California Private Investor strategies

4 Replies

Hello everyone,

So for the past few months we've (business partner and me) been busy setting up everything to start flipping in the next few months. We already have a real estate agent, general contractor, project manager and our first private cash investor. My question is related to private investors, we have friends interested in investing that fall in one of the three scenarios:

- some of them have cash 

- some have equity in their homes 

- some have money in their retirement accounts (401k, IRA, etc)

We want to take advantage of all 3 scenarios, with the cash one is easy since we can just offer a fix percentage per year, payable once the property is sold, for the months we used the money. But what about the other 2? This is what I'm thinking:

- some have equity in their homes: get a HELOC, which apparently has an interest in the high 3%, so they could keep the rest of the interest we pay them as profit

- some have money in their retirement accounts (401k, IRA, etc): transfer the money to a self-directed IRA or a solo 401k, and then invest with us

Any comments about this? Any companies that you would recommend? We are based in San Diego, CA, but plan to do the flips in southern Los Angeles county.


"We want to take advantage of all 3 scenarios"

This is not a case of "we" want to but rather "they" want to take advantage or all scenarios. 

Why view these as anything other than cash investors. How or where your investors get their money is irrelevant to you. They should all simply show up with cash in hand and you treat their compensation the same in all cases. You do not need to be their financial advisor.

It is not your problem as to how but you can suggest to them where they get their cash from. Beyond that it is their problem.

You are over thinking.

@Angel Morales

I understand what you mean by wanting to take advantage of all 3 scenarios. You want to be able to receive funding from those using a variety of sources instead of being limited to one or two.

My main comment is that with self-directed IRA or 401k funds, prohibited transaction rules apply, so you may have restrictions with some family members using retirement funds. Friends should be ok. You might want to reach out to a few self-directed IRA and 401k providers if you have any specific scenarios you want to learn more about. Many of our clients have made similar investments, though there are a few things to keep in mind to stay compliant.

@Thomas S.

I disagree Thomas, like the phrase says: you don't know what you don't know. They might want to invest but they don't even know they can. I want to at least know the basics so I can tell them what can be done with what they have, after that yes, its up to them to hire professional advice.

@Justin Windham

Thanks Justin! I look into more detail then, at least looks like I'm headed on the right direction

In terms of a self directed IRA there are a lot of options. I just did a bunch of research on this, do I want checkbook control or do I want self directed with a company. I decided to go with Equity Trust Company because my CPA said that she other clients who are happy with them and the fees are very reasonable. Seems like it is an easy way to do private lending. The fees depend on your balance but they are pretty low. Feel free to PM me if you want my contact's name over there. I have no affiliation, I just did this for myself so am happy to share what I chose.

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