All Forum Posts by: Joanne Basecki

Hello everyone. I recently discovered this remarkable site and intend to read and learn here. I find Real Estate very interesting, more so than any other game that I know. But must admit I don't identify myself with it. I suppose not too many people do, not even those among us who are so extremely successful. I do identify myself (still) with all of my sob stories of the past (smile) and passion for the future. I don't want to take your time with my picture of RE changing in front of our eyes due to technology (and social wisdom) but I wonder if I could ask what YOU think on the subject? How soon our homes will include (more) structures involving entertaining illusions and safety (total) against natural disasters and when will we lift some homes upwards to the air, perhaps to live without an address.whenever desired..?

(I have one more off subject question, a bit more down to rearth: How do I ad the "follow" and the "PM" buttons under my pic on the left?)

QUESTION: How many small investors have you come across within the last month or so who have been denied a loan requested for any reason (credit included)? Was that number larger than the clients approved?

Input form any mortgage broker or just an informed person would be great but I must admit a mortgage broker working in the city of Chicago might have the most accurate answer to what I am considering. (If you are wondering what it is that I am having on mind take a look at my other post titled "Another way to access funding 4 a small rehab?").

I see I need to be more clear. Let's take as an example Investor 1. What I said was:
ARV - price paid for the property = 90k - rehab = 50k
To put all the details it could look like this:
ARV of 100K - price paid for the property 10K = 90K - rehab price of 40K shows that there is 50K left to be maid and after 50/50 split with Major Investor that person would be left with 25K profit. Thus his share of LLC would be 5.5% as the 100% is 450K

Please give me just a bit more of your time in hope I could change your opinion to a more positive one. The numbers below present exactly how I see the situation in real life, except that I am using 5 properties in place of 10 for simplicity.

Note: This would be a service to all those who cannot receive a conventional loan for unknown reasons, often unfair reasons for sure, as they are contributing members of society who have never done wrong to another. (We can always do background check on these folks) IT IS OBVIOUS that for those persons this would be much better situation to commit to than to accept total losses:

Investor 1:

ARV - price paid for the property = 90k - rehab = 50k

Investor 2:

ARV - price paid for the property= 70k - rehab = 50k

Investor 3:

ARV - price paid for the property = 20k - rehab = 10k

Investor 4:

ARV - price paid for the property = 80k - rehab = 50k

Investor 5:

ARV - price paid for the property = 190k - rehab = 100k

Note from above: Rehab price must be less than half of expected profit

Contractor committed to the total rehab price of 40 + 20 +10 + 30 + 90 = 190K

Major Investor committed to an investment of 190 paid directly to contractor and profit of 25 + 25 + 5 + 25 + 50 (50% from profits of each of the 5 property investors) = 130K It is obvious he almost doubles his investment. Lesser the rehab price in comparison to the profit better for him. EVEN if that investor needed to pay 20 for atty and closing he still made 110K in a SHORT TIME from his initial 190 which is 58% - A HUGE PROFIT WITHOUT MUCH EFFORT

Now all involved need to commit to the numbers and the % need to be calculated. (The end buyer must as well commit to his price at this point)

All involved expect to be paid as follows at closing:

Investor 1

25k = 5.5%

Investor 2

25k = 5.5%

Investor 3

5k = 1.1%

Investor 4

25k = 5.5%

Investor 5

50k = 11%

Major Investor:

190 + 130 = 320K = 71%

The price buyer must pay is the total of 130 + 130 + 190 = 450K which is exactly the sum of all ARVs (He will now lease each property for profit. Thus stinkers could not be accepted to the group in the first place)

Jon and Chris, I must say I finally understand your point. Thanks for making it so clear for me. One day soon I would like to explain why this particular concept was and still is so important to me. I really appreciate your help and patience very much. The conclusion that I now see is as follows: The major problem would be in a fair distribution of profits. If and only if an attorney could set up an LLC arrangement where those percentages could be easily predetermined and agreed upon ahead of time, perhaps there is some chance of success with this, for those folks who are denied conventional loans for one reason or another. An exit organization, a buyer, would need to cooperate as well.

David, you seem to understand me and likely you would be able to help, except that my property and investment focus is in Chicago. Thanks so much for the understanding!

Jon, you misunderstood me. The concept is NOT created for the contractors but for the people who in fact purchased fixer properties and cannot find any loans to pay for their rehab project. I experienced it myself. I purchased a property with cash and was told by HM my deal is too small for them. Yes, the people like me would indeed bring the value in. The cash investor would only bring a part of the value. There is nothing wrong with your concept and I thank you for your input but I am painting a picture of a totally different situation. (Smile.) The steps of my concept:
1. Investors purchase their fixers
2. LLC is formed
3. Now a large (new) organization is looking for funding for its projects
4.The projects are sold as soon as the rehabs are accomplished and proceeds are distributed according to % values.

To me this is a specific concept aimed at a specific situation and I am so hopeful it might be a workable one. Thanks so much for discussing it with me. Any questions are great and very helpful.

Answer to CM questions: My initial thought was the properties would be cash purchased. Often times, as we know, the fixers can be purchased with little cash, much below ARV. Now I am thinking that perhaps a mortgage would not present a problem as long as there is profit to be made via a rehab. Thus, there would need to be a valuation done by assigned broker(s) presented along with all other docs normally required in such instances.

My assumption is that there are many such small investors in any large city, that there is in fact a need for a solution for a problem. Therefore I thought that each LLC designed for this purpose would be "open till filled" meaning that investors would be signing up to them whenever one would be available and perhaps availability would be advertised by an attorney. So the answer would be yes, the sign up would be in a relatively same time, during two weeks or so. Yes, time would have to be of essence.

Look at it in a different way:

This is no longer about lenders or lending. This is about a joint venture agreement created for the exact reason of BYPASSING the problems and hoops that are piled before a small investor, often the first time investor who needs a source of money for his small rehab. For him his small rehab is the lifetime opportunity while for the big money folks he is but a small aunt, not much to think of or consider.

This is about a joint venture agreement drawn by a REAL ESTATE attorney, not just any attorney. All participants, 10 or less, agree to hold interest in the venture equal to the ARV of their respectful properties. There is an additional participant, one who is to cover the cost of rehabs and agrees to hold interest equal to his investment plus profit.

Now we have avoided lending institutions with all their requirements. Now the private party with money, the individual who wants to invest (repeatedly) in RE hands off, now he is looking at a large enough deal to be an attractive deal to him. Additionally, there is no need for him to worry about "truth in lending" or interest rates or anyone's credit worthiness. The profit is predetermined, the term as short as possible, as short as the rehabs may require. Professionals involved, from brokers to contractors treat the group with more respect as there is a sizable deal for each of them at stake.

My question and concern is the amount of risk assumed by the investor covering the cost of rehabs. Agree, this may be a new territory for many, but is it worthy exploring?

A mortgage broker on this forum might know whether or not there is enough small investors in any given city to participate in such ventures. If there are, such a broker may be used as an info resource. Surely at some time in the future some of those grateful individuals may return to him as borrowing clients. Perhaps a win win? Such a broker may as well know the deep pocket individuals (smile) in search for new great investments. I do hope to hear more comments on this...

Are there any RE attorneys on this forum?

Thank you so much for the information. They have never accepted any of my offers yet. Got all the deposits so far back. So good to know this in advance!