All Forum Posts by: Cole Davis

@Bill Gulley is spot on. Don't mess with the SEC. Do it right if they are going to be passive. Assuming you didn't advertise the deal and that your investors are all accredited investors (as designated via a signed investor questionnaire and subscription agreement, you can get away with not preparing and filing a private placement memorandum (PPM). 

You would just need an operating agreement and a subscription agreement. 

If they are not accredited investors and will be completely passive, you'll need to prepared a full PPM. Either way you should file your offering once the investment has closed. 

Regarding structure - we advisor our clients (and do this ourselves) to hold title to the property in the holding company LLC, which is the securities offering that you're selling to your investors and then create a management LLC which can pay your property manager and hire staff if needed. The name of that management company (which owns nothing) is the name the tenants associate with ownership and not the "mothership" entity, which owns assets - this helps a bit with liability protection.

I put the percentage interest of equity owned in every LLC for the assets we own - including syndicated deals (private placement offerings) where we have an equity stake above a certain preferred return. Technically we don't have ownership to title day one, we only have ownership to the distributions above the preferred return.

Not one of our many banks has had an issue with this. 

Hello! Best of luck. 

$48K cash flow on $150K? Ummm...

Love the high bar goal, but that is a ~31% cash flow return on your equity. Flipping a home, perhaps but a direct real estate investment in home rentals or apartment building is probably not going to hit that lofty goal. Unless you see a ton of deals and can identify, lock up and purchase the dream apartment building investment (mom & pop seller) who has no idea what their property is actually worth perhaps with equally low in-place rents, you're probably not going to hit this goal. 

Some mobile home park investments can cash flow that high, but not if you don't know what you're doing. 

If you're looking for $4K in monthly cash flow to quit your job, and aren't afraid of hard work. I would do one of the following:

1. Learn how to wholesale deals - spend time and/or money getting educated - this includes taking successful wholesalers to lunch - ask a ton of questions.

2. Spend a $2-$5K (mailers, website, targeted ads, etc.) of your $150K on marketing to find great deals (motivated sellers). You're going to need a lot of inbound leads. 

3. Go to local RE investor meetings - meet deal guys / girls that you can wholesale to. 

If you get the front end (inbound lead system) set up correctly and continue to feed the marketing beast with reinvested capital from your first couple deals, you should have a steady flow of new deals that you can assign for cash. 

Putting $150K into a duplex / small apartment building is not going to set you free anytime soon. You need to think about building a business to hit this level of cash flow in a year. 

While we prefer real estate syndications to leverage your time and money vs wholesaling, it still will take longer to hit $4K in free cash flow after you pay your investors their preferred returns. Wholesaling is probably the highest probability path to income replacement for you. 

When your wholesale business is on cruise control and after you've learned a ton from seeing the deals your investor contacts / contract buyers love and hate, you can step up to the ownership big leagues and start raising money from private investors. 

Once again - invest in yourself first, otherwise you can take the $150K to vegas.