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.
I've always been a fan of productivity & efficiency hacks to allow me to do more with the limited time in each day. But lately, I've been working really hard to institutionalize these things within our company, PointAbout.
Everyone reacts a little differently. Some people take to keyboard shortcuts easily, while for others using the mouse is a very hard habit to break. I would liken keyboard shortcuts to blogging: With both, there's a "valley of death" you have to get through before you emerge in the sunny field on the other side, and most people don't make it. Both blogging and keyboard shortcuts require several weeks or months of concerted effort to prove successful, but once you emerge on the other side of that time commitment, you look back with the realization you should've done it years ago, it's so valuable. Initiatives like the F1 GeekSpeed Challenge help make it a bit more fun.
One thing that's been easier to institutionalize has been the use of Basecamp , a cloud-based Software As A Service (SAAS) lightweight project management tool, instead of email. I've gotten quite militant with everyone around me that if a conversation turns into a thread on email, or if you know it's going to be one, it should be moved to Basecamp. There are several huge benefits to this approach -- again, not all of them immediately obvious. The first is that it allows you to assign owners and dates to tasks, something email is notoriously poor at. The second is that you have a threaded conversation, all kept in one place, and various people can be added & dropped to comments along the way as necessary (no more 'reply to all' hell). These benefits are nice when they're happening, but invaluable as time goes on and the knowledgebase builds.
Today I came across a great example of exactly this. Hayat, our admin, had asked me how to do some transcription work. About 4 months ago, I had previously trained another admin on this. Since I put the original training instructions on Basecamp, I was able to very quickly & easily call up the thread and just have Hayat read it + watch a video I had posted in the thread. That was it -- I didn't have to do anything more than point her in the right direction, the rest of what she needed was perfectly memorialized on Basecamp from the first time I went through it.
It felt so great and refreshing to have successfully stored the knowledge in a place where it could be readily reused that I did a video to show off the details. Here it is -- enjoy!