passive investing - Investor Loan Source

Questions Every Real Estate Investor Must Ask Themselves!

When Socrates said, “Know thyself,” it is unlikely he was talking about real estate investing, but it is still good advice. Before considering any major investment, you need to make sure you know what you can or can’t do, what your goals are, and what you are comfortable with. Here are some questions to ask yourself, so you are prepared to seize a good investment opportunity when it presents itself.

Am I an Accredited Investor? Knowing your status is non-negotiable. Some investments are only available to accredited investors and knowing your status will help you to narrow your focus. An Accredited Investor is generally someone who has 1MM in net worth, not counting the value of their primary home.

Am I a conservative or aggressive investor? Do you like to play it safe with a lower steady fixed rate of return or are you someone who likes high risk, high reward situations? Risk tolerance, considering where you are in life, knowledge of the industry and the market cycle, should all play a part in this decision.

What type of investor am I, Passive or Active? Are you a hands-on type of investor who wants to be uber involved in your investments? If so, you may want to consider more active investments such as fix and flips, rentals, note buying, etc. Just remember that these types of investments take a lot of time and involvement.

If you are working full time or just starting out, something passive may be your best bet! Consider real estate investment funds and other low involvement opportunities.

What is my level of knowledge when it comes to RE investing?

Are you just starting out? Then you probably shouldn’t take on a 100K intensive rehab project for your first flip. No matter your investment decision, take time to learn and fully understand what you are doing.

Who is in my network that I can leverage for their talents/expertise?

We have all heard the quote “Your network is your net worth.” — Porter Gale. This is especially true in the real estate world. This industry is constantly evolving and having a strong network is a must. Every RE investor should have a good agent, lender, attorney, CPA, and contractor on their side with whom they can ask questions and brainstorm. Go to real estate club meetings, mixers, and conferences. Get to know people and surround yourself with like-minded individuals. Lean on the strength of others to compensate for your areas of weakness (we all have them) and you, too, can contribute your strengths to help others.

What type of funds am I using to fuel this investment? Analyze the effects of that choice.

There are many ways to fund your investments but sometimes that can come with certain restrictions, tax liabilities, etc. For instance, if you lend money on a fix and flip out of your IRA (structured funds) and the borrower defaults forcing you to foreclose, you need to be sure that you understand the foreclosure laws within an IRA as this would be handled differently than if you had lent the money with cash.

If you choose to invest as an individual, do you know how this investment might affect your taxes? Everyone’s situation is different, but these are the questions you want to know the answers to BEFORE you jump in.

Investor Loan Source, a hard money lending company, provides high-quality investment property loans to private real estate investors at the lowest costs possible. Our process for providing real estate investors with private lending is unique. We place emphasis on the hard asset and value of the collateral (property) and less on the borrower. Our asset-based real estate investment loan model means we can provide more money lending to more investors than is available from standard bank loan models. At Investor Loan Source, providing real estate investors hard money loans is our business; it’s all we do. We offer several business real estate loans products designed to serve a variety of investors and property profiles, including hard money lending for properties to sell on owner finance.

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

Are You an Accredited Investor?

(We are not offering tax, legal, or investment advice. Please consult a professional)

There are many opportunities out there for passive investors to take advantage of. Knowing if you are an accredited investor will help you to navigate the waters.

“Accredited Investor” is a term used by the Securities and Exchange Commission (SEC) to differentiate between those investors whom the government believes to possess “financial sophistication” and those individuals who might require more protection/oversight. The government believes it is their duty to keep the world’s less savvy investors from so called “riskier projects” since they do not have the sufficient investment knowledge or reserve funds to handle a significant loss. Unfortunately, this rule excludes many investors from unique high-yield opportunities that could be life-changing. However, the good news is that if you are an accredited investor, your options are endless.

Many accredited investors look for ways to include non-accredited family and friends in their investments. Unfortunately, there is no legal way for them to be directly involved in an accredited opportunity. Always seek guidance from a licensed attorney when structuring your investment.

As of late last year (August 26, 2020) the SEC adopted amendments to the definition of who is considered to be an “Accredited Investor” as defined in Rule 501(a) promulgated pursuant to the Securities Act of 1933 (the “Act”). The great news is that many who did not qualify before do now. You or your entity can be an accredited investor if you are any one of the following:

A natural person whose individual net worth, or joint net worth with that person’s spouse or a cohabitant occupying a relationship generally equivalent to that of a spouse (a “spousal equivalent”), at the time of his purchase exceeds $1,000,000 (excluding the value of the person’s primary residence and any debt secured by such residence up to the value of the residence; any debt in excess of such value must be counted as a liability); (MOST COMMON)

A natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (MOST COMMON)

A bank as defined in section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; an insurance company as defined in section 2(13) of the Act; an investment company registered under the Investment company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employment Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

A private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;

Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company not formed for the specific purpose of acquiring the securities offered with total assets in excess of $5,000,000;

Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

A director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

An entity not otherwise qualifying as accredited that own investments in excess of five million

Any entity not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;

Any natural person holding in good standing a Series 7, Series 65, or Series 82 license, or any other professional certification or designation or credential from an accredited educational institution that the Securities and Exchange Commission has designated as qualifying an individual for accredited investor status;

Any “family office,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 with assets under management in excess of $5,000,000 that is not formed for the specific purpose of acquiring the securities offered and whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment; or Any “family client,” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940, of a family office (as defined above) and whose prospective investment in the issuer is directed by such family office.

Prove your Status

There are multiple avenues one can go to get proof of their accredited status. A licensed Attorney or CPA, Investment Advisor, Broker Dealer, or Verification Platform such as VerifyInvestor.com, Accredited.AM, and Investready.com can all be of assistance. Be sure to get verification in the name/entity you plan on using for the investment. For instance, if you are going to invest in your LLC, your LLC will be the one that needs to be verified as different rules are applied to prove status. Once you have received an accreditation letter it is usually only valid for a certain length of time.

To prove one’s status there are multiple assets taken into consideration. For some, verification is quite easy and can be proved by one simple bank statement while others might have a little more legwork to do. Rest assured that knowing and proving your status is well worth it. While everyone’s situation is different, having an understanding of qualified holdings might make the process less tedious.

Qualified holdings may include:

Investment Real Estate (non-primary residence) – Prove ownership through Deed, Note, etc. Be sure to have the valuation, appraisal, broker’s price opinion (BPO), County Appraisal District (CAD) valuation, or other document to prove the assets value.
Banks Accounts, Individual Retirement Accounts (IRAs), Certificates of Deposit (CD’s), Brokerage accounts, Annuities, Insurance etc. – Prove value by providing the latest statement or obtaining a letter from the financial institution stating value of account.
Vehicles (automobiles, motorcycles, boats, planes, etc.)- Show title and provide a valuation
Personal Property– Use a third-party valuation

In short, knowing your status will help aid you in your alternative investments to come. For more information on Investor Loan Source & ILS Capital accredited offerings please visit www.dontbuystock.com.

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.

How To Start Investing in Real Estate

Thinking of investing in real estate, but not sure how to begin? First and foremost, know that you are not alone. Real estate investing is a great way to build your wealth, but when you have little to no experience it can seem a bit overwhelming.

Do Your Research.

We have all heard the old adage that knowledge is power, and it still holds true today. One of the best pieces of advice one can be given is to do their research. In this day and age, there is no excuse not to. So much information is available to us instantaneously. Begin by learning popular real estate terms. So often I get asked the definition for “ARV” and “deed of trust”. Arming yourself with the basic understanding of the lingo is imperative.

Time is of the essence, and most people feel they do not have enough of it. However, if you are serious about real estate investing you will find time. Listen to a podcast, eBook, or real estate talk radio while you are driving in the car, working out, or as you drift off to sleep. This is a great way to get your head in the game and learn while doing it.

Grow Your Network.

Your network equals your net worth! Surround yourself with like-minded people. There are so many avenues one can pursue with real estate investing, but one thing is certain, you will need trustworthy, competent people at your side. Do your research and build your network. Most large cities have Real Estate Investment Association groups (REIA’s) which are great places to learn the industry while making contacts. Many teach classes on real estate investing, tell both success and horror stories, and introduce you to reputable industry professionals and investments. Lenders, title companies, contractors, CPA’s, real estate attorneys and real estate agents are all worth getting to know. Leverage the experience and the field of expertise of those around you. These people will help you grow your business/investments setting you up for success.

Find a Mentor.

An ideal mentor is an experience investor with time and knowledge to share. They can help you stay on track, keep focused, and guide you in the right direction. Be sure to ask lots of questions. Find out what your mentor did to become successful and mimic it.

Assess Yourself.

Next, you will need to do an honest assessment of yourself and your situation. You do not always need a lot of cash on hand or a perfect credit score to take advantage real estate investments. However, knowing your limitations will help set you up for success.

Other questions you will need to ask yourself is how much time you have to dedicate to your real estate investments. If you have a full-time job, volunteer three times a week, and must keep your schedule as well as your kids, you might be better suited for a passive investment. One that does not take a lot of your time. Therefore, a fix and flip project may not be best suited to your situation. Semi-passive to passive options like real estate notes might work best for you.

Decide on the amount of risk you are willing to take. Do you have extensive knowledge in the industry and a pool of cash for investments that would allow you to go after those high-risk high-reward opportunities? If so, commercial deals might be your niche. Are you close to retirement and principal preservation is imperative, consider funds or REIT’s? Do you need passive monthly income? Consider a rental property. There are both aggressive and conservative options out there and knowing which category you are comfortable in will help guide you to the right investment.

Additional items to consider are the type of funds you are looking to invest; cash or structured funds (IRA’s, 401K, etc). If you, will you be investing as an entity or as an individual and what the taxing consequences might be in direct correlation to your situation (seek the advice of a CPA). Look at state laws and how they might affect your investment. These questions can be deciding factors.

Find a Trustworthy Lender.

Most new investors have limited cash resources. If that is your situation, consider finding a lender who can help you. There are private lenders, banks, hard money lenders and others out there who can help you get started. Even seasoned investors often use outside financial resources to help them grow their investment portfolio. Be sure to do your research and ensure your lender is trustworthy and deserves your business. Ask for referrals or ask your real estate networking group if you are having trouble finding good lenders.

Make Your Dream a Reality.

Once you have done these things go out and find your investment, do the leg work, and make your dream a reality. Remember to be realistic in your expectations and set goals. Do not overextend yourself either mentally or financially. Keep your mentor close, leverage the experience of industry professionals and never forget that your knowledge and network are the two most important things in your arsenal. This is how you will set yourself up for success.

To learn more about Investor Loan Source, visit our website or follow us on LinkedIn, Facebook, and Twitter. To apply for a loan, click HERE.