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Hi Jack,
It sure is exciting to have a way to ask you questions instead of waiting for the next seminar!
A very “deep pocket” friend asked today if she could buy a 50% interest in some of my rental properties.
She needs the tax write off and wants a quick and easy way to own rental properties.
We could share cashflow – not necessarily at 50/50 because I would still be managing the property.
She said name the number and she’s in!
I’m not so sure I want to do this. And can’t think of many advantages to me.
I could use the cash to pay off 4 or 5 more rentals and my cash flow would go up dramatically. But, I could just do it on my own in the next year or so.
If I did this, what would be the best way to structure the deal?
What would the tax ramifications be to me?
I really think I would be better off to just find some great deals she could buy and I’ll manage everything for her.
Giving up some control of my rentals makes me nervous.
Am I missing something?
Jackie Lange
The more I think about it I think it would be better if I just find some “deals” for my friend.
I’ve worked hard to build up my rental portfolio and I don’t want to slice and dice them now.
I can easily get her some really great deals. She can put up the cash to buy them. I will get a master lease and take care of all management. I could get an option for 50% of everything over the purchase price– even better, my Roth should get the option.
Yep, I like that plan better.
From Jack Miller:
Jackie, When I read your question, then saw that you had already come up with the solution for yourself that you liked better, I feel as of I’m in the middle of a conversation between you and yourself. For the benefit of the readers though, I’ll give you my take on it.
First os all, if you don’t need an investor, why take one on. It will add to your responsibilities and take away your control. On the other hand, if you can find a way to de-finance some houses using investor money, trading control for safety might be a good idea.
The easisest thing to do is to sell the houses that you don’t particularly like at your cost basis, but retain an Option to buy back a half interest in them at based upon that same price at some point in the future. This should be a tax-free move for you, since you will have made no profit on the sale. Your Option will capture half the amortization and appreciation plus cash flow without any investment or risk on your part. You need not exercise the Option until the house is sold, so there won’t be any more cash out of your pocket. Under current rulings, when the Option is bought back, the proceeds can be used to enter into a Sedtion 1031 exchange for other properties, or other Options.
Next, lease them back with a “performance” lease that gurantees to pass 90% of the net cash flow back to the investor every year. This way the investor gets all the tax benefits and you remain in contact with the houses to insure that they are properly maintained. You’ll also pick up an income equal to 10% of the gross rents. This will also provide some rental income each month that won’t be subject to payroll taxes, and that can be used to offset any rental losses on other properties.
Finally, use the rental income to go out and Lease/Option houses the same way from other burned out landlords who are looking for good management. Again, this will help you to increase your monthly income while you build equity in these houses.
This is the system one guy used over the years to build a fortune in houses. You’ll have your cake and eat it too. Hope this helps.
HI trevor,
There is no FORM that will work in every situation.
Every deal is different and the papwework needs to be customized to fit the deal.
You can sample contracts, lease forms, etc in the learning center under Foundations of Wealth – the print out the workkbook.
At Peter Fortunato’s seminars, he always supplied the exact paperwork that he used to do hundreds of deals. But that paperwork is only available to students who attend his seminars.
As Jack Miller’s seminars, he always has detailed contracts and paperwork in his seminar manuals. But that paperwork is only available for those who attend his seminars. For the options seminar he has options paperwork, for the trust seminar he has trust paperwork, etc. etc.
David Tilney has very special paperwork for sandwich leases but it is only available for those who attend the seminar.
The reason for this is because just getting the paperwork without a thorough understanding of the concepts and technique and how to what, where, when and how to use it could just confuse you or even worse, get you in trouble.
The basic paperwork available for members in the Learning Center under Foundation of Wealth will help you get started in the right directly. Of course it will need to be modified to fit the terms of the deal.
Jackie
Hi Jack! I am now a real estate agent in Florida. The market is slow and I have decided I need to do some lease purchases for some of my listings to get some people in them and perhaps a sale down the road. My question is: In Florida a real estate agent and member of the Association of Realtors is not allowed to prepare a lease. The owner must fill in the blanks of the FAR lease and we must not advise him. No additional language may be put in the lease that is very favorable to the tenant. I don’t know how to do the lease and the purchase agreement without violating this. I want the lease and the purchase agreement to reference one another. My broker is not overjoyed that I want to do lease pruchases since he feels that many lawsuits come out of this.
I’d like to get your thoughts, please.
Thanks,
Georgia Emmett
[email protected]Hello Jack,
I look forward in meeting you for the first time in Tampa in Feb.I am a fairly new investor, with no properties bought or sold, but I believe I am real close, and after attending money matters, I will put the things I learn to work right away.
My question is: And this was sent to me by a fellow investor in my CREIA investor group. He sent this info to the whole group, but I am curious to know if this a deal worth pursuing.OWNER wants $150 of the package. BUYER can pick and choose. SELLER will sell at 12 cap rate. BUYER will to pay comm. to be split 4 ways. These are commerical properties, spread sheets were sent and there are quite a few of them.
So, how would I response to him, as to whether this is a good deal or not?Thank-you,
SusanI would avoid commercial properties at this time. It depends what you want to do. If you want to be a dealer (hard in this market) I still think houses are the way to go. If you want to acquire wealth, houses are definitely the way to go. There isn’t enough info in your post to decide whether the deal is good or not.
The key to a successful seminar isn’t before or during the class. It’s after. If you impliment what you have learned immediately when you get home, that is a worthwhile class. It’s certainly motivating to go to the classes (especially when you start attending) but ACTING soon after is the important thing.
Susan,
Run in the other direction.
When you said commission to be split 4 ways – I knew it was a BAD deal.
This is called a daisy chain. It means that there are layers and layers and layers and layers of people involved in the deal with each one wanting a piece of the profit.
You want to avoid daisy chains like the plague. They almost always fall apart at the last minute.
And they are RARELY as represented ( false claims about value)
Your best deals will always come from dealing with the owner directly – that you have investigated.
Your 2nd best deals will come from only 1 other person between you and the seller and they have NO PROBLEM with you talking directly to the seller – that you have investigated.
Any other deals are to be avoided in my opinion.
Never – ever – take someone else’s opinion for the value. Always come to your own conclusions based on the information you gather yourself — not what someone else feeds you.
Avoid daisy chains.
Mr. Miller,
My name is Diana Douglas, I am a single mom, veteran, & disabled.
I made a very bad loan $73,200 (my retirement money) to a mortgage broker & contractor who were going to purchase/rehab/sale homes, they would pay me 12% interest & cash returned in full within 6-12 mos. They both told me the house they’re working on is worth $280-330K, then the market turned, & they dumped unfinished house in my lap to try & recoup my money. Now I find out house was NEVER worth $280K+, there’s a $175K mortage @ 6% PITI = $1225. I knew the broker personnally & I’m now finding out they BOTH had bankruptcies 2 yrs prior to my loan to them. They did not PURCHASE house, they did a lease option, then passed it on to me. I’ve filed a police report for embezzlement/fraud, but authorities are inundated with similar complaints.I am incredibly despondent as a result of this situation, these were people I trusted. I need some guidance and advice as to how best to turn this situation around. I’ve thought about a short sale, but unsure if I can qualify now that a lot of my cash is gone.
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