I tried to ask a few of these questions in the original thread I started a four months ago, but they were ignored and the thread didn't get bumped to the top of the community as it appears others do.
Tynan, I realized that Texas doesn't allow peer lending. Did you have a
way of working around this when you started or were you a Cali resident
by then? Can a PO Box be set up in another state, for example? Any other tips on how I might be able to get in on LC besides their secondary Folio market?
Tommy, thanks for sharing your investment strategies in the earlier thread. How would I find and get started with a foreclosure flipping group like yours?
Anyone have experience in investing money through a hard money/private money broker?
I'm looking for hands-off or low-involvement investments and these seem like three good options; any other suggestions?
Its funny that you ask about my foreclosure flipping business because we dissolved the business about one or two months ago. I'll give the story from the beginning for learning purposes.
It all started in 2008 when I was looking for a house to buy to live in, since I had a job with a decent salary right out of school. I contacted a real estate agent, Steve, in my target area and he was a really hard worker and a good salesman. After a short while at my "stable" job, I quit in pursuit of my online business full time. I told him that I no longer qualified to buy a house and he understood, however we stayed in touch.
2 years later, my business had become more successful, and I saved up a bit of cash I was looking to invest. As if it were perfect timing, I got an email from Steve stating that he's getting into the business of flipping foreclosures and was looking for passive equity investors. This sounded like a great opportunity, so I jumped in.
The business ran for 2 years and it was definitely a bumpy road. Here's how it operated:
- Steve had been an agent for 10+ years. He knew the market well. He would use ForeclosureRadar to find the auctions, and he'd go to the courthouse steps to bid on these properties. He knew a hard money guy that we'd sometimes use. He had a bidder go into the auctions for him and bid certain properties up to a maximum price if he couldn't make it.
- Steve would then figure out all the repairs necessary to maximize resell value. He was friends with a contractor that did great work and would not bill us until we closed the sale.
- He listed the house for sale, and we'd split any proceeds between us after he took a 5-10k finders fee for doing all the leg work. Myself and the other equity partners didn't do any work. Steve did, in fact, have a lot of his own personal capital invested in the business.
Again, it was a bumpy road. Other equity partners came and went, we went through dry spells without a property, we ended up actually losing money on one of the deals, etc. One of the biggest problems was that other bidders were really jacking up the prices of the foreclosures, making it harder to find profitable deals. After 2 years, Steve (without dispute from the rest of us) decided that it was too much work for too little reward. We closed the sale of our final flip and everyone was cut a check.
After running the numbers, I made exactly a 7.73% APY on the money that I invested. While that's definitely better than a 1% savings account, there was a considerable amount of risk, I had to pay taxes on the earnings each year even though I didn't receive a single distribution, and my money was very illiquid.
So in summation, unless you've got some really good connections with the banks, and know exactly what you're doing, and have a team of trusted contractors, inspectors, agents, estimators, etc, I wouldn't try to join the gold rush.
With the money I got out of the LLC, I've invested in Prosper and Lending Club and I'm already seeing better rates of return there. My money is more liquid, less risky, and much easier to manage. I was helping with the books for the LLC.
Oh, and I've been doing much financial/investment planning recently, so I should be making a post about it soon on TomsAdventure.com
You may want to look into EarthClassMail.com I use them as my mailing address for both business and personal. It was instrumental in helping me to establish residency in Florida. They have physical addresses in several states that you can use as your own.
No one is going to tell you an easy way to make money
In the beginning days of my gambling thing, it was very easy to make money. The system was basically foolproof and anyone with a credit card could make a good yearly income. I wasn't making money through any sort of skill, I was essentially exploiting a loophole. But here's the thing about loopholes: no one is going to tell you how to do them, especially not someone you don't really know personally. Because if too many people find out about a loophole, it closes. So if you want to make "easy money", you're probably going to have to stumble upon it yourself. If someone IS trying to share a loophole with you (especially aggressively, by email) it's probably a scam like a HYIP or a Forex trading scheme.
Most of the people who were gambling like I was now play poker. You can play poker online or in casinos and make six figures a year. But it's not a loophole, so it's okay to tell everyone. The barrier to entry is a few years of exhaustive practice, thousands of dollars to lose while learning, and the ability to sustain that lifestyle while you struggle to break even.
As part of my Fundraising Cribsheet series of blogs to help entrepreneurs raise money more quickly and efficiently, I interviewed today George Zachary, a Venture Capitalist with Charles River Ventures. CRV is very well known out here in Silicon Valley, as is George, who's been in the business for 15+ years.
Previously, I interviewed Naval Ravikant of AngelList, and interviewed Shai Goldman of Silicon Valley Bank, and I participated on a panel about the differences raising an angel round vs. a Series A round. Before the end of 2010, I'll be writing in-depth about the 14 weeks my co-founder Sean and I spent raising $1MM for AppMakr, so subscribe to my blog (top right corner) if you'd like to get more in-depth updates as I share them.
Before I started the interview with George, I tweeted a request for questions, and Shai responded with a question about George's outlook for 2011 and any impending bubbles, which I asked George during the interview below.
In this awesome 45 minute interview, George touched on a range of topics, including:
As part of my Fundraising Cribsheet series of blogs to help entrepreneurs raise money more quickly and efficiently, I interviewed today George Zachary, a Venture Capitalist with Charles River Ventures. CRV is very well known out here in Silicon Valley, as is George, who's been in the business for 15+ years. Previously, I interviewed Naval Ravikant of AngelList, and interviewed Shai Goldman of Silicon Valley Bank, and I participated on a panel about the differences raising an angel round vs. a Series A round. Before the end of 2010, I'll be writing in-depth about the 14 weeks my co-founder Sean and I spent raising $1MM for AppMakr, so subscribe to my blog (top right corner) if you'd like to get more in-depth updates as I share them. Before I started the interview with George, I tweeted a request for questions, and Shai responded with a question about George's outlook for 2011 and any impending bubbles, which I asked George during the interview below. In this awesome 45 minute interview, George touched on a range of topics, including: The best way to pitch George an idea, including what he loves, and what he hates What areas he considers hot right now, and would be willing to fund today Consistent mistakes he sees entrepreneurs making in their businesses, and when pitching VCs Why the Valley has a culture of giving "polite no's" and what he does differently Whether an entrepreneur he has passed on should be persistent and follow up with him How best to interact with investors once they've funded you What the lack of exits & IPOs means for the VC landscape What an entrepreneur should do to get favorable terms from VCs, and how the terms can be affected by other factors like valuations Why CRV is doing small angel-type investments ($100k-range) and how it's paying off What George's outlook is for 2011, and what George calls the "angel bubble" How you can contact George directly, and what he likes to see when you do so And a lot more. Lots of great stuff in this interview, so enjoy it; I hope it's helpful. Please post any comments in the thread below and if I get enough interest and/or interesting questions/comments, I'll follow up with him to get you answers. And a huge thank-you to George for being such an awesome and amazing VC to our company, and to the Valley in general. The fact that he took 45 minutes out of his day to give entrepreneurs access to the wealth of knowledge he has says a lot about him and CRV. Here's the video: