All Forum Posts by: Levi T.

Not legal advice.. The Court of Appeals for the Fifth Circuit held that a general partnership interest could be a security if the investor was dependent on the promoter and could not exercise meaningful control of the business: https://www.strictlybusinesslawblog.com/2012/04/13...

I have spent 10's of thousands of dollars trying to peal this back, with no success.

Basically the SEC has what I would call the Mom and Dad rule. If they think your doing it wrong, your doing it wrong and they can do something about it.. no matter whatever guidelines they outlined at another time. You can not separate it with entities, or other advanced methods. 

You basically have 3 main options, state level, federal level with 506(b) private placement, 506(c) with public placement. The last two are what most choose to avoid state rules.

What I have worked out, is you can do whatever the hell you want, a lot of people do, BUT, if the partner/investor/note holder gets digruntal because the deal did not perform as they expected, or they just woke up on Monday and hated you, randomly picked your name out of the sky with no business what so ever..they can report you to the SEC, and the SEC will smack you down. At the minimum, you could get flagged as a "bad actor", which basically blacklist you from securities, and goes downhill from there.

It's a real PITA my friends!

OP had good intent, just worded it wrong. Everyone needs to relax.

This side of the state line, Foundation Company, aka Virginia Home Buyer, aka MacDot Reality, aka one of the other dozen names they operate under, is king for now.

I'll never understand why everyone looks for another crash right after the last one.

It's as if one has wrecked their car, just got it back from the mechanic, and as they drive off the lot, they start preparing for another crash.

There is no crash currently happening, there's not going to be another nationwide housing crash.

If by some crazy chance it does, guess what, if your in or out, it don't matter, your bankrupt with 99% of the rest of the county.

If your in a state that people say it's crazy on everything they do. That's a nice way of saying your state has bad economics, is screwing up, and at some point one of two things will happen. It's going to go bust, or there will be a long period of depressed growth while other factors help stabilize the crazy (bad) economics of that state.

It's called a Sellers subsidy. If the deal is 150k, and you agree on a purchase price of $186k, with a $36k seller subsidy, it means the bank will finance around $148k of the purchase price, but you have a credit due at the closing table for 36k, so you need 2k in cash-cash, plus closing cost.. The bank will tell you that you need to put down 20% as they have to follow company policy, but it all works out in the wash at closing as you have a credit. They may know you have the credit, but they are still required to say that you have to put down x percent.

What your talking about is private placement, even if it's in the format of a note. You need to keep this investor pool within arms length, meaning your already friends with them, otherwise it's a public offering, and the kicker is they have to be accredited investors, meaning wealthy. Private and public offerings are both regulated by the SCC and SEC, no matter how you spin it. I recommend you at least get to know some of the rules.

There was a local real estate agent a few years back in Maryland, that did a equity / payback style deal like your talking about. SEC sued him, forced liquidation, and filed criminal charges for violating the rules. 

As pointed out, getting someone to give you a 2nd position note will be hard to come by. Getting a general partner is your best bet, but you'll find they want a lot more than your currently planning. 

Most will want their equity position to match their investment to deal size or larger, preferred rate of returns, waterfalls, etc.

Best of luck,

Could not of said it any better, nicely done!

As Andrew said, setup an operating agreement. I recommend using Google docs or something where you both can see and edit it. It must be clear and simple on each point. This way everyone is clear and fully understands what is expected.

 Yup, talk to Jason for insurance. 

 I do a lot of deals like this. Couple pointers:

Send them your lease, but keep it month to month for now, or at least wait 3 months before signing on a long term lease. You will likely evict 50% of tenants within 12 months for non-payment, or they just up and quit to avoid court. 

I would not hold your breath on them sending your lease back, they are watching you to see if your going to be lazy on late rents, or hit them hard and fast.. do the latter. Notice and certified out the door asap. Once one gets kicked, everyone talks, and starts performing better.

Good luck and congrats on the deal!

I suppose you could, it is a business transaction after all, but why would the bank give you a better deal, what's your leverage?

You got to remember credit is how much risk the bank thinks you are to them. They are number crunchers, and systematically follow their lending rules and the laws. They have underwriters to insure everyone follows the rules.

Your best bet is to make yourself look like a super low risk before hand. Become a bankers unicorn!

I have some SFH properties me or my managers have not seen in 7+ years. We have no plans to look in on them, unless the proverbial tea leaves start showing signs of issues with the tenants.

Tenants will report problems with the property if you fix the problems. If you refuse, or bill the tenant, they will stop reporting it.

Tenants not paying rent goes hand in hand with not taking care of the property.. you'll know when you got one, as the property will keep popping up on your  radar each month. That's when you start checking in on it.

As others pointed out, this is what you paid a PM to think, manager, and deal with. You should only be collecting a check and living worry free, otherwise you should fire your PM.