All Forum Posts by: Edward B.

@Bryan Rodas, just because it's legal doesn't mean it's ethical. If your broker allows it then fine, but I would not try to go behind their back. You are opening them up to lawsuits as well as yourself. As an agent you have a fiduciary responsibility to try and get the best price for your client so it needs to be abundantly, in no uncertain terms, clear that you are not offering to represent them, that you are attempting to buy the property as an investment and make a profit on that. If you do not disclose that appropriately and make sure that you can prove it in court you, and your broker, may find yourself in hot water. Most brokers don't want to deal with that since you are pretty much just cutting them out of the deal anyway.

@Sean Rhodes, even good property managers go bad sometimes. And even ones that interview great and look great on paper turn out to not be great. I would ask them what the policy is if things aren't working out. Some of them have onerous clauses to get out of your contract. If so, is there a grace/trial period where either of you can walk without recourse?

I don't want to sound ominous but property managers are to buy and hold guys like contractors are to flippers and servicers are to note investors. Good ones are worth their weight in gold, hard to find, and seemingly one step away from going from hero to zero. There are lots of answers to your question on Biggerpockets and the internet in general, but no matter how much due diligence you do you need to be prepared for them to flake out. 

Case in point, I had a great property manager in Jax, NC, but then she got sick with no plan to carry the water if she was out. Got bad quick. Next guy interviewed great, looked great on paper, great references, turned out to be a borderline crook in my opinion. Now I have an outfit that is doing a great job, but they are starting to nickel and dime me with add on expenses. They've earned some patience, but if it gets much worse I'll be on to my fourth PM for those properties. This is in a span of 15 years by the way. I don't want to imply I'm burning through them at the cyclic rate. I'm on my third PM for a property in FL too. First guy started out fine then ran the property into the ground. Second group of ladies also fine but just couldn't get on the same page with the communication and accounting. Pretty pleased with whom I've got now. I could go on and on.

Bottom line, do your due diligence, but don't worry about finding your next best friend out of the gate. Find someone who seems solid and pull the trigger. Just make sure it won't cost too much to move on if necessary.

@Justin Wright, there honestly isn't a one size fits all, nor should there be. You want something tailored to you and your situation. Like I said, I'm pretty happy with the set up that I have, but I did have a friend who used them too and I question the set up they did for him. He was just getting started and they had him set up an LLC or two and a corporation. That was overkill in my opinion. Does allow for growth, but realistically most guys starting out will never get to the point where they need all that.

Unfortunately the best advice I can give you is do enough research to ask intelligent questions and if they can answer those questions satisfactorily then you may have a winner. Otherwise, move on to the next one.

@Kevin Hoodwin, these are all great suggestions. There is a wealth of information out there on the topic and you could study it probably forever. But eventually you just gotta pull the trigger. Sounds like you probably already know enough to dig yourself out of any hole you might find yourself in. If you've already written a note yourself you at least understand the debt side of the equation and have considered things like managing and servicing the note. Bottom line, you will likely learn more in that first deal then you think no matter how much prep you do. 

@Justin Wright, I've worked with Anderson Business Advisors. I think they are fine and know their stuff. I have found their prices to be competitive. I know attorneys that despise them, though, because they are so big and try to do so much. They do have a huge marketing machine which I am always skeptical of, but I have been pleased with the Trust and LLC products I've gotten from them and satisfied with the customer service.

I would interview a couple of these guys and see if you like what they have to say. A lot of them are Jack of All Trades, master of none, but when I was shopping around 5 years ago or so I did not find many local attorneys with a good understanding of Asset Protection. They were all one size fits all. "This is what we do...this is all we do." You definitely need to find a balance between AP, cost, and useability. Whomever you choose should help you find that balance, help you understand why it's right for you, what the risks are, and help you implement it...all for a reasonable price. Good luck!

@Patesia Andrews, hello again:) Wholesalers will accept anything that gets them paid, but financing is less than ideal because it's iffy and takes longer to close. You will almost always lose out to a cash buyer. And if you don't then it probably isn't a great deal or really any kind of deal at all.

I have never met an HML that will loan on owner occupied. WAY too much liability, regulation, and headaches. They do commercial loans only based on the viability of the deal where they can foreclose quickly if necessary and do not have to deal with Fair Housing or any of the other regulations associated with owner occupied homes.

1. Did you start in Senior or Junior? Senior
2. Did you start in Performing or Non-Performing? NPN, but would probably do it the other way now.
3. You started with your IRA or your own cash? SDIRA
4. Educated yourself, take a course, got a mentor, JV'ed? All of the above

@Jeffrey Smith, there is definitely a deal here if you can get an $800k property for $700k, but I think you are overcomplicating it. If it will appraise for $800k then you will have to come up with $160k-$240k down payment to finance it. I had to look up fund and grow and didn't look too far into it but I am skeptical of operations like that.

I would see if they will sell the property to you Subject To first. Sell them on the idea of steady income every month and then a big payoff when you sell/refinance the property. In that scenario they would sign the deed over to you or your LLC in exchange for a Promissory Note and Mortgage/Deed of Trust that YOU sign promising to pay them $550k based on the rate and terms you all agree to in the Promissory Note. Then you take over the payments of their current mortgage and the headaches of the termites, toilets, and tenants and they just get a nice fat check every month. Ask them what they intend to do with the money if they sell it and if they don't have plans for it then you can sell them on the idea that this is better than parking it in a CD or Money Market account. Lot's of ways to structure this type of deal. You can even put a balloon on the Note so they know when they will get their payoff. In your strategy, you are essentially asking them to do this anyway only with you paying off the current mortgage somehow.

If they want the money now it would be a little more challenging, but still doable. This all assumes that your numbers are correct and that they are willing to let it go for $100k+ less than market. Let them know that selling can be a hassle filled with uncertainties and it will likely cost them at least 8%-10% in closing and transaction costs to list a property with a broker.

I guess HELOCs are scams too since when you borrow money from them it reduces the amount of equity you have in the house. If your heirs sell the house they will have to pay off the loan you took against it...just like a permanent life policy.

And real estate in general must be a scam since agents/brokers make a commission when they represent buyers/sellers and that apparently is one of the clear signs of a scam.

Look, this strategy isn't for everyone. Just like real estate isn't for everyone. However, I can confirm that there is opportunity to leverage the cash value in a properly structured permanent life policy to boost your returns. Just like a HELOC. The house continues to appreciate and the life insurance continues to earn its dividend while you make the split between the interest you pay the insurance company and your return. I've run the numbers, both proposed and actual results, and it can make a difference.

So bottom line, if it's something you think you may be interested in do your own due diligence, just like anything, and don't take the word of hype-sters or nay-sayers on these forums. There is often more to the story. Get some ideas from here, but do the research yourself.

@Casey Cash, you can structure the deal any way you want. They can lend you the money or you can have them as equity partners where they share in any profit you make. The appeal of equity partners is that they can make a much better return, but they can also lose their money. Depending on how you set it up, you may not have any money at risk. Personally, I would never allow someone who invested with me to lose money if I can help it. I would eat the loss regardless so I don't like to give up further upside since they really aren't taking on the risk of loss. So I have always set up people who invest with me as a loan and secure it with the property. This puts them in a much better position because their investment is secured (they get the property if you default) and it clearly outlines how much they can expect to make (points and interest rate). It is obviously more complicated than that but that is the gist of it.

To specifically answer your question, depending on the lender and the deal, I have paid anywhere from 8% to 10% and 2 pts to my investors. Any more than that and I could probably find cheaper money elsewhere. Most people are thrilled to get that kind of return secured by real estate. 

If you are just investing in MHs and not MHs attached to land that would change the dynamic somewhat since you are talking personal property vice real property but the premise is the same. Their investment is still secured, but it would be more like lending on a car instead of real estate which is riskier and should command a higher return to the investor.