Startup investor

Hello, i am sean thompson. i am new to the real estate investing scene, and am trying to get off the ground on my first property.

what i am thinking about is : contact a corporate attorney to setup a small company, either a LLC or a limited partnership, but rather than paying the attorney up front, i would invest him in the company he helps create. he would be paid in dividends over the life of the property. Once the company is setup, i would advertise as many networking sites as i have available for investors. the investors in the company would recieve dividends for the life of the property.

is this a good way to get started ? or does someone have a better way to get started ? i have no capital to put into a property, but im seeing a number of profitable deals in my area. the top properties on my list should generate approximately 10k-40k gross per year.

constructive criticism is appreciated. helpful comments are appreciated.

thank you for your time.

Lawyers don’t want to be your business partner. They want to set it up get paid and then they are not hostage to if you are a good businessman or not, or if you are honest or not, or if the tenenat from hell ends up in one of the properties or not.

You said you have no money to invest. In general a person with no money to invest has some problem in their life that would tend to prevent others from wanting to investing with you. You need to ask yourself why you don’t have any money. Fix that. Then invest. You will find, if you are honest, that the reason you don’t have any money is a real problem that if fixed and even if you don’t ever invest in real estate you will have a better life.

I’d say you’re on the money (no pun intended) about most attorneys not wanting to touch business partnership with a 10’ pole.

However, to say that people without money have some problem in their life that needs fixing seems pretty cynical, or maybe just out of touch. I have several 100k to invest, and plenty of problems in my life to boot. Conversely, I know many outstanding individuals with little or no investments or savings. People have children, ailing family members, low paying but rewarding occupations, and many other circumstances that might seem to preclude their opportunities in the field of REI.

If you have a goal of investment, start simple and realistic, and create a plan to build your financial leverage that you can follow. Be creative in your efforts to add to funding possibilities, and make sure you are approaching REI for the right reasons. Sure, there’s money out there to be made, but those in my area who have weathered the financial ups and downs are those who take enjoyment from improving neighborhoods, who love to work on homes, have an eye for home design and improvement, etc. Many who approach it just to make a buck either end up broke or even in trouble with the law.

Most successful business people started out with very little capital.what is important have a great idea and with right advice you will make it.
REI is a good long term investment and you must be in it for the long haul to realize returns.

I am sorry but I don’t mean to be sharp but what I say is neither cynical nor out of touch, but actually true. I am not saying that people that do not have cash are bad or somehow not good people. I know that life throws things at you but until you see those life issues a problems to solve and get them solved you will be nickeled and dimed and you will never get out of that hole. You said yourself that you have these issues but you have several thousand to invest. If you don’t solve these problems you will never get where you want to be.

I think you’re putting the cart before the horse, as the saying goes. If you’re just getting started learn the business first. Educate yourself about real estate investing. Forget about meeting with the corporate attorney. Other than setting up an LLC (even this can wait till you do a few deals) which you can do yourself or have your accountant do it for you, that’s all you need on that end.

I remember when I was starting out, I bought an asset protection kit. Then it dawned on me, what assets am I freaking protecting? I never did use the info till many years down the road.

Remember the 80/20 rule (Pareto Principle), focus on the 20% that makes you money and not so much on the 80% the doesn’t.

What makes you money in this business – Marketing to find the deals, Meeting with Owners/Sellers, Negotiating a good deal, Lining up financing, Marketing for your chosen exit strategy and last educating yourself continuously. Everything else can be delegated.

How do you become a property investor when you don’t have savings set aside?
Real estate investing without cash means that you need to take it slow and steady to build equity. The worst thing you can do is overextend yourself and trash your credit even further. Here is what I would recommend:

Buy on a land contract. Because mortgage rates are so low, this is not always the cheaper option but it keeps you from going to get a bank loan. In a land contract, the owner plays the role of the bank but he will charge you a rate higher than the bank, especially if your credit is poor. You put a little money down, let’s say $1,000 - $5,000, then you make monthly payments to the property owner for generally a period of 3 to 5 years. At the end of the payment period, you have to pay the remaining amount in one lump sum. That is when you get a loan. By then, you have equity and hopefully a higher credit rating. Meanwhile, you rent out the property for at least what you are paying.

I say wholesaling is a good avenue to build capital plus you will gain alot of knowledge of your market.