Financing a property with other people's money

Same here.
big family, many monied friends and relatives; the problem I learned is this: No matter how carefully you state your invitation to INVEST and share the wealth in RE investing, they will HEAR you asking to 'borrow money'. And then, something goes off in their brains about 'never loan money to friends or family. .you lose your $ and your friend'. They get fearful, they do't understand and they are afraid of losing.
While that certainly can be the case if one or the other doesn't keep his/her word, that's the only way it can go south.
Integrity and credibility comes into play. . .After months of turn downs and writing lenghty deal/offers with terms, paybacks,ROI, etc., one of my brothers decided to 'take a chance' with me.
Hey. . he simply wrote me a check for $40k from one of his lines of credit fpr am $80K property purchase. I put in the other half, rehabbed, resold did all the work and repaid him in 5 weeks his money PLUS $4,400 dollars!!!!!!!!!!!!!! He figured up the return to be about 300%. . imagine that?!!
Anywho,since then I've had two friends(separate) sit down with me, learn what I'm doing and how, then invest personal loans with me from maturing CDs for 12 months at 6%..I'm so grateful. As conscientious as I am about repaying loans, esp. personal, I'll just bet when pay up time comes, they'll ask to reinvest.
good luck...don't get discouraged..just keep looking elsewhere and talk it up.
GRady

Thanks for posting the information and insight, I appreciate it. This always seem to be a tough area for a lot of people. Thanks for the words of encouragement. Good luck on all your deals. Believe and Achieve! Indiana-Joe

Hi Grady,
You often wonder why families are not as supportive as a stranger would be. This happens to me all the time in my business. They usually wait until they are financially taken advantage of and the work is not complete. Then I'm called in as the clean-up girl. Now all of a sudden they believe I can! Continued success.........
Lubertha

Thanks for sharing the insight. You know when you are financially free as a full time real estate investor the family will continue to call you for even more guidance and help. Good luck on all those deals. Believe and Achieve! - Joe

Financially Free...........I like the sound of that! Continued success.
Lubertha

Thanks for the comments. Believe and Achieve! You will be financially free, the only question is how fast before you get there:) Good luck on all your deals! - Joe

FINANCIALLY FREE.............I like the sound of that! Let me say it again......FINANCIALLY FREE!!!!

FINANCIALLY FREE.............I like the sound of that! Let me say it again......FINANCIALLY FREE!!!!

FINANCIALLY FREE.............I like the sound of that! Let me say it again......FINANCIALLY FREE!!!!

Today you are one step closer to that goal than yesterday! Isn't that a great feeling. Enjoy the journey because the destination will arrive if you Believe and Achieve! Good luck on all your deals! - Joe

Looking foward to a great response from the postcards I sent out last week. What I'm really excited about is the investor's meeting I'm going to this month. I know that I'll get some great leads there. I'm getting there and it feels great. Thanks for the support.
Some how with my last post, there was as you see multiple post of the same. Has this happen to you? Do you know why? Continued success.......Lubertha

Good to hear from you, I wish you success with your postcard mailing and attending the investor's meeting. This should be a great opportunity to network. In regards to the double posts, sometimes, when you hit the post button or reclick it because it is slow it will double post. I believe you can go in and delete or remove it, but not really sure exactly how to. Good luck on all those deals. Believe and Achieve! - Joe

Have any of you used hard money loans? not from friends and family. And what are some pros & cons of doing so? I think it sounds enticing. If I pay cash up front, get a good deal with equity, then refi imeadetly so I can pay back loan, then I think I can rent it out for positive cashflow. Well that is my idea anyway. Any suggestions would be apprecieated.

Thnx

I have bever used the hard money loans, but if you use someone with a good reputation and you fully understnad the contract and interest rate and you have another bank to do a refi, it may be a great option. Ask around at investment club meetings, realtors, and other investors. You may find a good reference in your area. Good luck. Believe and Achieve! - Joe

Do you know if I can line up a bank prior to closing? As in getting some paperwork started on the refi and would you happen to know approx time to complete? Thank you for your input.

What you want to do is shop around for the bank that will do the refi for you. Usually small local banks are the best. Be sure to ask the following:

1. if the bank requires a seasoning in the proeprty. This means if you are required to own the property for a certain length of time such as 6 months or a year before they will consider a refi.

2. Also ask how much you can borrow off the appraised value (such as 70% Loan to value). This information will asist you in running the numbers of your deal.

3. ask how long from start to finish the refi may take? 30 - 45 - 60 days? Each bank today is different based on the paperwork, title work and the appraiser they use.

Good luck. Hope this helps. Believe and Achieve! - Joe

Yes, that helps a lot.

I have the same type question I think, found company that will lend money so if I find a good property. Then they could loan me the money then I could get a refi-for the value of the property then try to find a buyer or a renter whichever way I go to earn a profit. If not I would be stuck with the home and payments for awhile. Is that right Thanks.

Sounds right. With a hard money lender they may limit the time you have to pay them off such as 3 to 6 months. So make sure of the time you have, the interest rate and any other fees they may have. You just want to ensure you will at least break-even or hopefully have a positive cash flow while you hold the property to sell or refi. Good luck. Believe and Achieve! - Joe

Thanks Joe, I'm getting smarter all the time I hope. Your right I have to Believe to Achieve cause, noone else will.

Im working on getting hard money right now but dont know any details yet. Waiting for email on specs. Its all good as long as your moving forward.
Thanks
Lance

When using other people's money how do you avoid the full tax implications once you sell the property? Or do you just take the full hit yourself and use the net after that as profit to repay your investors with?

There are in's and outs concerning tax on capital gains. A persons age and amount of profit have different guidelines. a free call to the IRS can clarify what type of tax situation you are looking at. Just an FYI for you.....Jan

I have experienced the same thing with family and friends. They seem to remain "scared" and will not invest. The encougarement I can give is that once someone does lend to you and you follow through, they tend to lend to you again.
We now have 2 family-friend investors that are repeat clients. Niether have a huge amount of money, but enough that works for a down payment or fix up costs.
It seems that they(OPM people)are watching and waiting to see what we are doing.

Thanks Jan. So I guess the way it's done is you offer a certain amount of return to your investor for short term money?

I ran into the same road block with family and friends, I was acually baffled because they all know i am always true to my word and never screwed anyone over in any way. But i think it is the fear of a possible uncomfortable problem and the fear of the housing market that they read about every day.
go figure, But like it is like you say, they are always asking me how its going, I guess to see that it really works.
GOOD LUCK
Richie.

Hi there,
I have a couple of questions for anyone willing to share their experience... I'm still reading Dean's books and haven't started buying property yet. I'm afraid I'll get into a deal where I won't know what I'm doing, won't recognize the pitfalls, or won't have the information I need to make the deal successful. Also, I'm not sure I will even understand the wording in the contract? I'm the sole breadwinner with three children. I also teach full-time. I have no money from friends, relatives or hard money lenders lined up, so if something does go wrong, it will be all on me. I'm finding it hard to take that leap of faith and get my first deal off the ground. Any words of advice?? I'm off to work, so I won't be able to read responses. Thanks in advance for the help.

Paula