All Forum Posts by: Robin Simon

I just started to learn about the BRRR, had an investment property in SoCal sold it. As I learn more and more, looking to start building cashflow portfolio.

The more research i do the more it suggested that California does not suit for our investment strategy of generating cashflow.  I know I'm new to this, am i doing my math wrong? 

As much as i would like to build portfolio locally, with understanding of it all come down to whether the number make sense, i am starting doing my research out of the state.  Would be great if some of you with more experience can share some thoughts!

I am also looking for recommendation of CPA to work with that understand the real estate investing.

If you are borrowing from friends/family and plan to pool their money together in an LLC that is not secured, you will need to research state and federal law related to this type of activity as that could be considered a security in your state and/or potentially subjected to SEC regulations associated with a pooled mortgage/debt fund or private equity fund (syndication). Additionally, you should consider how long your friends/family are willing to have their money out to you. If you use DSCR loans as permanent financing, you could be locking yourself into loans with stiff prepayment penalties that usually have a 5-year prepayment step-down penalty. If your capital investors want their funds back before year five, consider how you might be able to pay them off earlier than your refinance would allow.

`I would say for typical rates, that is really going to be all over the board. It depends on the state, the LTV, the hold time, etc. For example if you have someone who is coming in at 80% LTV that may be a higher rate than someone else coming in at a 50% LTV. I would NOT recommend doing a 100% LTV with friend money. As soon as the market corrects, there's a problem with the property, they are going to be holding a note for a property that has more debt on it than the value can support. If you want to remain friends with this person, please don't rely on the friendship alone to carry you through. Do the legal documents with an attorney, make sure everyone is crystal clear on expectations and timeline, and only do it for non-owner occupied property.

While borrowing from friends and family is typically the starting point for most people when finding private money loans, it's also the quickest way to sink relationships, if not done correctly or as a true business transaction. I find a lot of people just assume that since they inherently trust their friend/family member, a lot of the "what ifs" and worst-case scenarios are not hammered out in fine detail which can lead to confusion and personal interpretation after the deal is closed, which it should have been addressed pre-emptively before the money was lent out.

So my recommendations are 1) get an attorney involved so you know what your able to do legally and s/he can draft up the proper legal documentation to support the path forward, 2) consult with DSCR lenders to understand your prepayment penalties and bake that into your exit strategy with your private lenders, and 3) consider the cost of capital in relationship terms rather than monetary since that matters more than getting the money. You don't want to burn any bridges by miscommunications or not properly addressing resolution paths, buy-outs, exits, etc. in a legal manner on paper and signed by parties. If you and your family wants to become more educated in how to transact this loan safely, you could check out BP's newest book - Lend to Live: Earn Hassle-Free Passive Income in Real Estate with Private Money Lending. I happen to be one of the co-authors and an experienced private lender. Bottom line, if you plan to pool funds so that you don't have 2nd, 3rd, 4th liens, then you will need to tread lightly and ensure all parties involved are on the exact same page so that no one gets hurt/annoyed/disappointed/angry after funds are already tendered.

Has anyone dealt with Aloha Capital? Every time  I tried to get in touch, no answer or message. Any lenders similar?