To many deals need investor/hard money - Posted by Jim in MN

Posted by Jim in MN on April 11, 2006 at 22:49:35:

Thanks for the advice…the exit strategy for properties 1&3 are the same…they will be sold, as for #2 ultimately I will obtain traditional financing personally and live in it…property #2 is the only one listed we don’t already have under contract…our deal with investors ties their money directly to the particular property in question and we return their capital with interest upon the sale of the property in question…as far as rental properties go I LP on the side to generate passive cashflow…what I am talking about here specific targeted properties with what I would consider pretty high profitability…the main focus is to reinvest as much of the proceeds as possible ie 1031…we are planning to just pay the flow through gains taxes as they come up…it just has worked out over the past few months that many, very underpriced properties have come up for sale in areas I keep my eyes on, and yes, it may be a problem if the properties do not sell quickly, we have spent many hours figuring out what will be the best price to promote a quick sale…for all of the properties I listed, and if anything we’ve been told we’re too generous in our sales prices in the past but who can affordto have a house sit on the market for 6 or 7 months…I appreciate all of your suggestions and will be looking forward to any other advise you might have

To many deals need investor/hard money - Posted by Jim in MN

Posted by Jim in MN on April 10, 2006 at 10:48:38:

We have recently stumbled onto 4 properties each with 200K+ profit potential…would like to buy all of them but need help ie. investor money…have already raised $75K would ideally put together $400…any ideas would be appreciated thanks

Re: To many deals need investor/hard money - Posted by John Corey

Posted by John Corey on April 10, 2006 at 18:13:55:


There are a few people who might be able to help. You did not provide much information so it is hard to offer any specific ideas.

I suggest you post some details.

Expect that you might get a few emails in addition. You can also email me directly but I think at this point a more public discussion will quickly help people zero in on what might work best.

John Corey

Re: To many deals need investor/hard money - Posted by Jim in MN

Posted by Jim in MN on April 11, 2006 at 12:51:44:

Didn’t want to waste anyone’s time with all of the particulars…but here they are…

2500 sqft home with unfinished basement in upper middle class neighborhood with average sales price between $480-$560K…We bought it before first open house for $367K…as is appraised value=$450K…Why???Bankruptcy,Foreclosure,&Probate all at the same time… Seller was uninformed and just wanted to get rid of it…so we’ll finish the basement,adding 1000 sqft of living space, and paint the inside of the rest of the house and waallaa.P.S. it’s only 7 years old…
Property #2:
100 year old lakeside mansion with 4000 above ground sqft ARV between $500-600K we will be buying for around 200K It has been remodeled but they did a poor job so we’ll have to do it again…This place is just getting ready to be listed by OUR realtor so if we can come up the funds we’ll get it…It’s a real beauty!!!
Property #3:
Great Cape Cod in a very nice neighborhood, average selling price $150-200K We are buying in forclosure for $75,000. It needs roughly 30K in updates so still a good profit potential…

I need some ideas/Investors—we return 20% per house and have raised $75K so far but would like to obtain around $750K-1M for future investment

Re: To many deals need investor/hard money - Posted by John Corey

Posted by John Corey on April 11, 2006 at 15:56:44:


Real RE investors are never turned off by too much detail when they are seriously considering a transaction. Any that are will likely not perform when it comes time to ink the deal.

By having more detail here you will get more focused advice rather than blanket statements.

What is the exit strategy for the deals (#1, #2, #3)?

You are buying or want to buy high end. Obviously cash flow from a rental will not line up that well. What happens if you can not sell quickly?

Do you have a straegy to deal with the tax hit? It might be as simple as pay the taxes after each sale or as complex as a 1031 tax deferred exchange.

On the idea of obtaining up to $1M. Any sense of how you would do this? Are you saying that you want to raise the funds prior to having found the deals or just that you would want to borrow up to that limit as you find the deals?

If you are trying to raise capital without already having the specific deals under contract be very careful concerning the laws governing securities. A blind pool (funds from investors with you making the decision how to invest the cash after the fact) can be a problem. It can be a criminal offense even to publically state you are looking for funds.

John Corey