Having just came off a Real Estate Investor Cruise that spent a ton of time talking about Financial Friends and putting our Self Directed IRA Money to work. Then another two days of training at the Wealthy Code workshop analyzing deals and talking about private lending . . I have come to the realization that we here at KCInvest as well as most Investor really need to do a better job of getting to know their fellow investor and finding ways we can help each other out.
I ask you . . “Do You Have Financial Friends?”
You need Financial Friends in Real Estate Investing.
So let’s give you a for instance or two.
For instance, lets say that I know Bob and Bob is a wholesaler and he buys in areas that I really don’t want to work in. We get a fairly good lead, smack dab in the middle of the area where Bob works. I can’t really do anything with the lead, but Bob has a whole list of buyers who would buy this house from him. Great, I can refer this lead to Bob and Bob can pay me a referral fee or even have Bob pay me nothing so that he has a favor to return to me in the future possibly.
For instance, let’s further say that Bob the wholesaler has a buyer that will pay a premium for my property above and would pay $10,000 more than the motivated seller is willing to take. Now Bob likes his buyer and has a good working relationship but he knows his buyer would probably not pay a $5,000 referral fee. So Bob has to buy this house and cash out the seller and then resell the next day to his end buyer for $10,000 more.
We could take our lead and refer it to our Financial Friend Bob and have our IRA that is sitting on the sidelines doing absolutely nothing finance Bob so he can buy the house and then turn around and sell it the next day to his buyer. Bob needs $15,000 to buy the house on Thursday and he has a buyer who is ready to close on it for $25,000 on Friday. We could agree to have our IRA lend Financial Friend Bob $15,000 to buy the house. He then sells it for $25,000 and pays our IRA 50% of his profit. Not only did we bring the house to Bob, but we provided the financing, so he is willing to split his profit with us 50/50 and if he would have just assigned it to his end buyer, he probably would have only made $5,000 anyway, maybe a bit less.
For instance, let’s say we also have Sally Rehabber. She is doing great buying houses in better areas rehabbing them and selling them to owner occupants. She knows her areas, her houses, her numbers and has several great crews. Sally has a great deal in front of her and she is a little short. She needs to borrow $60,000 to do the deal and the numbers make sense. She comes to us to see if we could lend her the purchase and the rehab for a 50% of her projected $25,000 profit and it should take her 6 months max to do the deal. We check out the numbers and everything looks great, however, we have just bought a property with our cash and our IRA has just lend all it’s money to Bob, so we are mostly tapped out. However we have a Financial Friend Jack with $50,000 he wants to lend out at 10%. Using a new technique we learned on Cruise, we can use Jack’s $50,000 in a loan to Sally at 10% interest only and wrap that with the $10,000 we do have available in a larger loan that pays us 50% of the profits.
So Jacks loan of $50,000 wrapped with our $10,000 loan provides the $60,000 in purchase and rehab for Sally investor who buys the house, rehabs the house and uses some of her own money. She then lists the house and sells it and makes $23,000 profit in 5 months time . . bummer. She pays us $$11,500 and out of that we pay our Financial Friend their $50,000 back plus $2,083 in interest. Leaving us with $9,417 in profit almost double our money.
So on two transactions that we didn’t really do any work on other than filling out some paper and sending some emails, we make a profit between our company and our IRA in almost $15,000 and three of our Financial Friends made about the same. Sally and Bob made money by doing deals with leads we referred to them and loans we made them and Jack made a 10% return on his $50,000 that had it been invested with his other money in the stock market would have now been only worth $45,000. So everyone is happy.
So do you have any financial friends? The above deals are all made up but based 100% on real actual deals that have came across our desk.
Do you need particular deals or funding?
Do you have some funds sitting on the sideline doing nothing?
Do you buy Subject To or sell properties on Lease Option?
Be sure to reach out to us to share, the more we know about each other, the more we can help each other and the better profits we can all make.