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Old 04-20-2012, 01:37 AM
 
39 posts, read 45,373 times
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So basically a friend who got involved with real estate told me if I loan $100,000 so I can get a 15% return on investment within 8-9 months. Basically he asked me to give him $100,000 he would go out and buy a rehab home. The properties he says they are in the South Bronx and Canarsie Brooklyn. He says 20-30k will go into fixing it up so he can rent it out. He said I will get my monies back with the 15% is thru him refinancing the home bc the appraisal will be higher then the actual value what the home is worth and thru receiving rental payments from tenants. The title would be in his name since he refinancing and he says Im secured bc I will be a lien holder on the property. He basically says this is a trust deed investment. Would you invest $100,000 with 15% with him or does this sound like a scam ?
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Old 04-20-2012, 04:23 AM
 
Location: Beautiful Pelham Parkway,The Bronx
8,389 posts, read 19,623,816 times
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It doesn't matter if it is a scam.Even if it isn't a scam and he is well intentioned you still could lose everything because things may not pan out in the risk free way presented.

Never lend money to anyone unless you are going to have the 1st mortgage on the property.
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Old 04-20-2012, 05:56 AM
Status: "I am in preparation mode!" (set 5 days ago)
 
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No. There are no guarantees and $100,000 is a lot to lose.
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Old 04-20-2012, 06:29 AM
 
Location: Manhattan
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One must always factor in the risk of default on any kind of loan. A 15% return does not look good when faced with a 50% default possibility. Remember friends are not backed up by the FDIC.


I wouldn't do it unless it was with a good friend with a proven track record (and I woudn't take only HIS word for that track record.) Neither would I do it without understanding all the ins-and-outs or "trust deeds" and liens.
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Old 04-20-2012, 08:26 AM
 
Location: USA
8,016 posts, read 9,065,013 times
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$100,000 to make only $15,000 profit?


lol...i don't know if that would be worth it.
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Old 04-20-2012, 10:19 AM
 
8,750 posts, read 15,552,768 times
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I would only do it if my name were also on the title, and I had a separate agreement where he would be responsible to pay the 15% in 8-9 months plus principle regardless of whether he makes money on the flip or not. Otherwise, you are setting yourself up for a huge loss.
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Old 04-20-2012, 10:30 AM
 
Location: Dallas, TX
2,898 posts, read 4,930,283 times
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Quote:
Originally Posted by 11KAP View Post
$100,000 to make only $15,000 profit?


lol...i don't know if that would be worth it.
Madoff offered a 10% ROI and people were begging him to take their money, why do you think 15% return is not worth it?
The risks involved might make it not worth it, but the rate of return is pretty danm good considering current interest rates.
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Old 04-20-2012, 10:46 AM
 
Location: Washington, DC & New York
10,750 posts, read 25,526,667 times
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The one question that you need to answer is: If this investment were presented to you by someone whom you do not know, would you consider investing? If so, what would you look to in order to make the determination? How many times has this group done the work previously? Do they have employees or contractors who can assist in getting the work completed on time and on budget? What is the standard of finishes going into the units? Do they have an existing relationship with a successful rental agent who can assist in getting the units rented?

Getting into business with friends or relatives, no matter how well intentioned, must be done with the same critical eye to evaluating a partner as you would with anyone else.

As to the investment, it would depend upon several factors. However, the situation you described is NOT a trust deed investment, as a trust deed investment involves a disinterested third party trustee who holds title. You are the lender, your friend is the borrower, and the trustee holds title to the property to secure your investment (and that of any other partners). Should there be a default, you can then take title to the property, but at the conclusion of the investment, when you are repaid, your friend could get title to the property. What your friend has proposed is asking you to loan them $100k, not a trust deed arrangement.
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Old 04-20-2012, 10:56 AM
 
Location: Manhattan
1,746 posts, read 3,421,135 times
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No way, not under these circumstances. Lots of inexperienced flippers have lost their shirts when unexpected issues came up during renovations -- which caused them to shell out more mortgage payments and additional renovation costs.
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Old 04-20-2012, 11:00 AM
 
1,072 posts, read 2,404,269 times
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Quote:
Originally Posted by stillstuntin2 View Post
So basically a friend who got involved with real estate told me if I loan $100,000 so I can get a 15% return on investment within 8-9 months. Basically he asked me to give him $100,000 he would go out and buy a rehab home. The properties he says they are in the South Bronx and Canarsie Brooklyn. He says 20-30k will go into fixing it up so he can rent it out. He said I will get my monies back with the 15% is thru him refinancing the home bc the appraisal will be higher then the actual value what the home is worth and thru receiving rental payments from tenants. The title would be in his name since he refinancing and he says Im secured bc I will be a lien holder on the property. He basically says this is a trust deed investment. Would you invest $100,000 with 15% with him or does this sound like a scam ?
I wouldn't necessarily call it a scam (though it could be) but it doesn't seem all that well thought out. Typically you can't refinance for more than what the purchase price is. So figure 75k, since he's planning on using 20-30k for improvements. He's not going to be able to pull out more than 75k through refinancing, so where is the 25k (that he put into repairs) and 15k (interest) coming from? 40k in rent in 8 months? Unless he is putting in money himself as well, but I still don't see how the numbers would work.
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