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Real Estate First meeting with a RE investor

Discussion in 'Real Estate Investing' started by Bilgefisher, Oct 6, 2007.

  1. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    When I attended a recent foreclosure auction, I met a RE investor. I chatted with him for about 30 minutes and he gave me his card. He said he is always looking for new investors and would be willing to teach my partner and me how he invests. From the basics he gave me in our first encounter, he buys out junior liens and then makes claims on the property at the end of Colorado's 75 day redemption period and is able to buy out the primary lien at a discount. He has either flipped or rented out over 20 properties in the last 18 months which is when he started investing.

    My partner and I have been looking for a mentor and a way to get into RE investing. He seemed very nice and down to earth when I was talking to him and I didn't get a bad feeling from the encounter. He's offering to show us the ropes and I have setup a meeting with him on Monday. That little voice is creeping up right now because seems almost to good to be true.

    Are their any questions I should be asking when we meet?

    I wonder what he gets out of helping to absolute newbies in the same area he currently does deals?

    Why show someone else your techniques?

    Is there anything I should do to keep from blowing this opportunity?

    Sorry for all the questions, I'm overly excited and a bit nervous. I don't want to make incorrect emotional decisions. I don't want to mess this up, but I also don't want to be taken by something that is not legit.
     
  2. randallg99
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    randallg99 Bronze Contributor

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    >>>Is there anything I should o to keep from blowing this opportunity?<<<

    why is this guy so eager to bring you on board? ...
     
  3. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    He didn't seem eager to me, but more or less opening doors. My judgment might be clouded though, but I did introduced myself to him initially and I also made the phone call after we first talked. Perhaps thats exactly the way its played, which is why I am a bit nervous. I will keep that(eagerness) in mind when we talk again.

    I kinda feel like a tourist, the natives can spot me from a mile away and take advantage of that. I do think I am going to tactfully ask why he is willing to help us and what is in it for him.
     
  4. randallg99
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    randallg99 Bronze Contributor

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    remove emotions from all business transactions and negotiations.
     
  5. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Exactly my concern. I don't want to get overly excited about this which will cloud my judgment. I want to make correct decisions when we meet to determine if this is good or not.
     
  6. LightHouse
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    LightHouse Legendary Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    excellent way to get to the main point.
     
  7. nomadjanet
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    nomadjanet Contributor

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    My question would be:
    Could you tell us a little about yourself?
    How did you get your start?
    Did you have a mentor in your real estate business?
    And listen more than you talk. At your first several meetings when you are getting to know each other it is not necessary to ask deal specific questions unless he is asking you for input on deals (He will be trying to gain an idea of your level of education on the deal). Most people that are going to offer to mentor you will be relaxed enough to tell you about themselves & their business. Many of them had mentors coming into the business and want to play it forward, or sometimes they did not and wish that they had and want to make it easier for others. It is not wrong for there to be “something in it for him†as long as that something is of reasonable value commensurate with the effort he is putting into helping you do the deal. So if he wants you to do something for him or even to pay a consult fee on a few deals, is it worth it for the education you will get from the relationship? Maybe, maybe not, it’s your decision. Congrats by the way on finding a possible mentor, not always easy in this day & time.
    Janet
     
  8. ocean
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    ocean New Contributor

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    As a person who has been taken for a ride before, the best advice I can give you is:

    1. Don't sign ANYTHING unless you have your attorney look over it and explain your rights, obligations, and recourse first.

    2. If you feel pressured, and/or a time constraint, that would be your first clue. You're new to the game, he knows that, and shouldn't have a problem with you taking a few days to review something and have your attorney look it over.

    3. If you don't have an attorney... get one. Preferably one for each area of law you're dealing with. I can't recommend them, but if you're on a budget, pre-paid legal may be an option. Do your research. I don't have first hand experience with them, but they were recommended by people on other another board I read.
     
  9. yveskleinsky
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    yveskleinsky Bronze Contributor Speedway Pass

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    Meet with the guy, just don't turn over any money. Watch him put a few deals together and see if what he's saying is correct. I would also ask him, how you can be a member of his team- just make sure to not be a committed member of the team- at least initially. Do you have the guys name? ...I know a lot of REI people in Fort Collins.
     
  10. reipro
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    reipro Contributor

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    Bilgefisher,

    I would be very careful of someone in your own area. We have trained over 200 people to be reinvestors. I HAVE NEVER TRAINES SOMEONE IN MY OWN AREA! This would be cutting my throat.

    What has he asked of you? What are his fees? What does he gurantee you? Everyone that we have trained we have a money back gurantee. Does he?
     
  11. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Thank you everyone for your responses. He has asked nothing of me yet. I have made all the contacts. He hasn't asked me to sign anything, and if he does warning bells will definitely be going off. Yves, I will pm you his name. The meeting is Monday, I will be sure to let everyone know how it goes and I will ask many questions suggested. Perhaps the correct questions will also let him know I am serious about this as well.
     
  12. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    My first recommendation is to RELAX.

    Like nomadjanet said, ask generic questions. Ask a lot of things about how he started. Asking about his job and when he switched from being an employee to be an investor. Do not ask for being part of his deals, at least not during the next meeting. Also, for what I am reading here, he seems like somebody open and willing to help. There are may people like that in this world (hint: Look at how many people here in the forum are willing to help even though have nothing to get from you, or asking anything in return). Most people I know have good intentions. So relax a little bit. Maybe his intentions are as simple as to have a potential partner in the future, or just to have some more people to network with and make more deals in the future. Many people understand that there are enough deals for many people, so they don't need to hide from you what they are doing. You said it yourself... 30 properties in foreclosure per week... that is a lot of opportunities right there.

    What I've asked in the past to my former mentors was to have some of their time to review the deals that I was putting together. I've partnered with people that have taught me things before. I can pick up the phone and ask them questions, and know they will do their best to answer based on what they know.

    Let me ask you... If I come to you and ask you how are you doing what you do, would you ignore me or reject me? or would you ask me for something in return? or you would share some information and see if there is something you can do together down the road if the opportunity presents itself?
     
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  13. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Tonight was the meeting with the investors. Thank you everyone for the help in our preparation. Scroll to the bottom if you want the "To long didn't read" version (tl;dr).

    It went much better and longer then I anticipated. My apologize for missing the fastlane poker game. Our discussion was over dinner at Hu Hot. Unfortunately my partner's cell phone quit on him today and he had the wrong time. He missed all 8 of my calls trying to make sure he was ready. Oh well @#&$ happens sometimes. Thankfully he showed up in time to meet them and get his impressions of the investors. The meeting lasted 2.5 hours.

    We broke the ice by initially talking sports. Broncos and Rockies of course. Then we discussed each of our backgrounds and how they got started investing. One use to sell cars for about 8 years and was hired by a construction contractor to find properties. He was basically thrown to the wolves with zero experience. He eventually struck out on his own 2 years ago, did a few deals and ran into his partner about 18 months ago. He was doing 1 deal every 3 months or so. Together they were able to do about 3-4 deals every 3 months. His partner (the one I initially talked to) got started through the first guy by doing a deal on his own house. From there they have done about 20 deals in the last 18 months. They have flipped several properties and a cash flow on a few others waiting to turn them around down the road.

    They have done several deals with new investors like us. The investors use to teach new investors like us everything they knew but found that those people would end up striking out on their own leaving them high and dry. The investors spent all the effort on them but would not see the benefit. Now they do equity deals with new investors.

    They already have already acquired a property. They have the new investors buy into the equity on that property. Example: They purchase a property and after all the costs (holding, fix up, Realtor etc.) they have invested 160k. Now assume the property is worth 200k at FMV. The equity is 40k. The new investor would buy into half that equity for 20k. When the property sells the new investor gets the original money back and splits the remaining 20k with them. 10k apiece. Invest 20k get 30k back assuming the property sells at FMV. They pay back the new investor's full investment amount before they pay themselves. Assume the property sells for only 190k. The new investor get the 20k plus 5k split evening from the remaining 10k. The money the new investor puts into it allows them to go out and do more deals.

    I will be setting up another meeting with them. They wish to show us some of the properties they have flipped and some they currently own. They will work through all the numbers with us on the properties. How they obtained the properties and how they sell them.

    For my due diligence, I intend on finding out who their other investors are and talking to them. I have a few Realtor contacts in Fort Collins and will find out their impressions of these guys. I also want to see their results and check up on their results on my own.

    My partner and I spent a few hours after the meeting discussing the high and low points of the meeting and determining each others impressions of these guys. We also talked about what we need to do to check up on them and their deals. I am fully aware I am not above being a sucker, but I feel I am a fairly good judge of character and I got a good impression. My partner did as well. One thing I liked is they talked about working relationships and building trust.



    tl;dr version
    -meeting went well
    -they offer equity investment while teaching us they ropes
    -the equity investment allows them to do more deals.
    -my partner and I got a good impression
    -we will be having another meeting.


    One big question, how do you check into someone like this to make sure your getting into a good deal?

    edit: I also want to go over some math with them assuming different variables. I am having some midnight math issues that I want to clear up.
     
  14. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    I have meeting 2 setup. They are going to show us some of their houses they currently own and deals thy have done in the past. I intend to clear up any many questions I have and look into some references they have. Past investors, Realtors etc. This meeting will be at their office in old town Fort Collins.
     
  15. nomadjanet
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    nomadjanet Contributor

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    Some of my questions would be:
    How will your buy into the equity of the property be documented?
    Will it be through a recordable instument to protect your investment?
    Will you be investing for a % of return or % of profit.
    example you lend me 100 for 20% return I pay you 120
    you lend me 100 for 20% of profit, I profit 1000 I pay you 300
    What was the turn around time on the previous deals you research from them?
    What is the projected turn around time for this property?
    What role other than as investors do they see you assuming in the deal?

    Janet
     
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  16. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    Thank you, these are great questions. Tomorrow is my next meeting and I think its the correct time to ask them.
     
  17. nomadjanet
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    nomadjanet Contributor

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    Hey check my math, I was cross eyed or something. 20% of 1000 profit is 200 so you get your orgininal 100 + 200 =300. but you got my meaning, don't know where the other came from. I must need sleep.
    Janet
     
  18. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    NomadJanet,
    Thank you again. I asked all the questions you suggested and then some. I love asking questions and I told them to be prepared for an onslaught. They were happy to see that however, because it showed them we are serious.

    My partner and I have talked it over and I think we will be pushing forward on this. I still need to do a bit more background check on these guys, but from the info I have gathered, they're legit. We will setup a contract agreement. The plan is to use our LLC and their and form one between the two. I told them I will be taking the contract to a lawyer to scrutinize before we sign anything. The turn around time on properties is the only hangup I ran into. Some of their properties have buyers lined up before they even acquire them and others have set for 11 months. They understand were looking for a quick turn around and will suggest properties within our range that they suspect will turn around quicker. The learning process has begun.

    I hope to report on this again when its all said and done. Thanks again for all the help from everyone.
     
  19. Sid23
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    Sid23 Bronze Contributor

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    One question I have, and forgive me if it seems overly-cautious, but after reading all the posts and comments, I am not still not sure why they need you to accomplish their goals.

    I guess I'm a little fuzzy on how you fit into this system, other than giving them money. It almost seems like the new investors are the ones taking all the risk in the equation you described...I know they've "told" you of past successes, but that they document that? Showing you a property they rehabbed doesn't tell you if they made any money doing so or were 130% overbudget or something...

    But I haven't had my coffee yet, so maybe I'm a little slow today...
     
  20. nomadjanet
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    nomadjanet Contributor

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    I am glad that you think my question helped. I sometimes feel that I am not in sync with the rest of the group, not fast lane enough to post. :blush:, but that doesn't stop me :banana:. I am Very Glad that it is going so well on your end. Keep us informed of your progress and share some of your other questions if you don't mind. I would like to make note of them so if I am ever in your shoes I will have more questions to ask.

    Janet
     
  21. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    Pardon me for my real estate ignorance, and perhaps someone like SteveO would be more apt for an analysis, but why would I want to bring in partners/investors on a property when I know its a profitable deal? Why would I want to split a $40K profit with several others when I can take it all for myself?

    Bottomline is risk. These guys are allocating risk from them self to you.

    If the property doesn't sell at FMV and only at $160K are you out $20K? Probably, yet, these "investors" get their ROI with the elimination of RISK.

    Sounds like to me they are more interested in small, risk-free guaranteed returns than home-runs. To achieve that, they need "investors" like you.

    Without knowing the full story and the details of the partnership, I don't like the way it sounds.
     
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  22. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    As a follow-up; the deal they are offering sounds like a Lottery Scam ... send me $500 to get your $500,000 payout sent to you promptly. If there is $500K sitting around, why in the world do you need my $500??

    Or like the other deal posted somewhere here in the forum, "its a $20 billion dollar deal and we need borrow $2 million dollars to secure the titles"

    You don't buy a $1,500,000 million dollar Lamborghini and then go searching for a loan to pay for the $500.00 title and licensing. It just doesn't sound right to me.

    If you do a deal with these guys, please keep us posted on your progress and results. I'm really curious to see if deals like this are orchestrated.
     
  23. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    These are all fair questions. Questions I have been asking myself many of times.

    They use the money we invest on further properties. It frees up money for them to use elsewhere. The risk is on both sides however, we invest in the equity (our risk) they deal with the junior lien and buyout the mortgage (their risk). It does sound to good to be true. That gives me pause as well.

    Basically, we need them, they don't need us. That leads me 2nd guess. This is why I will be talking to other investors they have dealt with and looking at the hard numbers on their properties they have sold and currently own.

    I am not 100% sold on this yet, I still need to do more research, but my partner and I are leaning towards doing this. I will defiantly keep everyone updated.

    edit: Also MJ, you are correct, I have more math questions to ask them. Example. 160k property worth 200k. We buy in at 20k. Property sells for 200k we get our 20k back plus split the remaining equity difference. 10k to us 10k to them. But really it seems we only get 1/4th the equity profit. They get 190k(30k profit) we get 30k(10k profit). More questions I will be asking. So far though, this has been a pretty good learning process.
     
  24. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Unfortunately, I don't think I am the best qualified to answer this post. My expertise is not in single family and there are lots of quirks that make it different. You should always be leary of investment groups though and should thoroughly check out their story.

    Perhaps you should listen to reipro on this topic.
     
  25. Bilgefisher
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    Bilgefisher Bronze Contributor Read Millionaire Fastlane

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    SeanS,

    Also very good questions. Your right, showing us properties doesn't prove they have made any money off them. We will be looking at hard numbers next time we meet. I want to see the proof that this works. More research I will be doing. Half the fun of this it seems :)
     

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