All Forum Posts by: Leo C.

a small minority get rich in real estate through pure tenacity and luck, vast majority that are able to 'make it big' already has strong foundations (i.e. capital).

If you're already gotten as far as med school, the smart thing is to finish it, get a real job, then use the high income to leverage low interest debts for investment.

Jumping ship this late in the career game from a high trajectory track to something like real estate with no experience or other foundation is a calamity in the making.

If you mean protection for general liability (tenants, visitors, slip & falls), just grab an umbrella policy (~250/yr for 1mil covering ~5 properties, about 100 for each increment mils), simplest thing you can do and beats the couple thousand in fees a professional will charge you.

If you want or need to do tax sheltering strategies or optimize estate distributions etc, then definitely go for a qualified accountant or attorney.

In pooling the opinions expressed so far, viable approaches run along these two main types

1) If equity partner is supplying less than half of the full acquisition + prep for rent/sale, then it's usually better to treat it as a private loan with a set return, secured or unsecured pending individual circumstances.

2) If equity partner is supplying nearly all the upfront costs, managing partner charge a fee for services (one-time general contracting/labor fee to prep [5-10k] and ongoing management fee).

In case 1, managing partner holds title, case 2 equity partner holds title.

This is based on the premise that sharing control of a rental real estate is usually a headache, so either hold control as the managing partner and pay interest, or let equity partner call the shots and charge them for service rendered.

This is for deals under 100k, higher numbers a formal partnership or setting up LLC with operating procedures and buy-out provisions would be necessary.

I've heard no x-dog breeds, no students is really a new one. Maybe there was a claim history with the property with students that the insurers could pull-up? Or the particular zip code has above average claims and is a college town?

Can't really see how no students can become a criteria unless there's something specific about the situation.

All the residential low-rate terms are for 'own-occupied' properties purchases, and bank paperwork will stipulate that.

I have no expertise on bank underwriting and related regulations, but my guess is that even if a good credit person is found, rolling out 10 mortgages is not a walk in the park in the current lending climate. Then there's also the debt-to-income ratio that will limit most borrowers with payments to top out around 45% of their income.

Running one or two is probably fine, but the risk to either party is probably not worth the hassle (unless its high value deals).

Would be very helpful if anyone that did such equity-labor deals can do a numbers rundow, real or hypothetical.

Say 30k purchase price, 30k hard+soft renov costs, market value 80k at completion, successfully rented at 1k/month.

Intent as a buy and hold, how would this kind of deal exit? How is the title held?
Essentially what convention of a split makes it worthwhile for both the money and equity partner and appropriately manage risks.

It might work by deeding the property as tenants-in-common (money partner 80-90%, labor partner 10-20%), then draft an agreement with money partner pay all costs. The exit strategy would one to buy out the other at fair market rates after x-years.

Basically the money partner gets the majority of returns, labor partner has a vested ownership interest (and split of income), upon exit, one party gets paid lump-sum to sign over deed.

This assumes the transfer/structuring costs, insurance (plus liability concerns), and other costs do not add too much to the overhead.

That's one idea, feel free to chime in other approaches.

If they have a steady job and pass the general tenant screening criteria items, and not having a SS make them somewhat fearful of authorities (cops and courts) -- generally excellent low hassle tenants that pay cash and on time from my experience.

I'd look into p2p loans if you have decent credit, they do unsecured loans (6-30% interest spread) w/ no prepayment penalty only 1 point fee. Much cheaper than hard money if borrower credit score is decent.

I've invested in the prosper.com platform as a lender for a few months now. It's not a bad place to pickup 4-25k (depending on your credit), origination fee is 1% I think, and no pre-payment penalty. Borrowing rates range from 6-30% depending on your credit rating etc.

As a lender I've been getting great returns (small test fund, only 3 months). I think the platform is maturing enough to use to tap some liquid funding for investors. Lending club is the bigger p2p loan platform, their rates are a little lower but a bit pickier on underwriting (640+ credit).

Conceivably one could get loans on both platforms and circulate up to 50k in funds, pay back soon and re-borrow like a credit line.

Been a lurker on the forum a while now (good place to hang out and sponge info).