Info on using retirement funds for deals

Question: I am considering investing in a 506c investment on a multifamily property. They are raising a 1 million from investors, then getting a loan and making improvements to the property and repositioning it over 5-7 years.

I wanted to use my funds from my SEP IRA which is currently in a qualified intermediary trust. What is the UBIT tax? Will I be subject to that on this deal? Also, should I set up an LLC that then loans the money to their LLC? How can I structure this for tax and liability benefits?

Answer [Note: From my CPA and not this is NOT legal or professional advice – in other words do your own research]: When you invest in a business (syndicate = business) with your IRA, the IRA will be subject to UBIT (unrelated business income tax) and UDFI (unrelated debt-financed income).

For our purposes, UDFI is produced when an IRA uses debt to purchase real estate. Essentially, the portion of the property’s income considered UDFI is based on the percentage of rental income derived from debt.

For example, Property A is purchased for $100,000. You put down 25% of the purchase price as a down payment and finance the remaining 75% with a traditional mortgage from the bank. The property produces $10,000 in net income for the year. $7,500 (75%) of the net income is considered UDFI and is subject to UBIT.

There is a deduction for the first $1,000 of income subject to UBIT. Income subject to UBIT over $1,000 is taxed at trust rates. For 2017, trust tax rates start at 15% and max out at 39.6% after just $12,400 of income subject to UBIT.

UBIT is paid by the IRA account. If for whatever reason UBIT is paid directly by the taxpayer, the amount paid is considered a contribution to the IRA.

Follow up question: Is there any difference in how the UDFI will apply for these:
1) SD IRA
2) SEP-IRA
3) Solo 401K
4) SD IRA (operated as an LLC) so this one is confusing… My LLC owns an LLC (syndication) which owns a property

I’m trying to decide if one is better than another for tax purposes.

Answer: The solo 401(k) is not subject to UDFI but it subject to UBIT. The IRAs are all subject to UBIT and UDFI. Note that generally the passive income flowing back to you is very low and the as a result we don’t see a huge UBIT tax.

Another idea would be to take a debt position (lending) rather than equity. The interest you would receive is free of UBIT and UDFI tax.

(This suggestion of a “debt” position or note investment with the SEP IRA to avoid UBIT and UDFI tax is a creative one… but it’s a very low chance of happening because it’s just too complicated and honestly not worth the effort from the syndicators side. It’s a very similar case of to a Tenant-In-Common (TIC) arrangement where an investor has 1031 exchange funds and wants to parlay that money into a syndication. It’s possible but from the syndicator’s perspective a lot of unneeded work when you can just raise the funds the traditional way. Caveat: if you are bringing in a huge amount of money say 50% of the raise then that might tip the scales in your favor)

Ask you can tell this is a really grey area. One CPA mentioned, the answer depends on how you structured the syndication, UBIT may or may not apply for the real estate holding for solo 401k. I would really try to toss the Operation Agreement to your individual CPAs to examine and determine ahead of time.

The Journey to Simple Passive Cashflow – Preview

This course is currently in Beta mode and Beta pricing. Email Lane@SimplePassiveCashflow.com if you want a deal.

Week #1 – Introduction to the “Journey to Simple Passive Cashflow”

Week #2 – Seeing the Matrix – You will know why the middle class is shrinking and what you can do to continue your same standard of living

Week #3 – About Me – Learn about my background and why I have the formula for high paid working professionals to escape the rat race

Week #4 – Real Estate Investing from a 30,000 foot view part 1 – You will understand real estate investing and all the options. We will cut through the noise and identify what are the best options for the high paid professional

Week #5 –  Real Estate Investing from a 30,000 foot view Part 2 – Continuation with the addition of downloadable tools

Week #6 – A free special gift

Week #7 – Fundamentals – You will get to know the basics of what every investor needs to know without reading a gazillion books or going through hours of boring podcasts

Week #8 – In-Field Experience – A guide to effectively network and build your investor circle

Week #9 2018 Trends – The Fundamentals don’t change but the market climate changes so here is the latest market report and things to be on the lookout for

Week #10 – Buying a Rental Property Part 1: Acquisition – Start shopping for deals and refine your criteria to be able to spot out your next addition to your growing portfolio

Week #11Buying a Rental Property Part 2: Lending – You can’t buy anything and use leverage effectively if you don’t know the basics of using the bank to your advantage.

Week #12 – Buying a Rental Property Part 3: Operation – Congratulations you are a rental property owner but that’s only half the battle. Now we focus on managing the manager so we can optimize our returns.

Week #13 Buying a Rental Property Part 4: Mentorship/Networking – You net worth is your network. Don’t be that guy who repels help and good ideas and the last person to hear of the latest trends or work with bad vendors.

Week #14 – Half-Way Point! – Build your portfolio with the end in mind and with a holistic approach

Week #15 Syndications + Apartments Part 1 – Understand why most sophisticated investors scale up to larger investments

Week #16 Syndications + Apartments Part 2 – Find out how you can get access to deals once only accessible to the wealthy within the country club

Week #17 Investor Mindset – Once you get started you realize that the possibilities are endless (I know it sounds cheesy but some people sign the front of the checks and some people sign the back)

Week #18 Productivity – Following up mindset the limiting factor might be the fact that you suck at getting things done. Here are some of the best tips to increasing your output and having more time to do what you want to do.

Week #19 Taxes – You will learn what you will need to know to prevent legal churn from a lawyer who does not know what they are doing

Week #20 HELOCS/Refinancing – A great way to find lazy money to put to cashflowing rental real estate

Week #21 1031 Exchanges – Don’t be fooled but this talked about tax strategy. It is often not what cutting edge investors use.

Week #22 QRPs – Got funds locked up in retirement funds? Lets free that lazy equity!

Week #23 Life Insurance Banking – Its called life insurance but its use by the wealthy to bank from yourself and avoid taxes.

Week #24 Other Financial Hacks – Other secrets I pick up by hanging out with wealthy people

Week #25 Covering your assets – You will learn some ways to build legal protections around your financial empire

Week #26 Conclusion – Pulling together the basic and advanced topics for you

This is the stuff you don’t hear talked about from co-workers!

Most so-called financial planners don’t even have a clue – although they are probably a nice guy.

These are the secrets of the uber-wealthy and specific mentorship groups that I have spent over $40,000 to learn over the past few years.

Apartment Video Walk-Throughs on YouTube Channel

Check out all the videos on our YouTube channel. Subscribe to get the latest and hidden videos.

Des Moines, Iowa – 52-unit C+ Class Apartment (April 2018) – Video

San Antonio, TX – 192-Unit Class B+ MFH (March 2018) – https://youtu.be/-5h2GKZ3I58

San Antonio, TX – 253-Unit Class B+ MFH (March 2018) – https://youtu.be/vj8ZMteppfg

Oklahoma City, OK – 170-Unit Class C MFH (March 2018) – https://youtu.be/3n4Kan6fmAw

Turnkey Rental Wisdom (2012-2018)

Dear prospective turnkey investor,

The following is my constantly updated guide to turnkey. (Updated 4-2018) Email me for any additions or feedback. In the spirit of the Hui Deal Pipeline Club where we crowdsource due diligence together!

I don’t flip or wholesale or do any of that. I have a w-2 job and not looking for another job or chore. I am all about leveraging my money and more importantly, time. For people like you and me who live in places (Seattle, West Coast, Hawaii, East Coast, to name a few) where the Rent to Value ratio is 0.5% or less we have no other option. It drives me crazy when the Real Investor Peanut Gallery (internet forums know for big pockets small wallet) say we are overpaying… well if I didn’t have a life and I had the time to lick stamps and swindle distressed buyers I could buy a distressed property at discount too and probably do it better 😉

I don’t know about you, but I have full time professional job that earns more per hour than most folks even in real estate and more than these Turn Key providers do. So I’m like sure… I’ll pay retail and rely on their volume and expertise. But you have to find the right ones. Investing for cashflow is not a get rich quick schedule but a prudent way to build lasting wealth a few hundred dollars at a time.

Update – 8-2018 – Almost done selling the rentals on Roofstock!

Today I buy apartment buildings like this 193 unit in San Antonio where I work with deal finding specialist on my team but it took me almost ten years to get there.

 

When I started this blog/podcasts I was totally into these Turnkey Rentals. I even started to blog on a couple of them in detail:

Rental #4 – Birmingham

Rental #5 – Birmingham

I moved onto bigger more scaleable assets mostly because of stuff like this happening every few months:

“I do have some unfortunate news.  My crew showed up this morning and there was an empty police car in the driveway along with a note from the officer.  Overnight, the outdoor section of the AC unit was cut and stolen (no sign of breaking in).  My crew said he spoke with the neighbors (to the right of the home) and at about 1-2 in the morning a black truck was going around the neighborhood cutting AC units and taking them.  The neighbors called the police and they came out to do their work.  I called the Dekalb County Police and asked them what I would need to do and what the next steps are.  They said, if we want a copy of the police report to come down to the office and present them the case number and if there is any news they would let us know.  I have attached photos of the card the police officer left along with photos of the damage.  It is very unfortunate and I do apologize this happening.  The AC just got inspected and serviced yesterday and everything else is running smooth.  I am waiting to hear back from the HVAC tech about what it is going to replace the missing unit and repairs to the lines, once I receive the service report.  I will be sure to keep you up to date with any news or information.  Please let me know if you have any questions.  Once again, thank you for your time and I do hate that this has happened.”

As much as I poke fun at the asset class and jokingly call it “turkey” instead of turnkey rentals it all started here and is the foundation of my investing portfolio.

 

When I first started buying the rehabs done by the turnkey guys in the blue collar areas, if you posted “hey I’m looking for turnkey” in the forums you get the usual suspects soliciting you for marked up properties. It’s off market because they rehab it for the investor with more durable and less visually appealing materials than your normal retail product. I’m all for the wholesaler to make money because they do spend a lot of time and money on mailers and advertising but the layers of middlemen who add no value is excessive and is almost as bad as Wall Street.

I bought my first couple rentals back in 2009-2012 in Seattle (Primary market/no cashflow). As the prices started going up I was forced to go out of my comfort zone and purchase out of state rents because I needed cashflow in order to achieve my goal of replacing my W2 income as an engineer. I bought one I Birmingham, without seeing it and set up a professional property management company to manage the day to day. That was proof of concept for me to sell my two Seattle rentals and buy 9 Properties in 5 Months via 1031 Exchange.

I work with a lot of engineers and a lot of them say they get analysis paralysis because they like data. I call them out of it and tell them they are just scared and losing $500 of opportunity costs and time per month! A real engineer would look at the numbers. IF rent minus expenses (with contingency) minus mortgage is greater than THEN fricken do it!

Example of capital expenses that need to account for in your expenses and contingency.

Let me be clear, I don’t flip or wholesale or do any of that. I have a W2 job and not looking for another job or chore. I am all about leveraging my money and more importantly, time. For people like you and me who live in places (Seattle, West Coast, Hawaii, East Coast, to name a few) where the Rent to Value ratio is 0.5% or less we have no other option.

It drives me crazy when the Real Investor Peanut Gallery (internet forums) say we are overpaying… Our time is better spent at our high paid professions that we busted out buts going through a couple decades of schooling for.

My full-time professional job that earns more per hour than most folks even in real estate and more than these Turn Key providers do. So I’m like “Sure… I’ll pay retail and rely on their volume and expertise.” Its all about leveraging your highest and best use, which maybe your day job.  Sorry.

The problem is that you have to find the right property and people to work with. And have a mentor so you are not getting screwed. Investing for cashflow is not a get rich quick schedule but a prudent way to build lasting wealth a few hundred dollars at a time.

When I first started buying the rehabs done by the turnkey guys in the blue collar areas, if you posted “hey I’m looking for turnkey” in the forums you get the usual suspects soliciting you for marked up properties. It’s off market because they rehab it for the investor with more durable and less visually appealing materials than your normal retail product. I’m all for the wholesaler to make money because they do spend a lot of time and money on mailers and advertising but the layers of middlemen who add no value is excessive and is almost as bad as Wall Street.

“I don’t work with top tier turnkey providers…. For the same reason I don’t buy a Dyson Vacuum.. I’m cheap and buy value and buy the sub-100 dollar Shark brand from costco with the excellent return policy.”

These days’ people in the Hui Private group are not on internet forums. They say its 95% of active people who are not high paid professionals and marketers. Here is some of the chatter:

 

The most important thing to do is to grow your network.

So you can bounce ideas off other investors and not a salesperson. I still do free calls but please review the free content I have put on this website first. No, I do not just give recommendations to good people to buy from because things change and I am not going to throw my brand around like that. And by the way that’s an “ask-hole.” I know your character and the trajectory of your success but how you add value to others first instead of taking first. Some people are unaware of this which is why I’m saying something so I aplogize. This could be the reason why people are not helping you out and you feel like a lone wolf.

Webinar with 2018 trends is sent out to Hui Deal Pipe Line Club members sign up below:

I don’t really see much difference in the secondary markets with robust economies (Memphis, Kansas City, Birmingham, Atlanta, to name a few). I have tried to set things up so my different markets complement each other. For the most part I buy in the 1.1-1.3% RV range. I take home 70% in 2015 but now in 2017, I buy in the 0.9-1.1% RV range and take home 60% of the rents after all expenses (vacancy and Cap ex).

I made this diagram in 2016 and it illustrates some of the popular “secondary markets with robust economies” that a lot of out of state turnkey buyers like to invest in. Things have changed a little but as you can see you can either have appreciation or cashflow. It’s tough to get the best of both worlds.

I stress NOT to spend too much picking a market. If you sign up for the newsletter as a Hui member you will get more than enough data to create analysis paralysis. The biggest thing you can do is vet the people. As you can see the same principle is what I use in my syndication due diligence: 50% people & 50% the numbers of the deal.

There are three ways to purchase a turnkey rental:

  • Marketer – I would not recommend going through a marketer, they don’t even invest themselves and they did not add any value. The only one I can recommend is Marco but that is because I know like and trust the guy. By the time I bought my 3rd rental I knew way more than those folks did. Unfortunately, I probably overpaid by a few grand on each of those first few properties not knowing what I don’t know, Work with me only if you want to compress time and want me to look over your shoulder to get my unbiased opinions and guidance. Plus you will be setup with a plan and not shoot yourself in the foot like I did by buying a dozen non-scalable investments.
  • Direct from Turnkey Provider – You cut out the middleman and go direct to the source, theoretically getting the best price. Just know that you are not represented by a broker who supposedly has a fiduciary responsibility to you. (BTW never trust a broker) The transactions are done with their paperwork and their rules. They are the pros and it’s dangerous for a newbie to go down this route. There are household Turnkey Providers (TKPs) out there but I call them the “Prada of Providers”. You pay for what you get and often times more than what it’s worth – I’ll just say you are paying over 105% of retail.
  • Hybrid method – When I was going through my buying spree in 2015-2016, I was going (off market) via an agent that had a fiduciary responsibility to me to check all the BS that the providers give you – this is what I recommend only after going through the process a few times. Usually, the agent helping you is not an investor and does not really know what type of amenities/floor plans and locations are best for rentals. You will need to drive the ship. Note: I see brokers all the time trying to sell junk to new investors.
  • Another cool site out there is Roofstock which is where I sold my turnkey rentals to step up to syndications. Use the link get a $500 credit when you register… They give me $50 credit but I don’t think I will buy another turnkey rental again ;P

You seemed bored reading… There is no such thing as turnkey. Check out these disaster photos from an eviction that ended up being a $37K repair bill… https://photos.app.goo.gl/R4PZLuOLGHONO5Rl2

As I was in the middle of my 1031 buying spree (#6 of 11), a lot of TKPs started to come out of the woodwork and offered their properties to me and gave me the royal treatment (discounted prices from what they normally offer). I got to meet a lot of them via meetups and national conferences because I had this podcast and they were interested in getting at the Hui Deal Pipeline Club ecosystem. Since I was pretty experienced and they liked working with me they offered me referral fees to simply send guys like you over to them with a simple “CC’ed” email. Sort of like a referral source where they would give me $1000 per home sold. I thought it made sense for them because it was a lot cheaper than paying $6000+ to a Marketer (#1 above), but as you know when you go with a marketer or this sort of referral program the buyer (you) don’t really get any value add. That said if you want $500 credit at Roofstock use this link.

Personally, I’m not really into picking up $1000 referral checks and passing you off to the TKP (never to hear from you again) since I’m more looking to give back to other investors and build my network for my larger syndication deals in the Hui Deal Pipeline Club. I think turnkey rentals are ok for people starting.

After over 1000 strategy calls with investors and coaching clients over the past couple years here is what I tell W2 employees… For those who are able to save more than $30k a year or have substantial liquidity (over 200k), being a landlord and especially flipping is a lot of work. If you like it cool/good for you… but just remember why we got into this… To be free from a JOB. A lot of us (80%) who stumble upon simplepassivecashflow.com and start drinking Kool-Aide will be financially free in 4-7 years pending taking action. So I always urge people to start with the end in mind and take a more passive approach.

“I have B- class rentals and high that rent for at least $900 a month and I am still having a hard time selling dang properties to other cheapo investors”

 

Do the math here… you with 300 dollars per property (2 months of work to buy a turnkey rental) you are going to need 20-40 of these to replace your income. I have 10 of these and have systems in place but have 1-2 evictions a year and 3-4 big things that happen. Image if I had 30, just 3 x those numbers.

Directly investing in a turnkey rental or small MFH is a good way to start to learn and build up the war chest to go into my scaleable investments such as private placement syndications. Whatever you do, try to be as close to the investment as possible. This is the fundamental problem I have with Wall Street who takes too much fees off the hard-working efforts of the middle class.

I currently work with one business who I can align with because they offer sort of a hybrid between the marketers (I know you know the reasons why to stay away from them) and going straight to the TKPs since you lose a lot of the protections when you do that and it’s sort like signing agreements in the “wild wild west”. The reason I do it this way is that I get a licensed agent that has a fiduciary responsibility to your best interests and guides you through the transaction as you buy through the TKP. Basically, it’s like having MLS agent to cover you for the off market deals. All the properties are aggregated from only the good TKPs and the same price that you will find on the weekly digest that is sent out by the local TKP. This is the way I buy my properties and if nothing else it’s good for browsing what’s out there.

Can you please recommend a good turnkey provider? You said you would help…

The short answer is not really. A provider will try to size you up and try to pull a fast one on you when they get the chance. I will not endorse anyone! The only way to protect yourself is to network with other investors by providing value first – if you are a cheapo. If your net worth is over $300K, have at least $50k liquid, and have a time crunch (kids) I think it’s a no brainer get me on your team and stop screwing around.

There is really no reason why you cannot put in an offer on a property and start collecting $300 a month with a $25K down payment in under 90 days. Someone who is still “reading”, “contacting investors”, or “picking a market” frankly lacks focus (finish one course until success) or scared of making a move. Every day you don’t do anything is $500 a month of opportunity costs!

My rentals in Seattle were cash flowing each with $600-800 a month but it was because I bought at the right time and I did not look at the numbers like a sophisticated investor does. Although my cashflow was good (bad in terms of percentages) I realized that my return on deployable equity was very low, in fact it was under 5%. Now each rental I get typical cash flows by $350 but I think of it like $250 to be conservative and more importantly, my money is not being lazy. I think if you’re making less than 8 percent you’re better off in the stock market despite my aversion toward stocks or mutual funds. A sophisticated investor does not say “well… at least I’m able to cover my mortgage”. They are constantly monitoring their return on equity.

I wasted a lot of time in 2012-2013 looking for rentals in King, Snohomish, and Pierce County (Washington state) and nothing cash flowed. I still have the spreadsheets where I underwrote how crappy the Cashflow was. Now prices are even worse.

I helped dozens of people with this out of state investing game and have pretty much figured it out after making a bunch of mistakes that I didn’t realize till later – this is why it makes me laugh with the “do it yourselfers”.

One mistake I see people making is going after these sucker properties that only can be sold to “Californians,” “Hawaiians,” or any rich person not from the area perceived to have trees that money grows on, from a trust fund, and drink seven Mai Tais on the beach everyday. (Personal Note – I have lived in Hawaii for about six months now and I have only been the beach twice).

These types of people (not follows of SimplePassiveCashflow.com) like to pay a plumber for ten hours to fix a small toilet leak.

Sucker properties are in the wrong area that none of the locals would touch with a ten-foot pole. They are C or D class properties that the Broker calls “B-Class or good area” and usually cost sub $60K for $750 rents a month.

“It may look good on paper but stick to rents that are higher than $900 a month”

The second thing I see newbies doing is buying 2-8 unit properties after hearing all the good things about multi-family and scaling. I think most highly paid professionals will graduate to syndications (which is why I structure business and own investing around them) and therefore will need to sell these SFHs to move up. The exit strategy on selling 2-8+ just is not there. They look good on paper but the exit strategy kills you. If you are thinking you are going to hold on to these properties for cashflow for 7+years think again because that is not what sophisticated investors do because they monitor their ROE and they know the cap-ex tidal wave will hit them in year 5-12 taking back all those profits from the earlier years.

How many turnkey homes are people buying. Here is one data set I found from one popular turnkey provider. Takeaway – most (82%) get a few properties and the rest don’t get it or are too lazy.

The main thing is building the relationships and knowing who has the integrity out there. More importantly, you have to buy a few and go through the process of buying/selling and operating a while to learn how this mouse trap works. Tactically, it’s no different than what I have learned in corporate America (although I’m trying to leave the rat race) by setting expectations and keeping people accountable via email remotely. Trust but verify and financial freedom will be yours.

 

Frequently asked questions:

FAQ from past coaching clients and questions you ask:

Where is your spreadsheet with turnkey providers because I am lazy and want to just copy what someone else does?

That might have been smart a few years ago but things have changes and good providers have gone out of business or more expensive. You don’t need to be a super active investor but by not putting a minimal amount of effort you are shortchanging yourself the necessary lessons that will minimize a big mistake down the road. If you need the provider list sign up for the Hui Deal Pipeline club and it is in that share drive.

What’s the deal with REI Trader and the partnership with Simple Passive Cashflow?

I would do your own due-diligence and learn about rentals by talking to as many people as you can.

I know eventually you will find that working with my team is the going to be the optimal path forward as I am committed to mentoring you as an investor so you will continue on this investor journey to bigger and better deals.

I stand behind REI Trader and support you through the entire buying process – I don’t just pass you off to the Turn Key provider and say peace out…

The properties have good value for the purpose of rental real estate. The due-diligence that we do after the purchase contract is signed is the secret sauce and the unfair advantage over other turnkey options. Yes, there are a few perennial Turn Key companies however you will pay over market rates (110% retail).

The broker that helps you with boots on the ground with REI Trader is property agnostic. In fact, they don’t care if you buy that property or not.  We know you will buy the right one eventually.  We want to build a relationship with you the investor. Most clients buy one property, come back for more, and tell their friends.

Where do I find tax information in Birmingham?

http://eringcapture.jccal.org/caportal/CAPortal_MainPage.aspx?IsHTTPS=0&IFrameURL=CA_PropertyTaxSearch.aspx

Should I be concerned about a septic system?

Do you know if it was inspected after you purchased? What future maintenance should I expect? Will the property management company know when it needs regular maintenance?            A lot of properties have septic in Center Point and most PMs have this down to a system. We went through this including myself as before.

On another property the investor hired his own septic tank inspection. They checked in and said it was not working but when we sent our own service out to reconfirm, it was working as required. Often some of these third-party services are not as honest as they should be with out of state buyers. Regardless, the home warranty you receive covers septic service. This is just an FYI for future purchases where a septic tank is involved. This property is on city sewer so we don’t have these issues.

How much and what comprises the attorney’s fees that will be split 50/50?       

Typically, on financed transactions it’s about $650 split 50/50.

What if there are issues getting an inspection(s) completed with tenant in place?           

This is an issue with the seller not being easy to work with and could be grounds for you to back out.

If there are delays, we then have both parties agree to an extension of the inspection period with an addendum. Only time this happens is if your inspector can’t inspect and provide report back within the 14-day period.

How do I decide on an offer price?

Property in good condition and in a good area that meets the preliminary numbers go fast. Dude, it’s a sellers’ market and anyone can swoop in and grab it. I have seen the amount of turnkey buyers go up exponentially in the past few years as everyone is jumping on the band wagon. News flash incase you missed it… Real estate has been good for the past decade.

From the rehabber/flippers prospective to complete project geared more toward the retail buyer to take part of the emotional buyer market. Selling to cheapskate and annoying investors like us just does not make sense on many fronts. So don’t we a whinny investor and don’t try to make like you have leverage.

Properties that have a tenant in them are often owned by investors and non-owner occupied owners. The good thing is that it’s a numbers game and they have a profit that they are looking to get. The bad news is that the property performs as an income producing asset (that’s why you are buying it) and the sell is content holding on to it indefinitely – after all it cashflows.

Turnkey sellers will allow minimum flexibility on their pricing. Remember, they don’t have to sell and sometimes it does not make sense so move on if that’s the case. That being said, the average discounts I have seen is about $1500 off asking price. Seller is asking $69,900 and I would suggest initial offer of $67,000 and see how he responds. Point is know what is a deal and know the price.

How to handle property inspection report          

You really need a mentor or have someone look over your shoulder who has done this before and knows what is fair. Here is my advice:

Have a 5-10 minute call with the inspector. Tell him “look I know we aren’t going to get much more than 2-4K of repairs” so…

#1 would you buy this?

#2 what repairs will bite me in the next couple years?

#3 what is the best use of 2-4 of work?

#4 do you have any contractor contracts I can have?

Take this to the seller and negotiate but just know they have a line around the block waiting to buy their property sight unseen. Even without appraisal and all cash.

I want to make my own turnkey company? I know a rehabber?

Here is a spreadsheet with the math behind making your own turnkey company.

I think multi-family properties are my future 1-2 years from now.  Would you start 4-8 units or get a partner and go bigger?  

This depends on your trajectory (how much money you have and earning ability). High paid professionals I work with are going to go into bigger deals I would recommend going with SFH because you will likely sell in a few years and vault into bigger stuff. 2-8 units have a horrible exit strategy as only people who want them are cheap investors. “looking for a deal man!”
My buddy FI Fighter also calls these Turkey rentals too but I disagree with his sentiment about going for the “best assets.” I believe you can invest in undervalued value add Class C and B assets as long as you have a capped time horizon. This is why I like to look for 1975-1990 properties because our business plan is the squeeze out the last of the value of these properties with still having high single digits of cashflow as the hedge to a downward turn in the economy. You can’t really do much with a 1960’s property. You really have to go through 500-1000 deals to find one of these and you are not going to find these being in the game with only 6 months of experience and no track record. This model is not infinitely scalable (and too small for the institutions to bother with) but what small sophisticated investors are quietly doing in the 2-8 million dollar asset range.
Setup a short coaching call because it will be worth it. Don’t be like me and buy 10 of these sfhs because it will be a pain to sell them later to go into more scaleable syndications.

 

Here are more resources:

  1. *The Analyzer Video Walk Through- https://youtu.be/qr8M6NMBhRw
  2. *Download 2018 Buy & Hold Analyzer Spreadsheet – https://drive.google.com/open?id=1kMAn962d52UN-ObKNWmjT11z6gqATR1I
  3. *SPC005 – So you want to buy a Turnkey Rental – http://simplepassivecashflow.com/podcast-5-so-you…a-turnkey-rental/
  4. SPC014 – 22 questions to ask a turnkey provider – http://simplepassivecashflow.com/podcast-14-22-qu…turnkey-provider/
  5. SPC015 – 9 Turnkey listener questions Part 1 – http://simplepassivecashflow.com/podcast-15-9-turnkey-listener-questions-part-1/
  6. All the SFH related material – http://simplepassivecashflow.com/tag/sfh/

Refer me to a friend via email and I will personally send you both my spreadsheets of usual suspects of turnkey providers plus the questions I used to ask them for due diligence. And let me know if you would like a referral to my exclusive partners.

Here are the books I think you should read before moving forward.

***Put a red circle on your calendar 60 days from now and see where you get… and how much of your family’s time you waste as you consume websites, books, and podcasts.

You know what I mean ‘Jelly Bean’

https://www.youtube.com/watch?v=BOksW_NabEk

“I started the Hui Deal Pipeline Club because I want to see each of you get to your goals financially so you can focus on what is really important to you. There are other fundraisers out there that will train their investors down to 10-15% IRRs on crappy deals and do “deals to do deals” or to pick up acquisition fees. Between investing alongside you folks and wanted to grow my track record the right way with the best product I know you guys will keep coming back and bring your friends.”

We have the best “propeller hats” in the Hui Deal Pipeline Club

Over the past year, it has been an honor to get to know you in the Hui Deal Pipeline Club. The average member is under the age of 55, engineers/IT, geek out on data, and very adept at looking up stuff on your own. You guys will balk at deals that get you under 12% a year!

That said if you guys are finding good deals or operators let me know because I know you are Googling this stuff into the night!

Another Hui member built this free web app to get the preliminary data and crunch the numbers automatically for you on an SFH.  Check it out at http://propalyzer.info         

No login required. Please reply back your suggestions so I can give them back to the developer.

I’m working on a concept of buying new build turnkey rentals (getting the financing for you) and working them as a group. Let me know if this appeals to you.

Commentary from the elder Hui members:

 

Podcast #101 – Interview Jorge Newberry – Note Buyer Bootcamp announcement and non-performing notes

YouTube Video Link: https://youtu.be/aJ5lSoJoRK4

 

Youtube Audio Only Link: https://youtu.be/NWxFiWwXhrY

 

Please help the show by leaving a review: http://getpodcast.reviews/id/1118795347

Download the FREE 2018 Rental Property Analyzer for free: https://simplepassivecashflow.activehosted.com/f/14

Pardon the grammar – I’m an Engeneer, Enginere, Engenere… I’m good with math! Here are the Show Notes:

After Turnkey rentals I see people go into 1) Syndcaitions 2) BRRRS 3) Non performing notes

12/20/2016 – SPC034 – Jorge Newbery goes $28 million into the hole and the fight to get back to even – https://www.youtube.com/watch?v=Y1IN4BTvRPg&t
5/30/2017 – Non-Performing Notes w/ AHP Fund making 12% a year! – https://www.youtube.com/watch?v=ZvKue-rq4y8&t=2s
What is performing notes and non performing notes
Steps to get started
What can you get from people or networking in note world
NBBC Training
How did you start to scale ahp
where AHP succeeded and where we failed
the importance of due diligence – and how identifying trouble before you buy a loser is as important is buying winners
What are a few specific things you do (sort the spreadsheet) and simple formulas for a quick and dirty analysis
how to connect with real sellers willing to sell at real discounts
how to build your note business with the maximum likelihood of success
why the note-buying opportunity continues, and how to get ready for the next downturn
what to expect when you start foreclosure or borrower files bankruptcy
how much to raise capital
the value of contacts and relationships (AHP has taken years to build these up – and you can connect with them in two days)
the overlooked value of servicing, collateral and recording
how to maximize returns with fast, consensual resolutions
choosing a law firm: how to align interests and turn slow & costly into fast & cheap
how to get the most out of your servicer

Notebuyerbootcamp.com use code “simplepassive” for $200 off admission

April 18 & 19, 2018 – See you in Chicago

 

On April 18 & 19, 2018 I will be attending notebuyerbootcamp.com in Chicago-Land!

Why the heck am I going to a note buyer conference? Have I got shiny object syndrome again?

Not to worry I am speaking on a panel about raising private equity 😛

Use $200 off coupon code “SimplePassive”

One takeaway I have gotten from the past couple months of open phone calls with your folks is that after turn-key (SFH) rentals, your natural progression is to forge a path on either syndication as a LP, BRRRRs, or non-performing notes. In that order of popularity from my unscientific study.

If you make it out there… I’ll buy the first drink!

__________Event Information_________

AHP’s CEO Jorge Newbery and 10-years of contacts will gather to share what they have learned about NPL (non-performing loan) investing in order to inspire a new breed of note investors – those who want to achieve superior financial returns and an extraordinary social impact.

Come to learn and connect with some of the leading note investors in our country! It doesn’t matter if you’re new to note buying or a seasoned vet, you will learn step by step how to build & scale a note buying business.

 

Podcast #97 – Investing via Crowdfunding Sites to open the country club – A Chat with Reality Shares

Here are the Show Notes…. But first please leave me a review: http://getpodcast.reviews/id/1118795347

Reality Shares came from the Jobs Act
April 2013 Reality Shares began
Accredited only
14-20% Class B MFH estimates
Also have preferred equity options 10-14% IRRs
1st lien debt or 2nd lien 7-12%
If you are not connected Crowdfunding options
From a syndications view, they are charged an origination fee
1% asset management team (from cashflow) from reality shares
1% Funding Fee, 1% Asset management fee
Some crowdfunding is taking equity upside
Due diligence – credit checks, background checks, 3rd party check of purchase price verification, then look at the deal (market, pricing)
Less than 5% of deals make it to the platform
There is a max the crowdfunding site with one syndicator (2-3M) to diversity risk for the firm
Reality Shares is a Broker-Dealer