Hello, I may be investing some funds with a local Flipper who is with Homevestors. He needs additional funding for mostly closing costs and some rehab. He has offered 20% return with a Promissory Note stating the 20% will be garunteed. That seems a little high from what I've heard from other investors.

Also, has anyone used a self directed irá to invest in real estate and what company did you go with?

20% for how long?

A good friend invested their proceed from the sale of our rental. The "Flipper" was very experienced, knowledgeable and talented. The only problem, he had many projects in the workings and my friends "investment" was small potatoes. It took only 3-1/2 years for this "small" project to get done and rented out. By that time the "time" ate up all potential profits so they ended up rented it out.

From Tommy Boy...

"If you want me to take a dump in a box, and mark it guaranteed I will... I've got spare time."

Guarantees are only worthy if backed by a solid guarantor. I too wonder why a solid flipper with experience is having to offer 20% on money. Is this deal too good to be true?

I'd ask him, point blank...why are you offering 20% when hard money is available for 12-14%. See what he says / how much he squirms and tries to deflect the conversation. It could be legit, but I'd do 3x the normal due diligence due to the unusually over-market interest rate.

I've paid people 50% on their money before. So I wouldn't get too caught up in the return, Ive paid that high, because I like to keep people coming back.

But that kind of return is not common and very deal specific. You need to make sure this guy has done a good number of deals. If not then you need to take control of the property as Ken said.

Very capable flippers still need to borrow money. The smart ones already have all their money working for them. However, it's easy to build a house of cards if the cash flow isn't managed properly. One property that sits on the market could bring it all tumbling down. 20% is not unreasonable, but it needs to be secured by a property. You want a mortgage, note, and deed in lieu on a property with as much equity as possible. Get a good lawyer to draw up the contracts for you.

Have you seen the house?

Do you know the numbers?

Were all back here on computers trying to identify you deal. For me it's all relative to your area. It might be legit, I'm not sure but as others have said due diligent is warranted.

Oy, I'm showing my age - as soon as I saw this title, I was imagining a dolphin using his brains (they are supposed to be very smart) to convince people to invest in clams or something...anyone older than 60 will "get" this.

More than likely the reason it's 20% is because it doesn't involve monthly payments and just a balloon at the end when it sells. Is it 20% return on your investment or 20% of the profits? Big difference.

If you have to take a loan out for this then I'd say no. You have no control over the outcome of this like others have mentioned. Also you're making payments, he's not. You're under the time pressure but he isn't.

To even things up, make him this deal...

If you like the house and think it would make a good rental, and he bought it at a good price, offer him the loan conditional upon being able to secure at least a second position loan, or even better, a first position loan and file the loan with the county clerk. Make sure the loan stipulates that it's non-transferable. Offer a sliding scale to give him a time incentive. Make it 20% for the first 6 months, 50% for the next 6 months, then he surrenders the house to you after 1 year if the house isn't on the market. You can foreclose to remove all debts below yours. Just make sure taxes and insurance are paid up.

Jason,

I loan out money from my Roth IRA and Roth 401k. I use Mike Todd with IRA Innovations.com 1-616-794-8961. Smaller company offering super service and are a MrLL sponsor. Mike has been at the last several MrLL Conventions.

These transactions are tax free!!! But must be handled properly or you jeopordize the tax free status of the account. Not hard but not “common sense”. MUST get educated.

HomeVestors is a legit franchise. But each franchisee is individual and different. The good news is they have training and a support system.

I say examine the deal carefully, make certain you have the paperwork Robin mentioned. Start with smallmtransactions.

Do the transaction thru a title company. Get your note and mortgage recorded at the courthouse. Have your loan listed on the insurance as ALSO INSURED.

Set a firm deadline on paperwork.

Good paperwork makes for good relations. No verbal agreements.

BRAD

Loved the tv show FLIPPER!

I was the age of the two boys on the show. Thought it was the coolest to wear cutoffs and jump off the dock anytime.

E E E E E E E said Flipper. O

Thanks for all the information. Below is the information on amount he is requesting / purpose of funds / date funds needed/ payoff date / and return amount. If you have any other input if really appreciate it.

$14,000.00 Finish Rehab ASAP 5/16/2019 $16,800.00

$10,000.00 Start Rehab ASAP 7/26/2019 $12,000.00

$10,000.00 Closing/loan short 3/22/2019 7/12/2019 $12,000.00

$5,000.00 Wholesale Closing 3/29/2019 6/28/2019 $6,000.00

Thanks for all the information. Below is the information on amount he is requesting / purpose of funds / date funds needed/ payoff date / and return amount. If you have any other input if really appreciate it.

$14,000.00 Finish Rehab ASAP 5/16/2019 $16,800.00

$10,000.00 Start Rehab ASAP 7/26/2019 $12,000.00

$10,000.00 Closing/loan short 3/22/2019 7/12/2019 $12,000.00

$5,000.00 Wholesale Closing 3/29/2019 6/28/2019 $6,000.00

In the above post are the numbers and below is what I asked him and what he replied:

Me:Hi David, Im talking with a few different companies today on the self directed ira. Also, I had a few questionsb

1. Why are you offering 20% when other hard money lenders can offer a lower rate?

2. Do I have any other security such as a note /mortgage on the properties?

David :Im not borrowing the full amount. I mentioned that but guess you did not understand. This is gap funding for closing costs and initial contractor costs. If you do not understand or do not feel comfortable no big deal. Was looking for a way to fix a issue i have with gaps at times of heavy inventory. Im willing to pay for that knowing Ill make up in volume. As i said before I get money to purchase and do rehabs....just gaps I need

this is also why he just replied to me with. Does it still sound a little sketchy. Thanks for all the input and guidance:

This afternoon has been crazy just signed another purchase agreement. My plan to secure the loans would be a 2nd deed of trust for the guaranteed amount. That way it is paid out through the HUD