All Forum Posts by: Brian Burke

I'm not a tax expert, but the only way I have heard of is if you can convert your LLC interest into a TIC prior to the sale, then do the 1031. There are some experienced tax guys on this site that can tell you if that really works or if there is a better way.

Nothing eats up more profits, or creates more work, than turnover.

LOL Rob K, that's a hilarious metaphor.

On the SF side, I have 25 employees. On the MF side I've got another dozen but most of them are technically employees of my PM companies (on-site property managers, maintenance staff, etc).

I have an in-house asset manager, and several management companies. The management companies do property-level management, and the AM manages the management companies.

I can relate to your story about the phone ringing. To hijack your metaphor, I'm more like Heidi Fleiss' business manager. Instead of calls from sellers, buyers, and tenants, now my calls are from employees needing direction or decisions, investors seeking updates or market insight so they can make future capital allocation decisions, news media seeking quotes, banks and lenders calling to see if I want to borrow, and attorneys going over contracts.

William Donaldson, here are some links to some threads I found on the topic:
http://www.biggerpockets.com/forums/51/topics/76494-equity-partners-vs-pooling-investors-under-reg-d
http://www.biggerpockets.com/forums/49/topics/62274-what-are-the-sec-requirements-for-soliciting-private-money-?page=1
http://www.biggerpockets.com/forums/50/topics/55532-please-be-careful-when-raising-funds-sec-cease-and-desist-letter-

Maryann L., Ann Bellamy is right, it's not a reflection of character just a business risk to be undertaken by the person providing capital. They will want to make sure that the deal is lucrative enough for them to accept the risk, that will be the defining factor in how they set the "price" for their money.

I'm full time as well, going on ten years now after another 10 years part-time. Right now i'm flipping a little over 100 homes per year. Growing a rental portfolio at the same time, closing in on 100 houses (will probably hit that mark in Q1 2013, bought about 50 of them this year and most of the rest last year), plus a few apartment complexes and a self storage facility. Now that I actually read what I just wrote, maybe I'm more than full time...

1% of $32,000 = $320 X 4 months = $1,280. 20% of $50,000 profit = $10,000. Option 1 is a better deal for you if you can find an investor to do it (1% per month is the same as 12% interest, and with no security I think it would be tough to find someone willing). 20% of the deal isn't necessarily a bad deal for you, if it is the difference between doing the deal or not.

Are you personally guaranteeing the primary loan? If so, you might be able to argue that you are contributing 80% of the capital stack so you deserve 80% of the profit. That might work with some investors, but not with others. Some might want a 50/50 split.

It just all depends. Negotiating profit splits is like negotiating the purchase price of the asset...you want to pay the lowest price, and the investor wants to rent you their capital for the highest price. You want to offer the lowest reasonable amount without insulting the investor, and negotiate from there.

Keep in mind, if the investor does not play an active role in the deal, SEC regulations governing private placements and the offering of securities applies.

It may sound odd to those of us on BP, but not everyone wants to be a real estate investor. Maybe they just found that it's not for them. Maybe they have equity trapped in the property and want to deploy that cash somewhere else (like buying a larger primary residence, pay off debt, remodel their kitchen). Maybe they saw the value drop and just want to cut their losses and eliminate market exposure. Or, perhaps they have had one problem after another with tenants and are just fed up. There are so many reasons why people do what they do. I guess that's why they say that one person's trash is another person's treasure.

If you get the owner to deed it to you, BOA will have no motivation to short sell it to you because they see YOU as the motivated party. It is not at all uncommon for lenders to post a foreclosure auction notice with an auction date, the owner moves on or before the auction date thinking they have lost the property, and the lender postpones the sale for months (or even years) for no obvious reason. In that event, the owner thinks they don't own it anymore, and the bank knows they don't own it. It's all part of today's insane reality of more loans to foreclose on than the market, staffing, or bank balance sheets can bear.

You've received great advice so far. Recently, every property I've bought, REO or not, has had multiple offers. In many cases, I've offered we'll over the asking price, and still didn't get it. In some cases, I offered we'll over the asking price, got it, and made a lot of money on them when I sold them.

On the other hand, there have been cases where I've offered less than the asking price and didn't get it, and times where I offered less than asking, and less than other offers, but got it anyway. I got it because my offer was cash, quick close, big deposit, and had no contingencies.

The bottom line: figure out how much you can pay, offer that, and let the chips fall where they may. Don't let asking prices or other offers influence your decisions (except the knowledge that there are NO other offers and you want to take the risk of offering less than your strike price hoping to get it for less).

PO Box. Yes, anyone can find you anyway, but a teacher never gives out the answers to the test...