60 Second Insights

What is a Sponsor?

Hello my name is Jeannie Orlowski welcome to the first edition of 60 second insights. In this series we are going to answer burning questions in 60 seconds or less.

A sponsor is someone who qualifies you for the mortgage amount. If you have a three million dollar property you are going to put 20% down. You will need to have the net worth equal to 2.4 million or the bank may require you to have a sponsor. They also may require you to have up to six months liquidity for mortgage payments- that you can co-sponsor with your sponsor who qualifies you for the mortgage.

Sponsors are everywhere. You can find them at local real estate investment club, you can find them in your own neighborhood, maybe even in your own family. People that just want to get a piece of the deal. They don’t want to do all the legwork that goes into getting a deal under contract doing the due diligence getting all of the necessary documents together in order to close on a property they just want to put up their tax returns and get a piece of the deal and that’s how you find sponsors. If you have any questions regarding sponsors, private money or any other burning questions leave it in the comment section below and perhaps next week we will be answering your burning questions.

60 Second Insights – Funding Deals

Today’s question is, how do I fund my deals?

Hard money is secured by real estate. A hard money lender typically will charge a 11-15% interest plus points. A point is 1% of the loan amount. They will get interest on their money every month until you are out of the deal which is typically under a year. Debt partners- a debt partner usually comes into the deal in a promissory note. They typically charge 10% interest, they get paid on an annual basis and they are in the deal for 2-3 years then they get their money back. Equity partners-this is the way savvy investors invest in real estate. It’s a syndication you’re portion 100,000 dollars, you would get 9% first year, 10% the second 12%, the third that is 31% cash on cash return from what we buy the property for to what we sell the property for, you would get another 50% of that. Add the figures together, divide by 3 and you get a 27% annualized return. Bingo! You’re in. That’s the way serious investors invest. Got a burning question? Leave it in the comments section below. And next week we might be answering your question.

Today’s question is how to invest in real estate with your IRA.

First you pick a custodial account such as iPlan, equity trust, Pensco. Then you have to find a brokerage account such as Fidelity or TD Ameritrade or one of those.

Then you have to roll the money from the brokerage house into the self-directed IRA. Once it’s there, you want to get your paperwork in order. Once you get all of the documents in place in entity DOR that needs to be filled out in order to get the money in place and a custodial account will take over. You need your property package, subscription, operating and questionnaire in your articles for organization to make this all happen.

Got a burning question?
Leave it in the comments section below and next week we might be answering your question.

Today’s question comes from Jim. Jim says,”Hey! How do you handle a question from an investor who says , if that deal is so good, why don’t you put your own money into it?”

First of all, you tell the investor that you are the sponsor of the deal; you are the person that puts in sweat equity in the deal, your reputation is on the line and you’re the asset manager. And that’s how you earn your keep in a particular deal. So yes! The deal is good, you wanna be a part of it and that’s why you are sponsoring the deal and typically you don’t put any money into the deal. That’s how you roll. Now some investors not gonna like that. And that’s ok. Because somewhere else someone so what? Next I still have investors today tell me hey if you don’t put any scheme in the game I’m not gonna do any deal with you. Here’s another trick I wanna show with you. As you know you can get acquisition fees from most of your family properties. Well, tell the investor you gonna put 5 or 10% of your own funds in, ok, typically the acquisition fee, if 5% acquisition fee of the purchase price is what’s more 10% of the raise which you’ll be able to put in. So you can not only put in 10% of the raise through the acquisition fee but you will still have money left over from that acquisition fee. So you’re technically in the deal with no money in your pocket. You got a burning question, put in the blog below we might just answer yours next week.