I am officially a real estate investor!

OK. So as of yesterday, I am officially a real estate investor! (Well, my IRA is.) I was a little nervous about the whole thing, but Peter and Rosanne at American Wealth Builders made everything really smooth and overcame every “fear” that I had along the way. (OK. Still just a little nervous about wiring $100,000 from my IRA, but…)

Background

This $100,000 mortgage backed note is providing financing for wholesale flips AWB is doing doing. Their team is in the process of raising rents, handling repairs, replacing tenants as needed on the entire portfolio, lining up for sale to a wholesale investor. This is a 12 month non-recourse interest only note with a $100,000 balloon at 12 months. The expectation is that the sale to the wholesale investor will occur closer to 3-4 months, but I am OK with the full 12 month term. There is no prepayment penalty. I would rather keep the interest rate confidential, but it is good. 🙂

The process

Rosanne held my had through the whole thing and put up with all of my newbie questions, concerns and mistakes. The next time should go much more smoothly. Rosanne has worked with my IRA custodian (Equity Trust) before so she knew the whole process and filled out the paperwork. Everything that I asked for to help me feel more comfortable was delivered usually in a matter of minutes. For instance:

I asked for copies of inspection reports and scopes of work and Sarah provided these on all four properties within 24 hours.
I asked for copies of the articles of organization and certificate of good standing for the LLC to which we were loaning the money. I received these within MINUTES, no questions asked. From these, I was able to cross reference with the secretary of state Web sites for the states of Florida (where the LLC was incorporated) and Ohio (where the mortgaged properties are located) and and found the identical documents. I also went to the county Web site and found that the LLC already owns the properties.
I asked for a couple of references and Courtney provided two such references. Both references have held a note with AWB for about 2-3 months and have also purchased turn key rental properties from AWB in the past 6-8 months. Both references were please with their experiences in both transactions. (This is good because I am considering AWB for future turn key rental purchases myself.)
After having my Ohio attorney review the note and mortgage documents, he provided me with a new note. Rosanne had her team review the new note and we used it without incident.
When I requested that the funds be wired to the title company rather than the LLC’s bank directly, I was promptly provided with a wire information sheet for the title company.
Rosanne followed up with everything every step of the way and I expect this will continue through filing of the documents with the county and start of payments.

Peter at AWB teaches and promotes these notes (which start at about $25,000 each) as a vehicle for “parking” cash which is less than the $40,000-60,000 necessary to purchase AWB’s typical turn key rental properties. I think that sounds like a good idea and will probably follow that plan in building my future real estate investing portfolio. This current larger note is being used to deploy cash parked in my self directed IRA until I turn 59 1/2 in July and pull cash from my IRA to invest in buy and hold SFH rental properties.

I’ll post updates as the term of the loan progresses.

Thanks to C. Timothy Murphy for Ohio legal guidance.

Disclaimers: I am offering no legal or professional advice, only comments regarding my experiences with various real estate investing methods and providers. I have no affiliate relationship with any person or business listed here. If you follow any links contained herein, I receive NO compensation of ANY KIND.