All Forum Posts by: Kevin Yoo

@Jacob Michaels

I am having trouble following you. 

1. If you agree to a purchase price of W95mil from the seller and then Jeonse to tenant for W82mil then you need to put in your own money of W13mil at time of closing.
2. And since there are no monthly payments, you earn 0% on your W13mil. 

Am I not getting it right?

@Sean Tracey

We go out and find partnerships to invest in. That is our real estate business model. Simply put, we are the Cash Partner and bring all the cash and financing to the table. The local person is the Ground Partner that finds, rehabs, rents, and manages the deals. We then split everything 50:50. We do certain things like purchase the property and close the escrow, buy insurance, pay for taxes, bookkeeping, get financing, etc. We do not do anything that requires local stuff like property management, contractors, tenants, comps, etc. 

You may think that this is an awesome deal for the Ground Partner because they bring no cash to the deal. But our partners are bringing deals to us that are typically 65 to 75% ARV all in that they could fix and sell for close to market value for a nice tidy profit for themselves. Instead they keep it for the Partnership. My company then refinance at 75% LTV and pull almost all of our cash out and repeat the process all over again. You see how this is an awesome deal for us.

In your situation, if you plan to not bring all the cash to the table, then you must figure out how to bring more value to the partnership such as making phone calls remotely taking on some of the work. If you plan not to bring all the cash to the table, be prepared not to get 50:50 but less because as hard as you may try, your Ground Partner will ultimately be responsible for much of the work because there are so many things you just cannot do remotely.

@Chris Allard

I will give you some feedback on your partnership. I am not quite sure that your partners are matching you dollar for dollar on cash contribution or are only putting in 25%. I am also not sure you are obtaining the financing in your name with your credit. But from what you said in your post, you have a great deal for yourself. By having your Ground Partners put 25% of the cash needed in to the deal, you are making them put skin in the game. But you get 75% of everything with preferred return and majority control. The only concession you gave up is that your Ground Partners get the 7% PM fee which means ultimately they are getting more than 25% but not much more. 

@Jeremy Sanders

Private money is money from any individual that is not hard money, bank money, institutional money, etc. Partnerships can be created in multitude of ways. Let me see if I can share with you how I have done it. But as to how the equity of the property or the profits of the deal is split up is dependent on who brings what to the table.

1.) Fully Equity Partnership is mainly used when flipping Houses. You use the funds of others to fund the deal, you do the work with rehabbing, renting, and managing side of the deal and both you and the initial investor whom invested their funds split the profits 50/50.

This is one common way it is done for fix and flip. But equity partnership is not only for flipping homes and can be done for buy and hold properties. Moreover, some private lenders may want to be a debt partner and not an equity partner where they are simply lending you the money and you pay a set interest rate just like a bank loan. 

2.) Down Payment Equity Partnership- The investor funds the down payment needed. The investor will then get the mortgage in their name, but the legal title will be in both yours and the investors. You both will then split the profits 50/50.

This is simply Equity Partnership in a buy and hold deal and can be structured this way. However, as to who is on the title, this needs to be negotiated because some investors may not want you on the title if you do not bring any cash or credit to the deal. And who brings the down payment also needs to be worked out. If the Investor puts in the cash for down payment and gets a loan in their name, they have both their cash and their credit at risk. Many investors will do one or the other but not both. And for the split of the deal you will need to split the equity, cashflow, and the tax benefits. Again, if the investor is bringing both cash and credit, they may want more that 50%. It all needs to be negotiated.

3.) Private Lending Partnership - ( ??) This one I'm alittle confused on.

#1 can be Private Lending Partnerships if the Investor simply wants to loan you the money to do the flip and do not want to be on title. #2 cannot be Private Lending Partnership since the Investor needs to qualify for a loan.

4.) Credit Partnership - A person lends his ability to get a loan but doesn't supply any down payment. You would then use a hard money lender or another private lender to purchase a property, including repair costs. After the home is rehabbed, rented, and producing month-after-month cash flow, the initial lender refinances the home into a fixed-rate, long-term mortgage using his or her great credit, but both remain on the legal title for the property.

Yes, if an Investor only brings credit to the deal then he is a credit partner. You should use a credit partner because they have excellent credit that allows you to get a very good loan. So, you would most likely not refinance the loan after the property is stabilized. And if the credit partner does not bring down payment and you get another investor for this, then you need to give them a piece of the pie. As to who is on the title, if you have three separate parties, this gets tricky and needs to be negotiated. The credit partner must be on title when they qualify for the loan because the institutional lender will require this. But once the loan is in place you can decide who is and who is not on title including the credit partner. 

You are making this more complicated by trying to fit each square idea into a round hole.

Real Estate comes in two flavors. Short term and long term. That is fix and flip or buy and hold.

In fix and flips, private money can be debt partner or equity partner. Debt partner simply lends you the money for a fixed rate of return and is not on title. Equity partner gives you the money for a portion of the profit and is usually on title.

In buy and holds, there are three people to each deal if you include financing. One is the person who finds, fixes, rents, and manages the property = Ground Partner. Two is the person who brings the cash to buy and fix the property = Cash Partner. Three is the person who brings the credit if you want to finance and leverage the deal. You can be one, two or all three persons in this deal. If you have different individuals then you need to make sure that there is an equitable way to share the three benefits of owning real estate: 1) equity, 2) cashflow, 3) tax write offs. 

I hope this helps.

@Carmelo Alba Thank you for posting that Michael Ghadis and Wahl Bradley from Concorde Finance are scammers. This is very very valuable information for BP nation. We simply do not have enough posts like this.

However, @Edward B. is right. Without actually providing evidence you are smearing someone. I know it is always a long story but if you posted this to help others which again is so important that you do that, you must share your long story.

Personally, I am truly disappointed in BP as a site becoming the "motherload" of a site where scammers can pick off unsuspecting investors. And I am just as disappointed in BP posters (whom I admire greatly) like @Jay Hinrichs and others who know this very well but are not really doing much about it. I am including myself in this group.

We spend a great deal of time posting and reading about success stories. But we spend very little time with posts and discussions about all the failures and truly spend very little time talking about those on our site that take advantage of others. Why do we not do as a good of a job policing ourselves as we do teaching others how to do real estate investing correctly? We are an unregulated industry, and if we do not regulate ourselves the government will. 

We are pretty good about helping a newbie get started. But we are very hush hush about it when one BP member harms another even if it is done fraudulently. We should be very transparent about this so that we can keep such people out of our Community. We should use the power of social media that BP is to protect ourselves. But we should also be very very careful about sticking to the facts and not make things personal. 

We should really have a Forum Category titled "Scams on BP." And if you happen to have someone post that you have hurt them you should be given the opportunity to correct the situation to protect your reputation. It should go both ways.

@Jay Hinrichs

@Sheldon Alex and @Kyle Hricko

How is it that you are looking for 100% funding without having a track record of being worthy of such funding? Would you bet everything on a horse that has never run a race let alone win one?

Please do not spend your time looking for this because you will more likely than not find such a thing. If you do, it will probably be someone who is too inexperienced or too dumb to know any better and when you fail to perform as often happens for beginners, you will leave this investor holding the bag and out of lot of money. This has happened to me on several occasions and I believe that lack of experience was not the cause for my oversight. 

For these reasons, 100% financing is not for the beginner. Unfortunately, BP and other real estate information sources drives us to think that is available and should be our goal. That is simply wrong. And when someone posts as a response to mine that they got such for their first deal and went to make great money, that is the exception and not the rule. 

@Sheldon Alex "What are some other ways I can find investors to work with to get my first deal going?"

Go work for them. For Free. Show them your passion, commitment, and capabilities. Find someone who seems to be very good at real estate investing and offer them your time and efforts. And then give it everything you have. Not only will you learn a lot but you will have a lot of doors open up to you. You will then see deals come to you and money become available.

@Corey Woodruff "Cause if not it's always better to get a deal and then find an investor then to try to get an investor and then find a deal. If you find a deal that is truly a deal an investor will flock to it."

It is true that a great deal will always find the money. However, when you are a beginner this tactic is fraught with danger. If you have a great deal without having a team including a mentor who can do something with the deal, you will lose it or do it and fail at it despite great numbers. 

In summary, gain the experience and relationships that will show others your value to a real estate deal. It is wrong of us to think that the deal makes the investor. It is the other way around, the investor makes the deal. Make yourself the valuable home-run deal first and then you will see that money will flock to you. 

@Travis Vizier

As a PML myself, here is how you should set up the deal so that its a win/win for both and you can use me again in future deals.

1. First and foremost, provide a solid personal guarantee. Providing this would tell me you believe in yourself and this deal is a solid one. If you tell me you would not do a personal guarantee, then I am taking almost all the risk is on my shoulders. So, if the deal goes south, be prepared to take care of me. At least give me back all my principal.
2. Have my 401K be the purchaser and be on title or write up a strong promissory note and record my lien on the property immediately after purchase and provide me proof that it has been recorded. Private message me and I will send you a copy of Promissory Note we use.
3. Have some skin in the game for the first few deals until you have proven yourself. If you can do 20 to 30% of the deal, great. Perhaps I pay for purchase and you pay for rehab. If this is too much, then a few thousand dollars will do. At least pay for all soft or ongoing costs.
4. Pay me a respectable return. Unless your private lender does not care and would lend you for 6 to 8%, he can typically get 10 to 12% in the market place. Whatever rate you agree upon, make monthly payments. If he wants to be an equity partner, at the least give him 35% of the profit but typically it is 50% and sometimes more. 
5. Keep constant communication every week, until I tell you to stop calling me so often. And don't ever ever lie. 

I wrote all this from a PML point of view because that is who I am. But remember that you will win as well because you will do this deal and many other deals afterwards with hardly any money of your own. And if you perform well and take care of me, this will be easy money and really a great line of credit for you.

@Michael McLoughlin

OK, Michael. I do not know what Delaware Statutory Trust is. Please explain to all of us who do not know. I am not ashamed to admit I do not know something. But it sounds very interesting. 

@Levi Painter 

1. Is this a good deal?

On the surface, this is an outstanding deal! 2% Rent:Purchase Price is the the holy grail in rentals. In your case, it is 2.8%. However, there are a lot of other things you will have to look at most specifically deferred maintenance, vacancy rate, class of neighborhood, and CMA to see if this is a good buy.

2. Also I am only working part time since I am at college, and am wondering what is the best way to finance this property?

If you do not have a W-2 income, it is hard if not impossible to get a good conventional investor loan with rates around 4 to 5%. Moreover, very few if not no conventional lender will lend on a property that is worth less than $75K and most less than $100K. 

3. Do I need to find a private investor?

Yes, that will be the best way. Because the initial numbers look so good and if all other things check out well, you should be able to find someone to buy this with you. Few private lenders will lend you money at reasonable rate say 9 to 12%. Others like me would only do this deal if we get half of it such as equity and cashflow. Just get out there and network with lots of people so that you can find someone to help you.

4. I don't think I will be able to get a mortgage from the bank. Any thoughts?

You are right in that no bank will want to lend to you or to this property. But you should ask and look around at all the local and national lenders so that you learn what financing is out there.

Good luck.

@Kathleen Bassett

Please send me an NDA. 

@Christopher Haynes

I have heard a lot of horror stories about driving a car. But I still drive a car and do it very safely.

HML is one of the tools that you MUST have in your treasure chest for real estate investing. It is wrong for @Account Closed to tell you to forget the hard money route. Charles has most likely had tremendous success and it is not wrong not to ever use hard money. But there are many many who use hard money very successfully. So, it is wrong to state that you should never use it.

The key to success is to learn when to use HML and when not to use it. But you have to be very careful because you are right, there are many true bad stories of people using HML. By the fact that you are having to ask this question, I can see that you are a novice and need to be even more cautious.

There are many different formulas used by HML but most commonly they will lend 80% of the purchase price + rehab which for you means 80% of $75K. And if your deal is worth $165K after repairs, this is a very very safe loan for HML. You may even be able to borrow 100%. But you don't get all this money up front because they want you to have skin in the game. They will come to closing with only 65 to 80% of purchase price and you have to have the rest. They will also have fund control which means you have to float the cost of the rehab until the fund is released by HML after verification of your work. Lastly, you have to pay monthly interest which is often included in the loan, but you still have to make the payments. So, make sure you have the cash to do all this.

If you do not have the cash, then look for PML (private money) because with the %ARV that you are buying this property at, this is a deal that would very much interest a PML like me. That is a topic for another posting.

Just like you would shop around to buy a new car, talk to a lot of lenders. You must get this education even if you don't use HML on this deal or ever.