Found private investor…have some concerns - Posted by Tyler
Posted by Tyler on December 08, 1999 at 23:08:52:
Had a good day today.
About 3 weeks ago, I got a call on one of my “Fixer Upper” ads from an older fellow (sorry, Jim). I could tell right off the bat, that he wasn’t a RE investor. After some questions, I found out that he was really just someone who had inherited close to $200k and was looking for a place to invest it.
I quickly switched hats and started telling him how I work with investors…giving them an EXCELLENT return on their investment, safely secured by Real Estate.
I couldn’t help but chuckle at his enthusiasm over (yeah I know I’m generous) a whopping 8-9%!
When I saw that these numbers were turning him on, my determination to keep him on the line really started to grow.
So after educating him bit on some different scenarios, I told him that the next step would be for me to just call him when I had a specific deal to work with.
Three weeks later.
I called him on Monday, to tell him that I’d found a property that I was looking to put private money on. I had found a 85-90k ARV property, and put it on contract for 56k. I told him I wanted 60 (which would cover purchase + repair costs).
We met at the property yesterday.
Now, I should point out that he is completely foreign to RE investing. He really has no grasp of what market values are on the properties in our area.
He starts out playing very safe. Makes a couple calls on my business (information, etc.) before we meet. On the phone asks LOTS of questions. He’s being very cautious…and it’s showing. After all this is the most money he’s seen in his life! He’s in his 60’s and has received an inheritance of about 200k (ok I already said that).
We meet at the property, I show him around, we talk, we go to coffee.
I show him comps, show him the title report, copies of old checks from previous deals, etc. You get the idea…I sell myself, the deal, my business, and my game plan.
I had 2 phone conversations with him after this.
Then tonight he calls me. He says that he has decided that he “want’s to work with me”. Evidently he put in a request this afternoon to have his funds transferred out of the trust account, into his savings.
He’s ready to roll.
We agreed on 9% (Call me a nice guy). No fees. No appraisals. No points. No bull.
Bottom line is, the guy trusts my judgement on properties. He’s not worried about anything like LTV or me having cash in the deal. He’s not asking for P&D reports, P&L reports on the corp, or anything of the sort! (Although I did show him my personal credit report only cuz I have good credit)
I’m sure the guy will even make the loan to my corp!
Obviously I’m stoked. This is great! But, it’s so-hassle free, that I have to wonder if I’ve covered all my bases (and my assets). I have to wonder if it isn’t quite as easy as having the title company just create a note between him and I, and him bringing the funds to close.
Are there any agreements that we should have outside of escrow to protect my relationship with him?
Do I have any liability concerns with him (outside of the note on the property)?
Do I need to worry about anything to do with securities laws because of the way we made contact (my company’s ad)? Is there anything the law would require that I give him in order to make a private loan to me?
This is new ground for me, so I just want to make sure there’s nothing that I’m overlooking.
I really appreciate any input I can get from those of you who work with these types of relationships.
Thanks in advance…looking forward to Atlanta!!