Need start-up help

[TommyK]

I am relatively new to Real Estate Invesing.  I've been reading and doing property research for almost two years, making about 10 offers without completing a deal.  I have myself and three other investors right now with total investment cash of $50,000.  I'm leaning toward a purchase then either a rental or lease option on the property then a sale when the market turns.   What is the best "business" set up for this investment, i.e.  LLC or trust or can I streamline the process.  My investors are open to many options with our investment cash.  Any  ideas???

[Rob in Atlanta]

I have found that it is better to have 'debt partners' than equity partners.  If your friends are putting up the money and you are doing the deal, just give them a mortgage rather than equity in the deal. 

I've attempted to buy so many properties over the years where there were many investor/partners who owned the property and none of them could agree on a decision from any offers.  Now if there is more than one owner, I usually don't even make an offer.

Hope this helps.

Rob

[MichaelQuarles]

Rob great advice....

The only time I would is if there is a TIC in place and I control it...

Happy House Hunting

Michael

[Summit]

Totally off subject CONGRATS on post 1,000 MichaelQuarles I always enjoy reading your posts and posting with you!

[ReCoachDennis]

Hey Tommy.

Glad to see that things are moving along.
Congrats to MQ as well!

LLCs have always worked well for me. The ease in setting up and management make it appealing.
Just remember to really follow through on stuff like meetings, taking minutes etc or you can get into a legal bind later where someone may try and pierce that entity.

I would definitely take Rob's advice on working with partners.

Additionally, 2 years is a long time Tommy. You will need to beef up your offers by increasing marketing, and setting yourself up as a real buyer. Get the word out. You have the cash.

It's a numbers game and you need to be making 10 times as many offers as you're doing right now.

$50k is a nice sum. Don't put it all in one deal though. With $50k and some creativity, you can control, own, etc 5-10 properties.

Dennis

[christopher w]

Tommy,

I would suggest you look at possibly lending out that money. Buying properties to hold and rent is a huge hassle and unless you have the time to commit to managing them as well you will just be spinning your wheels. You could loan that money out at 15-18% interest and not have to worry about the late night phone calls and other crap that buy and hold investors have to deal with.

[TommyK]

Everyone thank you for your advice and direction.  I agree 100% with the possible indecisions that could arise out of multiple partners and one property. 

[davewindsor]

I am relatively new to Real Estate Invesing.  I've been reading and doing property research for almost two years, making about 10 offers without completing a deal.  I have myself and three other investors right now with total investment cash of $50,000.  I'm leaning toward a purchase then either a rental or lease option on the property then a sale when the market turns.   What is the best "business" set up for this investment, i.e.  LLC or trust or can I streamline the process.  My investors are open to many options with our investment cash.  Any  ideas???

Hmmm,.you've spent two years researching real estate, have $50K cash and made 10 offers without completing a single deal?  I'm curious what kind offers you've been making and how much did those buildings cost?  I don't see why it would take you so long to close on something like a duplex or triplex.  Maybe your expectations are unrealistic.  Perhaps, moving to another area of the country or investing in higher interest paying tax lien certificates might be a better field to build wealth.  Isn't illinois still offering 36%? 

[TommyK]

I am relatively new to Real Estate Invesing.  I've been reading and doing property research for almost two years, making about 10 offers without completing a deal.  I have myself and three other investors right now with total investment cash of $50,000.  I'm leaning toward a purchase then either a rental or lease option on the property then a sale when the market turns.   What is the best "business" set up for this investment, i.e.  LLC or trust or can I streamline the process.  My investors are open to many options with our investment cash.  Any  ideas???

Hmmm,.you've spent two years researching real estate, have $50K cash and made 10 offers without completing a single deal?  I'm curious what kind offers you've been making and how much did those buildings cost?  I don't see why it would take you so long to close on something like a duplex or triplex.  Maybe your expectations are unrealistic.  Perhaps, moving to another area of the country or investing in higher interest paying tax lien certificates might be a better field to build wealth.  Isn't illinois still offering 36%? 

Seeing as though I'm located on the NH/MA border property prices are still high despite the market.  I've offered on rehabs, condos and flips but the offers I've made have been about 65%.  The foreclosure market is high but the banks battle long and hard for a short amount of money that isn't worthe it in the long run.  I admit I've tried to stay close to this area because it is what I know and can keep an eye on things as they progress.  Maybe tax leins are the way to go.  Thanks again for all the input.

[taxlienadvisor]

Hi Tommy,

I would like to offer a couple of avenues you should look into....it is nice to see a fellow north easterner on here...I reside in FL, but I grew up in Lynnfield, MA for 25 years before moving to FL.

If you want to purchase foreclosures check out.....harmon auctions dot com ...you can get a list of all the upcoming sales in MA, NH, and RI....some of the properties you will see will be cancelled, or postponed, or sold back to mortgagee, or 3rd party purchase...but do not be discouraged scroll slowly through the exspansive list and you should find what you are looking for...you want to focus on the postponed ones, or the ones that don't have any rbight red notices.

They do have sales, I have a friend and customer who purchases in the Lowell MA area, and has bought and sold 2 and isworking on the third...he profited $30,000 on first and $20,000 on second..he hope to make $40,000 on this one...

You also mentiopned that it may be better for you to focus on tax sales....in MA, they only sells deeds, even though in the state law they can sell for 18% certificates, but no counties are having any sales anytime soon...the only 2 areas to look are Worcester, and Lowell area.

NH is a tax deed state (but in the rules they may say that they do sell tax liens)...which they do, but do not buy them, the 18% interest only goes to the county...please dont ask why, I have no idea why this is....also RI is a tax certificates states... 10% 1st 6 months + 1% each additional month, 1 year right of redemption

Good Luck...I hope this helps you a little

[TommyK]

Thank you all for your experience and insight.  I'll check out the foreclosure listings.  Would a tax lein be a solid RE starting point.  I was leaning to the rehab because I have experience and could manage a small to medium rehab.  I've estimated costs very well, but this may be a big leap for my first investment?  Does anyone recommend their first investment to be on something ouside their geographical market?

[taxlienadvisor]

you are most welcome Tommmy,

If you have experience with, and can manage, and also see yourself rehabbing & flipping, then I would say go for that. You can do whatever you want with the properties you buy, whether it is just flip them, or fix them up a bit to maximize the profit. The tax deed sales (which are minimal in your area), and the foreclosure purchases are just the avenues to acquire the properties...rehabbing the prop would be an extension of the purchase...some rent, some lease, some rehab, etc...choose rehabs if it interests and excites you...this business is supposed to have an enjoyment & fullfillment element to it.

Any new RE investment is a sort of leap, hopefully Michael Q will see this post, he described the process of your first & initial "leap" very well in a previous post I read of his...I will also let him or someone else comment on whether or not it is a good idea to begin out of your geographical area...I dont want to step my bounds.

Yes, a tax lien is a great starting point...but will not really be the solution you are seeking, or will make you monies like flipping houses...it is a safe, secure investment, and you shouldnt treat it as a way to acquire prop (unless attending deed sales)...it builds wealth over the next 20 years or so

example...$10,000 in bank at 1.59% over 20 years nets you $19,718...so you will have in the bank, if you keep rolling it over every year - $29,718

take that same initial investment, and put in tax certificates in FL (for example)....and after 20 years you will net $263,000 - so you will have $273,930

see the difference in wealth building

[jbhollis1180]

taxlienadvisor, could you explain how tax certificates work, I am not familiar.  Thanks.

[taxlienadvisor]

absolutely,

that's why I come on here...I just posted step 1 of 7 in the foreclosure forum...check it out

What state are you in?..the process differs from state to state.

[taxlienadvisor]

Hey JB,

What are Tax Lien Certificates?

The Simplest way to understand Tax Lien Certificates is to realize all real estate is taxed by the county and municipality. Taxes are collected to provide many different benefits to citizens. Every property owner is assessed for property tax one or more times each year. Tax districts and municipalities receive their revenue from property taxes.

In many states, if the property owner does not pay the property taxes the county or municipality will accrue the taxes and penalties for many years. Ultimately, if the property owner does not pay the taxes, the county or municipality will sell or auction the property at a tax sale or auction.

Counties issue a tax lien certificate, which are sold at auction in many states. These certificates allow the counties and municipalities to collect the tax revenue they need to run the government this year, rather than wait for the property to be auctioned to collect the taxes due. In other words, the county or municipality sells a tax lien certificate that is nothing more than a certificate that shows the taxes due on “X” property.

The objective in selling the certificates is to allow an investor (rather than the property owner) to pay the property tax on “X” property. The benefits the county with immediate revenue and benefits the investor with a low risk certificate that has a high-yielding interest rate. The interest ROI could be from 8% all the way up to 50%.

Tax Lien Foreclosure is the formal term for the process in which counties or municipalities collect their money. The sales for delinquent property taxes occur at every level of government, from the county to hospital districts, to water districts, and to transportation districts. All these government agencies have taxing authority and the tax person’s ultimate remedy is a foreclosure.

The basis of our tax system dates back to the foundation of our country. The system was brought over from England. From the English, we learned that the basis of a person’s wealth was land holdings. Consequently, the land provided the tax assessor a method of attaching the property owner’s wealth. Real property cannot be hidden and it’s easy to assess.

Taxation is a complex science, as the property is not the only thing being assesses. The property is the security for the tax collector because the owner cannot conceal or move Due to this lack of mobility, many agencies attach their payment lien (assessment) to this rigid structure (the property.)

Many different authorities assess property owners. Non-payment to these entities could lead to a loss of the asset by the owner to the county or municipality district at a tax lien sale. Fortunately, most property taxes are assesses at the county level. The various districts aren’t necessarily uniform in their procedures. Your county might issue you one property tax bill that covers all tax authorities in your area. Although, there are more than 3,100 counties in the United States, and they don’t act uniformly. The fact that you now know they act independently will be a real competitive advantage for you.

It’s not unusual for different districts to serve their own assessment bills to the property owner. Generally, the county will serve a bill and after collection of that bill, the county administrator will distribute the money to the various districts or agencies of the local government.