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GOLD! Envision - Real Estate Progress Thread

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Envision

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Circling back to my triplex, have had my architect working on the storage project but we're going to finish out my plans to build out the lot on the back of the triplex. This will turn in into a 4plex with garage units. I think the value will come in around 1-1.1 million after this.

This got me thinking on how insane this property was for me and the progression of my portfolio and how to actually build wealth with real estate.

Currently I own Triplex 100% for free and I did that in under a year.. I want to explain this because this is where true wealth is created.

I acquired the triplex for $450,000 with 15% down from a local credit union.

I had to put down $69,000 and I pulled my HELOC on one of my duplexes and used that as my down payment (think of myself as my own bank). Yes this is 100% leverage (my company more than covers this debt load if I ever needed it to - this is more risky but in my situation it was not too bad.

The triplex was run down, rents were under market, and the location is phenomenal. I "overpaid" according to everyone around me. You need to create VALUE where no one else can see it.

So I buy the triplex, all the tenants move out after I double rents. I renovate all units over 3 months for $35,000. I self funded this from savings.

Old rents were around $1800/mo

All in $485,000 for a completely renovated triplex with rents coming in at $3625. Im breaking just over $200/mo in cash flow after utilites and my line of credit interest payment.

The value of the triplex is now worth $600,000 with the improvements in rent and value and I've seasoned my loan and tenants over the course of 9-12 months.

Value: $600,000
Mortgage: $370,000
HELOC (interest only): $68,000

Now here is the Key

I go to my bank and tell them I want to refinance my properties into a portfolio loan. I have a great relationship with my banker and we loop together the duplex with my HELOC, one of my single family homes and the triplex into an LLC.

The total value of these properties is around 1.4-1.5m and I have about $800k in debt on them. The bank finances my new portfolio loan at roughly $980,000 and I cash out $170,000 tax free while paying off the heloc I used as the down payment

Value: $1,500,000
Old Debt: $800,000
New Debt : $980,000
Cash Out: $170,000

Old payment with heloc $6500
New Payment paid off heloc: $6000

Summary
I cashed out 170k from my portfolio tax free (which will produce 25k/year ) because I put it into the storage deal.
--- I would never cash out money that would not go into another income producing asset because you are increasing your debt load ---​
I paid off the $69k heloc with simple banking leverage from my triplex increasing in value
Once the heloc was paid off I owned that triplex for FREE. None of my own money was in the deal the bank is carrying all of the load.

These properties will continue to be paid down over the next 10 years and the values will continue to go up, in 5-10 years I will refinance again if the time looks right.

A note on starting out.
I started out with literally nothing 6 years ago, 6k down on my first 155k duplex. People would say thats a waste of time. That it's not worth the work. That theres better things to do with your money... why would you live there?

That property is worth $450,000 today, its enabled me to NEVER pay rent. It's enabled me to buy that triplex (it had the heloc on it), its never had a vacancy, etc...

I started small and did the best I could with what I had.
If you haven't started thats where you should start. Small and secure and compound your returns.

Start small, start with the dumpy unit, dont listen to anybody thats not where you want to be. Most people couldnt possibly understand your vision.. thats why its yours.
 

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Raja

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Circling back to my triplex, have had my architect working on the storage project but we're going to finish out my plans to build out the lot on the back of the triplex. This will turn in into a 4plex with garage units. I think the value will come in around 1-1.1 million after this.

This got me thinking on how insane this property was for me and the progression of my portfolio and how to actually build wealth with real estate.

Currently I own Triplex 100% for free and I did that in under a year.. I want to explain this because this is where true wealth is created.

I acquired the triplex for $450,000 with 15% down from a local credit union.

I had to put down $69,000 and I pulled my HELOC on one of my duplexes and used that as my down payment (think of myself as my own bank). Yes this is 100% leverage (my company more than covers this debt load if I ever needed it to - this is more risky but in my situation it was not too bad.

The triplex was run down, rents were under market, and the location is phenomenal. I "overpaid" according to everyone around me. You need to create VALUE where no one else can see it.

So I buy the triplex, all the tenants move out after I double rents. I renovate all units over 3 months for $35,000. I self funded this from savings.

Old rents were around $1800/mo

All in $485,000 for a completely renovated triplex with rents coming in at $3625. Im breaking just over $200/mo in cash flow after utilites and my line of credit interest payment.

The value of the triplex is now worth $600,000 with the improvements in rent and value and I've seasoned my loan and tenants over the course of 9-12 months.

Value: $600,000
Mortgage: $370,000
HELOC (interest only): $68,000

Now here is the Key

I go to my bank and tell them I want to refinance my properties into a portfolio loan. I have a great relationship with my banker and we loop together the duplex with my HELOC, one of my single family homes and the triplex into an LLC.

The total value of these properties is around 1.4-1.5m and I have about $800k in debt on them. The bank finances my new portfolio loan at roughly $980,000 and I cash out $170,000 tax free while paying off the heloc I used as the down payment

Value: $1,500,000
Old Debt: $800,000
New Debt : $980,000
Cash Out: $170,000

Old payment with heloc $6500
New Payment paid off heloc: $6000

Summary
I cashed out 170k from my portfolio tax free (which will produce 25k/year ) because I put it into the storage deal.
--- I would never cash out money that would not go into another income producing asset because you are increasing your debt load ---​
I paid off the $69k heloc with simple banking leverage from my triplex increasing in value
Once the heloc was paid off I owned that triplex for FREE. None of my own money was in the deal the bank is carrying all of the load.

These properties will continue to be paid down over the next 10 years and the values will continue to go up, in 5-10 years I will refinance again if the time looks right.

A note on starting out.
I started out with literally nothing 6 years ago, 6k down on my first 155k duplex. People would say thats a waste of time. That it's not worth the work. That theres better things to do with your money... why would you live there?

That property is worth $450,000 today, its enabled me to NEVER pay rent. It's enabled me to buy that triplex (it had the heloc on it), its never had a vacancy, etc...

I started small and did the best I could with what I had.
If you haven't started thats where you should start. Small and secure and compound your returns.

Start small, start with the dumpy unit, dont listen to anybody thats not where you want to be. Most people couldnt possibly understand your vision.. thats why its yours.
Envision,

In india rent is less than EMI, real estate is like this from when i last remember.

Can you give some thoughts on that.

I am interested in investing in real estate from the first time I read your thread but don't know how as these critical rules does not apply to my location.

Great work, keep going
 

Envision

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Lots of big things out of 2020 probably one of the best years of my life.

-Closed on the 100k sq ft facility - will increase my net worth ~4M in the next year.
-Refinanced my rei portfolio
-Hit 500k/mo in revenue with biz 1 (Thrasio interested in acquiring)
-Doubled company #2 (hit ~600k/yr)
-Built out my team to 10 employees and we're really getting into our stride now.

Some targets for 2021

We're closed on the conversion - complete that conversion over the next 10 months.
Build development on back of my triplex + Acquire any sfh/small residential if I see opportunities
Scale to $1m/mo business 1
Scale to $1m/yr business 2
Launch and scale brand 3
Team 25 employees (more jobs)
Save $150,000 for warehouse development
Acquire an iron foundry.
Get back into my flow with fitness and eating right
Relearn french (first language)

My business is in a unique position to reposition a foundry and ive been doing some deep research on the topic and I think I could do what I do with ecom/storage with a foundry. Some of my concerns involve the management and location but I think those could be worked through. I could immediately increase the valuation of the foundry and my companies by merging the two. This is something that I am actually going to focus on over the next 1-3 years and try to do at some point in the future.
 

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Lots of big things out of 2020 probably one of the best years of my life.

-Closed on the 100k sq ft facility - will increase my net worth ~4M in the next year.
-Refinanced my rei portfolio
-Hit 500k/mo in revenue with biz 1 (Thrasio interested in acquiring)
-Doubled company #2 (hit ~600k/yr)
-Built out my team to 10 employees and we're really getting into our stride now.

Some targets for 2021

We're closed on the conversion - complete that conversion over the next 10 months.
Build development on back of my triplex + Acquire any sfh/small residential if I see opportunities
Scale to $1m/mo business 1
Scale to $1m/yr business 2
Launch and scale brand 3
Team 25 employees (more jobs)
Save $150,000 for warehouse development
Acquire an iron foundry.
Get back into my flow with fitness and eating right
Relearn french (first language)

My business is in a unique position to reposition a foundry and ive been doing some deep research on the topic and I think I could do what I do with ecom/storage with a foundry. Some of my concerns involve the management and location but I think those could be worked through. I could immediately increase the valuation of the foundry and my companies by merging the two. This is something that I am actually going to focus on over the next 1-3 years and try to do at some point in the future.
How is the valuation from thras.io? Do they give out higher valuations or do they use lower multipliers and provide you with an incentive of profit share? Been thinking of going with them.
 

Envision

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How is the valuation from thras.io? Do they give out higher valuations or do they use lower multipliers and provide you with an incentive of profit share? Been thinking of going with them.
I didnt give them any of my info because they own one of my major competitors but they are seeking primarily FBA companies and we are about 50% FBA so I think our valuation would be higher than standard but it still doesn't make sense to sell if you enjoy running your business.

I believe they do a base 3x SDE and a 2 year earn out on the added profit so it can push to a 4x.
 

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I didnt give them any of my info because they own one of my major competitors but they are seeking primarily FBA companies and we are about 50% FBA so I think our valuation would be higher than standard but it still doesn't make sense to sell if you enjoy running your business.

I believe they do a base 3x SDE and a 2 year earn out on the added profit so it can push to a 4x.
I saw one of their offers a couple months ago. I can't speak to specifics for obvious reasons, but it didn't look too bad, and the earnout potential was large.

As with any other contract for a large transaction, I'd have a lawyer go through with a fine tooth comb.
 

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Rather than getting an MBA, get a JD. My law degree has been SO helpful in my RE business. And like you, I was working full time in the RE business while I went to law school. I wondered at that time if I'd ever use that degree-- since I chose not to practice law. The answer is yes, yes, yes -- every day. And, yes I paid for that degree myself. No, I have never gotten the "college experience" and I really didn't miss it. I have 4 college degrees and I worked throughout all of those school days. ( I also worked during my high school experience too. ) Keep going. You're on the right track.
 

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I didnt give them any of my info because they own one of my major competitors but they are seeking primarily FBA companies and we are about 50% FBA so I think our valuation would be higher than standard but it still doesn't make sense to sell if you enjoy running your business.

I believe they do a base 3x SDE and a 2 year earn out on the added profit so it can push to a 4x.
I actually think they prefer 100% FBA businesses so your valuation would be lower for having more channels. They don’t seem to like FBM that much either.

But that makes sense. They try to grow the business using better listings and branding, more efficient ppc and lower cost of goods. They don’t want to run warehouses and a fulfillment center.

Based on my research their offer is more like 2x up front and 2x potential earn out after 2 years assuming that they increase your sales to the point where they get paid and you do too. So they present you a 4-5x total payout but you have to wait 2 years and a lot of things need to go right.

They are new and could end up like the income store. I would never take a deal like this for my business.
 

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I actually think they prefer 100% FBA businesses so your valuation would be lower for having more channels. They don’t seem to like FBM that much either.

But that makes sense. They try to grow the business using better listings and branding, more efficient ppc and lower cost of goods. They don’t want to run warehouses and a fulfillment center.

Based on my research their offer is more like 2x up front and 2x potential earn out after 2 years assuming that they increase your sales to the point where they get paid and you do too. So they present you a 4-5x total payout but you have to wait 2 years and a lot of things need to go right.

They are new and could end up like the income store. I would never take a deal like this for my business.
The one I saw was higher upfront, so I'd be curious if the one you saw was more recent or older.

Either way, you end up putting a lot of faith in an earn out.
 

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The one I saw was higher upfront, so I'd be curious if the one you saw was more recent or older.

Either way, you end up putting a lot of faith in an earn out.
I haven’t seen an offer. I was basing my thoughts on articles and posts that I’ve read online. There’s also an AMA on Reddit from someone at Thrasio. In the AMA he talks about 5x total compensation after earn out multiple times. This was from about 2 months ago.

Just curious if the offer you saw was 2.5x or closer to 3x. And did they take 10% off the top saying that you would have paid that going with a broker anyway?
 

Envision

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I haven’t seen an offer. I was basing my thoughts on articles and posts that I’ve read online. There’s also an AMA on Reddit from someone at Thrasio. In the AMA he talks about 5x total compensation after earn out multiple times. This was from about 2 months ago.

Just curious if the offer you saw was 2.5x or closer to 3x. And did they take 10% off the top saying that you would have paid that going with a broker anyway?

IMO its probably better to take the listing to market with a broker. They're trying to get you without anyone else looking and as private equity takes a larger and larger interest in FBA and ecom you will be able to get some pretty good offers outside of just thrasio.
 

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Envision

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Two days ago I reoffered on the 25k sq ft warehouse that I lost out on a few months back. They still havent signed a purchase and sale agreement and so I should find out this upcoming friday. I want the warehouse because it has everything we need... all the racking is in place, 5 dock doors, great office space. It would be perfect for us to grow into.

My strategy to buy it is going to be quite unique and Im probably going to have to slow down my real estate purchases so I do not get over leveraged though.

Purchase: 3.2M
10% Down (not sure if this would be 7a or 504 loan yet.
My bank and the sba would finance the rest.

For the down payment I just put about 500k into the storage conversion which was all roughly 90% of my cash so I was trying to figure out where I could get the down payment for this. Its going to be around 320k down. Ive been saving and have about 70k saved for the warehouse but I was looking at multiple options without giving up equity.

Shopify Capital... Essentially a hard money loan around 12% I could pull around $250k in capital and pay it back at a percentage of daily sales over the course of a year. The way I look at it is as long as my company can withstand the lower cash flow for a year we are going to eat our down payment over the course of year and get ourselves into a situation where we control our location and warehousing without a landlord or someone in control of us.
 

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biophase

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Two days ago I reoffered on the 25k sq ft warehouse that I lost out on a few months back. They still havent signed a purchase and sale agreement and so I should find out this upcoming friday. I want the warehouse because it has everything we need... all the racking is in place, 5 dock doors, great office space. It would be perfect for us to grow into.

My strategy to buy it is going to be quite unique and Im probably going to have to slow down my real estate purchases so I do not get over leveraged though.

Purchase: 3.2M
10% Down (not sure if this would be 7a or 504 loan yet.
My bank and the sba would finance the rest.

For the down payment I just put about 500k into the storage conversion which was all roughly 90% of my cash so I was trying to figure out where I could get the down payment for this. Its going to be around 320k down. Ive been saving and have about 70k saved for the warehouse but I was looking at multiple options without giving up equity.

Shopify Capital... Essentially a hard money loan around 12% I could pull around $250k in capital and pay it back at a percentage of daily sales over the course of a year. The way I look at it is as long as my company can withstand the lower cash flow for a year we are going to eat our down payment over the course of year and get ourselves into a situation where we control our location and warehousing without a landlord or someone in control of us.

Try lightstream, get a car loan $100k
 

Envision

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Try lightstream, get a car loan $100k
Interesting do they verify the purchase of the vehicle or just cut you a check? Those rates look really good

One note on shopify capital - they dont report to credit, I asked this because my bank would be financing the loan and they would definitely not be okay with my financing my down payment. They're adament about it being my cash. We always have about 200k on hand and what id do is say yeah I have the cash use the existing money in my account for the down payment. Then pull the shopify loan or something like it (without hitting my credit) and replenish those funds as operating funds and get into the loan without the down payment getting on the banks radar.

Shopify said they fund within 3-5 days and as long as the funds are used in the business they are good with it.

Was going to ask you this via FB but what percentage of rent/mortgage do you pay of top line revenue currently for your space?

Im budgeting ~200k/yr which would be just above 6% of this years top line. We are pacing doubling the company again this year which will push the rent down to 3% and lower taxable net income on the business but I was curious how you look at it.
 
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MoneyDoc

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Interesting do they verify the purchase of the vehicle or just cut you a check? Those rates look really good

One note on shopify capital - they dont report to credit, I asked this because my bank would be financing the loan and they would definitely not be okay with my financing my down payment. They're adament about it being my cash. We always have about 200k on hand and what id do is say yeah I have the cash use the existing money in my account for the down payment. Then pull the shopify loan or something like it (without hitting my credit) and replenish those funds as operating funds and get into the loan without the down payment getting on the banks radar.

Shopify said they fund within 3-5 days and as long as the funds are used in the business they are good with it.

Was going to ask you this via FB but what percentage of rent/mortgage do you pay of top line revenue currently for your space?

Im budgeting ~200k/yr which would be just above 6% of this years top line. We are pacing doubling the company again this year which will push the rent down to 3% and lower taxable net income on the business but I was curious how you look at it.
Does shopify deposit directly into your account?

We use clearbanc so all payments go through them... which sucks because my plan was the same as yours, take the upfront capital and do side deals since my business could afford $4-5k less per month.
 

Envision

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You are looking for ways around the Federal lending rules for your down payment -- and you are openly talking about your plans? Yikes!

Im not looking for ways around the rules I literally said I have the cash on hand. Im looking for ways to operate within the rules in my current situation. If the bank will lend to me they will lend to me. If they wont, they wont.

Every post you make on this forum is woe is me or this sucked for me or you dont know what I know... Keep that shit away from me.


Does shopify deposit directly into your account?

We use clearbanc so all payments go through them... which sucks because my plan was the same as yours, take the upfront capital and do side deals since my business could afford $4-5k less per month.

Yes, but I wouldnt use clearbanc man. They reach out to my pretty regularly and their approach of getting access to your store doesnt sit right with me. Shopify is a degree better IMO but still they do get remittance on daily sales until the sum is paid back.
 

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Interesting do they verify the purchase of the vehicle or just cut you a check? Those rates look really good

One note on shopify capital - they dont report to credit, I asked this because my bank would be financing the loan and they would definitely not be okay with my financing my down payment. They're adament about it being my cash. We always have about 200k on hand and what id do is say yeah I have the cash use the existing money in my account for the down payment. Then pull the shopify loan or something like it (without hitting my credit) and replenish those funds as operating funds and get into the loan without the down payment getting on the banks radar.

Shopify said they fund within 3-5 days and as long as the funds are used in the business they are good with it.

Was going to ask you this via FB but what percentage of rent/mortgage do you pay of top line revenue currently for your space?

Im budgeting ~200k/yr which would be just above 6% of this years top line. We are pacing doubling the company again this year which will push the rent down to 3% and lower taxable net income on the business but I was curious how you look at it.

They just wire you the amount within 2-3 days. They don't put a lien on your car, assuming you actually buy one. You should easy qualify for $100k based on what you've posted. They want to see your tax return and that you have capital in other accounts.
 

biophase

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Was going to ask you this via FB but what percentage of rent/mortgage do you pay of top line revenue currently for your space?

Im budgeting ~200k/yr which would be just above 6% of this years top line. We are pacing doubling the company again this year which will push the rent down to 3% and lower taxable net income on the business but I was curious how you look at it.

I'm paying about 4.5% for rent now. I've never actually calculated that number. I don't know if calculating that number makes any sense. Imagine if my ecommerce company sold pillows vs one that sold iphone cases. If both top line revenue was the same, the storage space needed for each company would be drastically different.
 

Envision

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I'm paying about 4.5% for rent now. I've never actually calculated that number. I don't know if calculating that number makes any sense. Imagine if my ecommerce company sold pillows vs one that sold iphone cases. If both top line revenue was the same, the storage space needed for each company would be drastically different.

Interesting, how do you quantify whats appropriate? By whats needed?

We sell things ranging from 6 ounces to what will be 300-500 lbs. If I can get this warehouse it looks like our rent with NNN would be around 17k/mo
 

biophase

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Interesting, how do you quantify whats appropriate? By whats needed?

We sell things ranging from 6 ounces to what will be 300-500 lbs. If I can get this warehouse it looks like our rent with NNN would be around 17k/mo

I would go by what I think I need and then double it. And it will always still be too small.

I calculate the number of pallet spaces I have. Use a program to layout your space and figure out what goes where and then add your future new products.
 

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Im not looking for ways around the rules I literally said I have the cash on hand. Im looking for ways to operate within the rules in my current situation. If the bank will lend to me they will lend to me. If they wont, they wont.

Every post you make on this forum is woe is me or this sucked for me or you dont know what I know... Keep that shit away from me.




Yes, but I wouldnt use clearbanc man. They reach out to my pretty regularly and their approach of getting access to your store doesnt sit right with me. Shopify is a degree better IMO but still they do get remittance on daily sales until the sum is paid back.
I asked this because my bank would be financing the loan and they would definitely not be okay with my financing my down payment. They're adament about it being my cash.
That's what you said -- your bank is NOT OK with you borrowing the down payment funds.
So then, in your subsequent posts, you are figuring out how to borrow the money for the down payment on other assets -- without it showing on your credit report and changing your lending ratios?
Now you are saying that you have the cash? But, you had posted that you already have that cash obligated to another project?
That situation tells me that you may be having cash flow problem right now. Or at least you have a possible lack of cash on hand to complete the proposed purchase and your current project. You are talking about paying a possible loan back through a "factoring" program ("remittance on daily sales...") for your store?
What part of your posts did I misunderstand? Are my conclusions reasonable under your stated fact pattern?
 

Envision

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That's what you said -- your bank is NOT OK with you borrowing the down payment funds.
So then, in your subsequent posts, you are figuring out how to borrow the money for the down payment on other assets -- without it showing on your credit report and changing your lending ratios?
Now you are saying that you have the cash? But, you had posted that you already have that cash obligated to another project?
That situation tells me that you may be having cash flow problem right now. Or at least you have a possible lack of cash on hand to complete the proposed purchase and your current project. You are talking about paying a possible loan back through a "factoring" program ("remittance on daily sales...") for your store?
What part of your posts did I misunderstand? Are my conclusions reasonable under your stated fact pattern?

I have cash within my business that can be used for the down payment. If you've ever ran a business you'd realized that that would cause a cash flow crunch which is not ideal. Which is where the a loan product comes into place to replace the funds for a period of time until my cash flow stabilizes again.

You must have stopped reading right before the "we have 200k on hand part"
 

WJK

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I have cash within my business that can be used for the down payment. If you've ever ran a business you'd realized that that would cause a cash flow crunch which is not ideal. Which is where the a loan product comes into place to replace the funds for a period of time until my cash flow stabilizes again.

You must have stopped reading right before the "we have 200k on hand part"
$200K seems a little bit short of $320K, plus closing costs? Add to a hold back requirement for reserves? I understand what you are trying to do. I am questioning your methods and the paper trail you are leaving in your quest to raise the money.
You are not the first to have these moments. We've all been there.

Yes, I do see things differently from you. The people at the bank look at packages every day that they are funding. Then they review those packages post funding. And the people who buy those packages look at them again -- sometimes through several buyers. And then there's the regulators and auditors who administer the Federal rules, and the FBI who enforces those rules. You are dealing with people who have seen it all and they know all the ways around their rules.
 

Envision

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$200K seems a little bit short of $320K, plus closing costs? Add to a hold back requirement for reserves? I understand what you are trying to do. I am questioning your methods and the paper trail you are leaving in your quest to raise the money.
You are not the first to have these moments. We've all been there.

Yes, I do see things differently from you. The people at the bank look at packages every day that they are funding. Then they review those packages post funding. And the people who buy those packages look at them again -- sometimes through several buyers. And then there's the regulators and auditors who administer the Federal rules, and the FBI who enforces those rules. You are dealing with people who have seen it all and they know all the ways around their rules.

f*ck Off.
 

CareCPA

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You came here to this forum asking for business advice... and laying out a plan that could get you in legal trouble... and you replied with personal insults toward me and you being penurious? Go in peace.
I'm guessing you have some stories about over-leverage and loan reviews that could be helpful to some of us younger investors. If you ever start a thread with those stories/warnings, please tag me in it so I can learn from them.
 

WJK

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I'm guessing you have some stories about over-leverage and loan reviews that could be helpful to some of us younger investors. If you ever start a thread with those stories/warnings, please tag me in it so I can learn from them.
Thanks for your reply. I have many stories that stretch over the last 45 years. This is my 5th business cycle since I started my RE career in 1976. (I did compliance work and audit work during part of those years as a consultant to banks. I also was hired on audit teams who took over some of the Savings & Loans and Thrifts during the 1990s.) This time period of time reminds me very much of the early 1990s. It was a blood bath in the RE business. I have been telling the stories in different threads. I just hadn't thought about pulling them together. I have a thread where I voice about the current RE market. Here's the link. I'm worried about the real estate market right now
 

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