All Forum Posts by: Sam Erickson

@Jeff S.

Thanks for the great response.  I simply want a loan, we would escrow the funds, I would buy the property with those funds and they would have a 1st mortgage on the property.

I did not mean hard/private money lenders.  My two leads are just individual guys that work 9-5 jobs that I have done business with in the past, they are not professional lenders.

I do have a pdf file that is just what you explained above, my background, deals completed, sample reports, etc. Both my leads work in the financial sector and within their circles have a lot more people with the means to be a private lender.  Though I would love for my name to get in front of those people as well do I need to be concerned with my presentation being passed along to them unsolicited?

Someone also told me that I need to be careful with crossing state lines? Can I send you my .pdf file? I would love your thoughts on it and if I need to be concerned with anything in it.

I'm looking to grow my business and start implementing private lending. Up until this point I have flipped with my own funds or with partners.

I have a few leads on possible private money guys.  I have created a .pdf file introducing myself, how we analyse deals, past success stories, etc.  

I guess my main question is should I be concerned about securities law when seeking private money? For example I know the big thing with securities is solicitation, which is what I would be doing.  I'm I right in my thought process though that I'm looking for a loan and am not trying to sell the investor anything like you are when selling securities?

If anyone has experience with this I would love the input.  Would also love to here how you pitched your private lenders to get on board.

Thanks everyone that responded.

I'm still in negotiations, but I'm not to hopeful at this point.  Its seems that every-time we talk the seller has a new hoop to jump through.

I've tried working in some your suggestions.  I'll keep you updated to the outcome.

We flip all year.  Only big thing that we change strategy wise is when it gets to winter we are much more picky with our timing of things, closing dates, etc.  

I don't ever want the house finishing up and going on the market in December, or first part of January.  No one is looking to buy, If you do finish one we have found that your almost better just to let it sit done till end of January so your DOM doesn't increase.

If your flipping in the fall and you can get is finished and on the market by November I think your safe.  You can then do things marketing wise in regards to getting you buyer in before Christmas.

Otherwise the only other thing we do is flip the rehab schedule around, and will do the inside first then finish with the out side.  This also ties back into our dates. For example if we find a house in January we will try to push the closing date as much as 60 days out (depending on scope of project).  This way we have the property locked down but aren't taking on the holding costs.

Thanks for taking the time to respond everyone.  I appreciate the opinions and insights.

One of my marketing campaigns resulting in a lead from Williamsburg, OH for a Tri-plex.  It appears to be from a wholesaler.  I don't operate there so I'm offering it up to the first person that says they want it.  Below is the content of the submission I received, let me know if you want it and I'll PM you the contact information I have for them.

I have the property under contract for 35k.

Its a 3 unit property

I am selling the contract for cash

All 3 units are 100% rented

The 3 units have The main thing wrong with the whole place is that the back has a stone foundation. Which will cost between 5k &10k to fix. Other than that just cosmetics to your own liking

ARV is 99k

 Thanks for the thoughts Joel that might be a good option to go with. I remember reading some blogs a year or two ago on BP that talked about Master Lease.  Thanks for bringing it back up.

@Account Closed I think your making a lot of assumptions and drawing your own conclusions from a very brief 5 point deal summary which wasn't even the topic in question. That being said I will respond to some of your points. If you still feel the same, I'll take your points into consideration.

Though I acknowledge I am over paying, I believe I'm only over paying by $50,000 (something you recommended I did when you thought the value was $400,000) The other offer at 400K is a low ball offer from a guy that throws you know what at the wall to see what sticks.  I thought maybe I could use that as leverage thus my comment of the paying $150,000 more then anyone else. Also my offer at $550,000 is still 100K under what he asked for.

As for the seller they are an older couple that moved here from Asia years ago and paid $875,000  cash for the building, to operate their acupuncture business out of it. They then leased out the other spaces.  The lease numbers are poor based on their inexperience.  They have all 1 year leases, with no bumps.  Some tenants have been their for 7 years and have never had the rent increased. The are also running the expenses at 55% of rent, being that 50% is a conservative rule I think with my experience I could bring it lower then that, but I'm actually using the 55% in my numbers. They are now looking to retire.

I should also note that in the last 5 years they put a new roof on, 9 of 9 furnaces replaced, all concrete work redone,  and retaining wall replaced. Leaving very minimum risk of Cap X in the next 5 years.

My experience however started 6 years ago and hasn't stopped as I worked for a REIT as Senior Commercial Manager of the fund and lead leasing agent. In my fist two years with the fund I not only worked with national brands and improved relations I oversaw a Days Sales Outstanding reduction of 25%.

I know I'm coming back swinging but I can't tell you how tired I get of responses that I see on posts from people that seem to just be waiting to bounce on people and then proceed to draw conclusions to fit the narrative that they want to write, and think that by using smiley faces it gives them a pass to be dis respectful. I would urge you next time to ask questions, "what is market value?", "why are they entertaining seller financing?", "do you have experience with commercial?", "what is your re-leasing plan?" "what are rents per sq ft in the area?"  All of which I would have been happy to answer and begin a dialogue on the deal itself if you were interested in doing so.

I found a seller that owns a 20,000 sq ft. office building with no mortgage that is interested in carrying the note for me. The building has a gross cash flow of $68,000 as it sits now, with a gross potential of $160,000. The seller is currently running $37,000 in operating expenses. Building needs $10,000 is common area updates and then each vacant unit would need paint, possibly carpet prior to renting. The building at 90% full would have an ARV of $950,000. Below are the terms of my deal:

Purchase price: $550,000.00

Down payment: $10,000

Interest Rate: 3% (Max payment is $2,000 a month)

Term: 5 years

I was able to negotiate that months 1-3 my payment is $0.00/month, Months 4-6 my payment is $1250.00/month, and months 7-60 are $2,000/month.  Giving me time to make updates and get tenants in.  It ultimately makes my down payment $1,750, since I'll be getting $8,250 in mortgage payment savings over the first 6 months that I can use towards improvements.

I don't think I have any issues with the deal as it sits above. The seller has received cash offers but for around $400,000. I know I'm overpaying but with a monthly payment of $2,000 and 3% interest and 5 years I think I'll be able to make up the difference plus and have plenty of equity at the end of the term. 

My issue comes in that the seller had their attorney look over the offer and the attorney is recommending that I give them a personal guarantee.

The plan was to purchase this with an LLC and have it be separate from all my other dealings. I think that the property can work if properly managed but of coarse there is always a risk. The attorney is recommending the guarantee because of the low down payment. Is an effect counter argument that the down payment is small but I'm paying you an extra $150,000 more then anyone else, not to mention the interest you make on the $550,000 for the 5 years?

Or if I think the deal makes sense should I just sign a personal guarantee and be done with it?  Another thought I had was if I sign a personal guarantee that I only guarantee up to $400,000 (what the property is worth today)

Thoughts our appreciated.

I think its important to determine if the basement is just feeling damp from being a basement or if you have water issues.  As long as your basement is dry (no water getting in) you should be find to insulate and drywall.  We always use standard drywall, as long as you do the foundation work and make sure the water is running away from the house there shouldn't be any reason to pay extra for the mold resistant.