Does holding a 2nd place lien make me safe on a flip deal?

Podcast Guest on Show #222

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

5y

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

4 Reply

Jay HinrichsBusiness Member

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

5y

you worst cases scenarios are not reality those are moon shots.

your worse case is the deal lags on first position interest adds up eroding your equity and your money is lost.

and 10% interest is not nearly enough for the risk in this scenario.. Plus you cant self deal in your IRA. so check that out.

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6 Reply

Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

5y

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

Gimer Law516 Reviews

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

5y

@Jim Stanley

Never ever ever ever invest with your teacher / mentor.

Also never invest with anyone who you have not run a background check on.

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Podcast Guest on Show #222

3 Reply

Jay HinrichsBusiness Member

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

5y

Originally posted by @Chris Seveney:

@Jim Stanley

Never ever ever ever invest with your teacher / mentor.

Also never invest with anyone who you have not run a background check on.

It is one amazing thing about this real estate business.. Landlords will put their poor work force tenant through the ringer to qualify them and yet investors will hand over 100s of thousands without really digging into who is the GP or Sponsor etc.. granted a lot can be gleaned with google search's but you really want to have solid bank references that are real etc.. In real estate since there is no one really regulating many of those that put these types of deals together you run into what your referring too.. the guy/gal who is great on SM and webinars etc but true background can be a nightmare..

JLH Capital Partners51 Review

5 Reply

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

5y

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Would you think a short term rental in Cumberland MD would be a good idea? Theory being tourists wanting to visit D.C. could stay in Cumberland and still have easy access to D.C. without the expense of the city. And the reverse that folks who need a few days of R&R away from D.C. & Baltimore could get out of the MetroPlex.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Patricia Steiner

Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes

5y

RUN. AWAY. FAST.

It's hard to overcome stupid and that deal is beyond stupid.

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

5y

@Account Closed

A STR in Cumberland for DC would be like selling snow blowers in FL. During a normal day it would take 2 hours to get to DC and Cumberland is very inexpensive for a reason.

Lake Anna is its own little place that’s busy during summer but again it’s not a place for getting to DC.

Virginia is more tenant friendly and slightly lower taxes.
for short term rentals to dc you wouldn’t go past the airport (aid) and that is a hike. Best to stay inside the beltway but finding a sfh under $500k would be difficult.

This area is better for long term buy and hold and get appreciation as your properties won’t cash flow.

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4 Reply

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

5y

Originally posted by @Chris Seveney:

@Account Closed

A STR in Cumberland for DC would be like selling snow blowers in FL. During a normal day it would take 2 hours to get to DC and Cumberland is very inexpensive for a reason.

Lake Anna is its own little place that’s busy during summer but again it’s not a place for getting to DC.

Virginia is more tenant friendly and slightly lower taxes.
for short term rentals to dc you wouldn’t go past the airport (aid) and that is a hike. Best to stay inside the beltway but finding a sfh under $500k would be difficult.

This area is better for long term buy and hold and get appreciation as your properties won’t cash flow.

Thanks for your input. The other option was the Annapolis area.

The ability to reach D.C. has a back story. We would use the STR a few times a year to stay & visit family in D.C. and entertain them at the STR. Sort of a "Cottage or Cabin" experience out of town. A 2-3 hour drive to D.C. is acceptable.

However, changing location if I may, if you were going to cater STR to Richmond/Norfolk (thinking of tourists/Navy) would there be much demand or does somewhere along the Rappahannock river make more sense?

Bryan HartlenPro Member

Investor · Phoenix, AZ · Member since 2018 · 313 posts · 157 votes

5y

@Jim Stanley I'll give you a 2nd opinion that is contrary to most of what you heard. I'll preface it with a statement that you should be extremely confident in the capability of the primary flipper, the rehab plan and the ARV of the subject property before ever jumping into this kind of arrangement. With that caveat / understanding:

What you are talking about is called GAP funding. I have made several GAP fund loans and have utilized GAP funders on flips of our own. It is a higher risk investment. You get paid 2nd and you generally have little to no decision making control.

You need to make sure that you have a note AND a recorded lien. You should be provided full access to the rehab plan and costs at the front of the project (even if you have no say in the day to day decision making). You should have full access the rationale in setting the expected ARV. Your agreement needs to be explicitly clear in what happens IF extra funds are required (for any reason). You can ask for, but may not be given, full access to the running expenses on the project.

As Jay pointed out, the primary risks are the project encounters an unexpected problem that results in increased cost and/or time. The lien is really only as good as the margin in the project. If the selling price doesn't cover expenses, your note is exposed unless you were able to get a personal guarantee on the note (and the flipper actually has the resources to do so). This is typically unlikely. It is possible to foreclose from 2nd position but it's complicated, generally requires more investment in legal fees and then other investment to do ‘something' with the property. So you need to get a premium for the increased risk. I would not do it for 10% APR: we typically do ours at 8 - 12% fixed rate for the flip up to a max of 6 months.

So, it’s not necessarily a bad proposition but you need to know who you are investing with and be very confident in the deal as it is higher risk.

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Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

5y

Record the lien with a title company, that would prevent the worst case scenario. Also make sure to have him add you as a lienholder on the insurance policy and send you a copy of the binder. That prevents the really bad case scenario. That being said, a 2nd lien is always less protected than the 1st. If the property can only sell for the value of the 1st lien, you'll get nothing. So make sure to vet the property and rehab scope and make sure it's reasonable. And vet him as well (ask for references, look at previous projects, etc.) Personally, I would want more than 10% for a second. Probably at least 12% and 1 or 2 points or a % of the deal.

3 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

5y

Originally posted by @Account Closed:

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Would you think a short term rental in Cumberland MD would be a good idea? Theory being tourists wanting to visit D.C. could stay in Cumberland and still have easy access to D.C. without the expense of the city. And the reverse that folks who need a few days of R&R away from D.C. & Baltimore could get out of the MetroPlex.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Cumberland is as far from DC as Philadelphia is to DC.

[email protected]301-893-4635 Podcast Guest on Show #192

District Invest Group545 Reviews

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

5y

Originally posted by @Russell Brazil:

Originally posted by @Account Closed:

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Would you think a short term rental in Cumberland MD would be a good idea? Theory being tourists wanting to visit D.C. could stay in Cumberland and still have easy access to D.C. without the expense of the city. And the reverse that folks who need a few days of R&R away from D.C. & Baltimore could get out of the MetroPlex.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Cumberland is as far from DC as Philadelphia is to DC.

Thanks for the geography lesson.

Here's one for you: Fargo North Dakota is as far from Casper Wyoming as Talladega Alabama is from Collinsville Oklahoma

Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes

5y

Originally posted by @Russell Brazil:

Originally posted by @Account Closed:

Originally posted by @Tom Gimer:

Originally posted by @Account Closed:

Originally posted by @Jim Stanley:

Not sure if this is the right place to post, but I figured this is where the people with the right knowledge would be:

I'm a beginning investor near Denver, with 1 SFH rental, looking to learn and grow. I met a guy at a foreclosure auction who invests in a lot of things: foreclosures, buying notes, flipping houses, wholesaling, some other stuff. He has offered to teach me and let me in on some deals.

The current offer is this:
We will knock on doors of candidate properties together until I learn what to say, then I'll do it solo. If I find one that he ends up buying, he will pay me a small finder's fee. He has a money man that he borrows from, but he does still need a down payment. I will invest $50k of my money (from my self directed IRA) as part of the down payment. His money man gets 1st lien on the property and I get 2nd lien. Once the flip is sold, I get my $50k back plus 10% APR. If the deal works really well for him, I get a bonus of unspecified amount. I help out on the whole process wherever I can to learn the business.

I have no particular reason to distrust this person, but I want to do diligence and understand my risks. Please tell me if I am wrong about anything and if I am missing anything (I'm sure I am!!)

-worst case- he just plain steals the money without giving me the lien, gives me a fake lien, etc Pretty unlikely but plausible.
-really bad case- the house burns down and the property is worthless. Would his insurance cover me on this?
-really bad case- we buy a property that is worthless (built over a toxic dump, etc). I should be able to mitigate this myself by doing diligence on the property before investing, and assumedly, so would he.
-most likely case- the flip just does not go well and the profit is negative (or he claims negative profit even if it is really positive). Please correct me if I'm wrong here, but I THINK my 2nd lien protects me here. He pretty much has to sell the house to pay back his money man (or the money man forecloses and sells it), and I get paid then, correct? I THINK the worst that would happen in this case is that I would not get my 10% interest and my $50k principle could be tied up a long time. I suppose he or the money man could simply keep the property and not pay me- would I have any recourse then?

- What else?

THANK YOU VERY MUCH

Take your money to Vegas and put the whole wad on Red 7. You have better chances of that being a good idea.

No. This is not a good idea at all.

Not Red 7... just Red. Almost the best odds in the casino.

And yes, much better than a junior lien.

I've been meaning to get your opinion, I see you're in D.C.

Would you think a short term rental in Cumberland MD would be a good idea? Theory being tourists wanting to visit D.C. could stay in Cumberland and still have easy access to D.C. without the expense of the city. And the reverse that folks who need a few days of R&R away from D.C. & Baltimore could get out of the MetroPlex.

Or would the other side of the border into Lake Anna VA be a better location?

Does MD or VA treat landlords better and which has the heavier tax burden for investors?

Cumberland is as far from DC as Philadelphia is to DC.

Okay, now that we both know we are brilliant at geography, where would you look for an STR ?

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

5y

So you get to doorknock to find his deal?

Then lend him your money as a sloppy 2nd on the deal you found?

Then.... LOL No way.

Someone this 'successful' should have their own money, not borrowing the DP and 1st and 2nd, after getting the lender to source it. Shady all day with a bag of chips for him.

I have lent on a 2nd to homeowners wanting to retail their house up to sell. Known factors, good returns but much safer and a win-win.

Luciano A.

Developer · Houston TX · Member since 2018 · 423 posts · 400 votes

5y

@Jim Stanley

As others have said...RUN if that is his offer. However, if he is willing to be a good mentor have him let you tag along on a deal from A to Z. This way you can see if he knows what he is doing and can see him perform. Many think they can flip because they watched HGTV but dont really know how to flip.

Best of Luck

Patti RobertsonBusiness Member

Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes

5y

I would never, ever lend in second position.

757-472-2547

Greg Franck

Investor · Saint Louis, MO · Member since 2016 · 72 posts · 65 votes

5y

The only scenario you should consider is one in which you are are the hard money lender (for this individual) and your money takes first lien position in one of his deals. In this instance you should have a good understanding of the property and valuation in it's current state and ARV so that you can protect your interest in case of default. As a hard money lender you can make much better return than 10% once you factor in loan fees, points, and APR. As others have mentioned using SDIRA funds comes with restrictions. Also do your homework on this individual, ask to see his deals and what he owns. This will give you an idea if he is legit or a fraud.

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

5y

Originally posted by @Steve Vaughan:

So you get to doorknock to find his deal? Then lend him your money as a sloppy 2nd on the deal you found?

Classic description!

Hey where is the OP? He got a lot of good advice here, I'd like to hear his final decision. I'll bet he does the deal anyway....

Will GastonPro Member

Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes

5y

@Jim Stanley this is the power of the forums. This post likely saved you 50k.

Andy Mirza

Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes

5y

@Jim Stanley I would add that the property type for your first deal should be your run of the mill, vanilla type suburban or urban property that has a lot of demand and will sell easily. Stay away from properties that are very old or unusual.

To reduce the risk of having your money tied up for too long, make sure the maturity date on the note is for one year or less.

As Chris pointed out, self directed IRA funds are inappropriate in the scenario you laid out. Self directed IRA investments are supposed to be passive. You're not allowed to do work on the actual investment.

Jim StanleyPro Member

OP

Denver, CO · Member since 2017 · 58 posts · 27 votes

5y

Thanks to all who have posted.

I should have made more clear that the primary goal of this for me is to learn the businesses and become a long term partner- a mentor/mentee relationship. He has been doing it for about 25 years and is quite successful. I've seen some of his current projects and looked at the numbers. I have no problem with working for free here. Kyosaki (rich dad) said work for experience, not money.

As Bryan Hartlen pointed out, 2nd position is not that safe. He doesn't need my money- he was just offering to let me get some skin in the game and make a little profit. So, I may not put any money in at first.

Several have said that 10% is not enough and one suggested 12%, but the difference between 10% and 12% on 50k over 4 months (projected flip time) is just $333. I'm not going to sour an opportunity over a few hundred bucks. I'm way more concerned about my principle than my interest.

Thanks again- I'll let you know what I end up doing.

Andy Mirza

Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes

5y

@Jim Stanley I suggest doing your first few deals without putting your own money into it. Collect whatever bird dogging fees you might earn but focus on getting the experience you mentioned. When you have enough experience working with your mentor, then consider co-investing.

My 2 cents. Good luck!