. and we know gurus are not on the front lines of what is legal and not.

other wise there would be no reason for the bigger established players to create 500 series funds.. no need at all they would just JV all the notes.. easy peasy...

in CA you can fractionalize notes legally without securities but you need to be a CA broker or NMLS or have consumer finance license all these states have their thing..

that was part of my problem in Oregon.. I did not realize you could not fractionalize in Oregon and did a few because that is what did in CA for years.. NOPE .. LOL... Anyway.. I now subscribe to the ONE note one investor rule or FUND ... but that's me personally and who cares what I think anyway.. right ?

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Ken Hobbick
Investor · Parker, CO · Member since 2014 · 42 posts · 44 votes
8y
@Mickey Bradshaw there really is quite a lot of detail that goes along with a being a JV partner, much more than is suggested by gurus. Thanks @Jay Hinrichs for sharing your knowledge, experiences and perspective, its definitely not something to take lightly and should seek qualified legal counsel for each individual case.
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Patrick Desjardins
Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
8y
Originally posted by @Mickey Bradshaw:
Wow, I really appreciate everyone's input. I have a lot to chew
No worries man, I get it. I was just explaining why the 50/50 split came to be. And something to look for. If your goal is to learn how to buy notes, then you're not just looking for someone that can buy notes, you're also looking for someone that enjoys working with you and can teach you.
My point is that there is more to it than just the numbers.
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Mickey Bradshaw
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Phoenix, AZ · Member since 2017 · 8 posts · 0 votes
8y
@Patrick Desjardins and @Ken Hobbick I really appreciate that. You folks have helped me understand and, even more so, appreciate the value that the senior investor brings to the table.
I appreciate everyone's time and input on this subject. Thank you!!
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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Jay Hinrichs and @Chris Seveney Great discussion! Love your points, especially Jay's experiences. What exactly is the hybrid of the 500 series fund you mentioned and why did you choose that over the Reg D, 506(b) and (c) exemption type funds?
Luckily, the JV's I've been involved with have gone well and my partners and I have all gotten along. As mentioned, though, you need a tight agreement if things go wrong. Our first Fund was a 506(b) but the limitations in advertising were problematic and we didn't want to run into any trouble. We went with a 506(c) for the next Fund to avoid this problem. IMHO, treating your investors right and keeping your promises is the best way to avoid problems with an investor but it's a good feeling to know we're well covered in case things go bad.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Andy Mirza:

@Jay Hinrichs and @Chris Seveney Great discussion! Love your points, especially Jay's experiences. What exactly is the hybrid of the 500 series fund you mentioned and why did you choose that over the Reg D, 506(b) and (c) exemption type funds?
Luckily, the JV's I've been involved with have gone well and my partners and I have all gotten along. As mentioned, though, you need a tight agreement if things go wrong. Our first Fund was a 506(b) but the limitations in advertising were problematic and we didn't want to run into any trouble. We went with a 506(c) for the next Fund to avoid this problem. IMHO, treating your investors right and keeping your promises is the best way to avoid problems with an investor but it's a good feeling to know we're well covered in case things go bad.
Its an Oregon specific non registered security called a Real Estate Paper offering.. I had never heard of it before either.. but that's what the state after I got my butt paddled made me produce to keep going on a NOTE JV ing.. and to get out of the Howery mess I created unknowingly.
But when you do your funds you don't have to worry your not JV ing a note your investor is investing in a fund.. the FUND owns the note one NOTE one owner big difference.
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