All Forum Posts by: Account Closed

Hello Eric! 

Today I just had lunch with a friend in a similar situation. Bear with me here, ask yourself the following: 

Could your wife be considered a "real estate professional" from a tax perspective? 

To qualify as a real estate professional, a taxpayer must satisfy the following tests: Perform more than 50% of services in real property trades or businesses (“50% test”), and. Perform more than 750 hours of service in real property trades or businesses (“750 hours test”)

We want to know that to determine which real estate you should consider buying. Paying taxes is our highest expense, and if we can get those reduced or even eliminated, it will severely juice your returns in the positive direction. 

If you have that much cash, you maybe able to buy a small apartment complex, around 1.5mil for example, and only put 25% down. Then with the remaining cash, you can put that into stocks, lend it out, buy corporate bonds with nice yields or even buy more real estate. The losses generated from that 1.5mil building via cost seg and depreciation would be more then enough to offset your income, and you could invest in other things if your not comfortable putting all your eggs in one basket. Our first few deals are rarely our best, so buying multiple deals allows you to learn quicker and make mistakes without to much at risk. 

Please let me know if that helps! My wife and I were in a similar situation and this plan I described above is what worked for us. 

 Yes, you would need lawyers involved, tho its not as daunting as it sounds. There are a lot of "lighting" doc places that give you the boilerplate and you are familiar with this kind of stuff. cost is a few 100$. Tho you need to do it for every state you lend in a little differently since there are unique laws per state, etc 

I see alot of ads with low rates, only for customers to get baited and switched at the end. It really comes down to how much risk you want to take on, and how much that's worth to you. Big operations like this may feel comfortable taking on more risk, but as smaller lenders, we need to be more cautious. I wouldn't even worry about return in the beginning. if you can get a "base hit" by getting a deal with a borrower with great LTV and great ARV, 2 points and 12 percent or around there is fine. No need to try to get fancy with extension fees, but you should be extremely careful with your doc prep.

TLDR: 

focus on doc prep and LTV, less on actual returns for first deal. Get a "base hit" before a homerun :)

Hope this helps! 

Yeah private lenders usually do these kinds of deals. This is likely their standard offer to get you to waist time. 

Private lenders like me are usually looking to lend anywhere from 6-12 months. This is not ideal for someone looking for a longer term. However I do know some lenders that will go as far as 2-3 years, but the rates are still close to that of a 6-12 month loan. 

As some comments have mentioned above, the lender should be providing docs. "predatory" sounds harsh. I would review the terms and see if I agree 

I would lend your money right now, considering we are at the top of the market, and there may be 20% more upside, but there is unequivocally 80% downside. whereas if we were at the bottom of a market its the inverse. 

Its all how much risk you can stomach friend. Things like private lending can deliver 8-12% depending on your state/credit policy. Or you can go to vegas and put it all on red.... no black..... no wait red!! There are lots of things in between, all with unique risk charatirsics. Identifying these oppurtuntities can be a full-time job in of itself, so you need to factor in time usage as well. 

I would say active investing is trading defined time for money. This means designated meetings, and defined repetitive admin, or other tasks. While passive investing is just something that has "setup time" where you underwrite once, get paid for a long time. 

Hard money / private money will get your business farther, but very few private money or hard money folks want people experimenting with their hard earned money. Think of it as level 2, where level 1 is buying your first deal with your own capital