Family offices have been around for generations. Historically, they were associated with Rockefeller, Mellon, or Vanderbilt, families that created generational wealth. They generated their wealth from many different industries. Having created massive wealth, they can invest conservatively. Preservation of capital is the first goal. Beyond that, they focus on the transfer of wealth to the next generation.
Brian DeLucia with Arrivato LLC provides a look from the inside of a family office. His family created its wealth in real estate, and continues to develop multifamily real estate holdings for the family.
Birds of a feather flock together, and so do family offices. There is a club of family offices where families socialize and communicate with each other. They have mutual interest, capital preservation and generational wealth. This common interest aligns their interest, which creates mutual trust in each other. From the trust grows unique opportunities to share and learn from each other.
Each family office is different. Some outsource all of the professional needs. Others handle everything inside, using the family business as a training ground for the next generation to learn the family business to continue the family’s mission.
Some look outside for investment options. If they created their wealth in a particular industry, they may possess a unique skill set that takes generations to learn. This can have tremendous value for investing in similar businesses where others are not experienced nor interested.
Other offices create multiple internal operational companies that allow multiple layers of opportunity to grow for generations. For instance, if a family created its wealth through real estate, they may have a management company, development operation, and together they build additional opportunities for the greater good of the family.
Are you writing a check to charity that is greater than your executive assistants annual salary? If so, it might be time to consider setting up the infrastructure to create a family office.
Traditionally an asset base between $100 to $250 million was considered the point of necessitating the need for a family office facilitate the transfer of wealth to the next generation.
The best way to work with a family office is no different than you would another professional. Build your relationship first. Once you have a relationship and trust is built, you will learn about the interest of the family and if your opportunity is a good fit.
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Passive cash flow from raw land, how can that be?
Mark Podolsky, The Land Geek, has mastered the raw land deal. Since 2001, he has done over 5,200 land flips, all across the United States that produce regular monthly cash flow.
Raw Land has no renters, rehab, renovations nor rodents. There are 3007 counties in the US with billions of acres of land. There is very little competition. In the raw land market place, there are no hedge funds, no DIY TV shows “Flip this Land”, etc.
The average return on investment is 300% on land flips and as much as 1,000% when he sells the land on terms.
Your ideal situation is to find a distressed seller. This is someone who does not live in the state who is delinquent on their property taxes. They are clearly not emotionally attached to this property. To these identified prospects, Mark sends out an offer to buy their property.
The “instant offer” is 25% of market value, including back taxes. He finds that between 3 - 5% of his offers are accepted.
When a potential seller replies, Mark has systemized the due diligence for quick confirmation of
The ideal buyer of your new property is a neighbor to the property. If that does not work, there are multiple online marketplaces, ie Craigslist & Facebook Marketplace that work exceptionally well
Because you are purchasing the property at a fraction of the market value, you are likely purchasing for cash. With no bank or lender to answer to, you the ability to be creative with your sale.
The ideal land flip takes 30 days from purchase to sale.
The perfect sale is when you collect a down payment equal to what you purchased the property for. For the balance, you can use a Promissory Note and Land Sale Contract, which is not subject to Dodd Frank.
A land sale contract does not deed the property to the buyer until the contract is fulfilled. This eliminates the need to foreclose. You can structure the promissory note for the buyer to pay monthly payments equal to a car payment for 84 months with 9% interest.
Need help collecting on your land sale contract promissory note? Mark has created Geek Pay which is available for you to use for payment collection. He has learned to collect multiple forms of payment, checking account & credit cards, to ensure you get your regular payments.
That’s how you create passive cash flow.
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Cash flow from day one is the key to building generational wealth that provides you options regardless of market conditions.
Daniel Ameduri from Future Money Trends has been investing in real estate since he was 18 years old. In a short time, he went from investing in properties that cash flowed to properties he hoped would appreciate in value.
When the market crashed, he lost those properties he was betting on for appreciation. The properties that cash flowed from day one, continued to produce and increased their output while the market was falling.
The lesson was learned. Invest for cash flow and you will be free!
An asset that produces regular recurring cash flow is the goal for any investor looking for a way out of the need for a job. A very simple plan, free from the hocus pocus of the stock market is real estate. For a modest down payment, you can purchase with leverage, a rental property. The tenant pays the rent, the rent pays the mortgage. When the mortgage is paid off, you get all the rent.
Compare this to saving cash, and earning minimal if any interest in the bank. You are way better off to invest in a tried and proven asset class like real estate.
Paid off real estate can be a tremendous base for your retirement future. Simple Retirement plan: purchase multiple single family rental properties. Pay them off. Cash flow for life. The key with real estate is time. So, the quicker you acquire, the sooner you will be free.
Financing. Unless you have an unlimited money supply, you will have to borrow to grow your real estate portfolio. If you have strong credit, and a good W-2 job, you can qualify for conventional financing.
However, if you have lesser credit and financial qualifications, you will have to get creative.
Seller Financing: Look for property and a seller with a problem. A property with a problem will not qualify for conventional financing. The seller’s problem is an opportunity for you to negotiate a low price, and determine what the actual cost to repair the problem will cost. A seller with a problem is more likely to agree to seller financing.
If they do not own the property out right, consider assuming their mortgage. All conventional mortgages have a due on sale clause. However, Daniel has never heard of a performing mortgage be called by the lender. So, this is your chance to take over an existing mortgage. Find out what the seller needs to allow them to move on. Most of the time, it is relatively little.
For a few thousand dollars, you can own a property that has a mortgage, and you get the equity the seller has paid down.
If you don’t want to keep the property, you can sell it. You can offer to carry a mortgage. When the original sellers mortgage is still in place, you create a “Wrap Around Mortgage”.
This is when your sell the property for more than you purchased it for. The new buyer gives you a down payment. You collect their payment, and make the payment on the original mortgage you assumed. The difference between what you collect and the cost to service the first mortgage is yours to keep.
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Private Money Lending is the debt side of real estate.
So much of real estate investment information is about how to. How to find the property, raise capital, improve the property, improve operations, refinance and disposition for a profit. Do you ever hear about the income the opportunity from the lender side of a real estate deal?
Anthony Geraci with Geraci Law specializes in working with private money lenders, from single property notes to hedge funds. Real estate investors who lend rather than borrow.
Traditional bank lending is not sexy. Banks are mainstreet. They are regulated. With this comes built in limitations and risk tolerance allowed by regulators. They like borrowers with proven credit history for buildings that are completed, occupied that provides a reasonable assurance of repayment. These properties provide the bank security. They can lien the property with a mortgage, collect regular payments consisting of principal and interest.
If you have a low risk deal that fits the buttoned up model banks are looking for, you will receive a low interest rate after proving you and your deal are worthy.
A private money lender is designed for risk. Often referred to as, hard money, for the risk they take and the rates they charge. Many commercial private lenders structure their loans so that they are interest only.
Because of the higher cost, private lenders are the option of choice for many real estate investors with a short term need to complete a project. For some investors, private money may be a necessity due to poor credit. However, for most, the use of private money is a preferred over conventional lenders.
Private lending is where sexy debt lives. These are the option for investors with an idea to improve a property, ie fix & flip. If you have a non conforming deal, a vacant building, a short term need for capital, or just don’t have the time to wait through the loan by committee process preferred lenders require.
The reward for private money lenders is significant. To guard against the risk, it is imperative that the proper legal contractual protection be used for if, when things go wrong. Each lender is unique and for this, the structure and offerings will vary depending.
Your legal team will advise you through all phases to manage the risk of your private lending business. Like any business activity, setting up the proper entity is a first step. Additionally, private placement memorandums are needed when raising capital from investors and loan documents for use with your borrowers.
When things go wrong; foreclosure, etc, your recourse is spelled out in the legal contracts signed by both parties. For this reason, it is a must to work with legal counsel focused on real estate.
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