Real Estate Investing - FAQs
Q: Who can invest?
Q: Is there a maximum?
Q: What if I need to sell my note?
Q: Will I get my equity participation if I sell my note prior to maturity?
Q: What is equity participation and how will it work?
Q: What do you mean "vested interest" and "skin in the game"?
Q: Who pays for maintenance and taxes?
Q: When I buy a note from TWH how do I get paid?
Q: What happens if the property that secures my note has a vacancy with no income?
Q: Maintenance and repairs?
Q: Are the homes insured?
Q: What is the difference between TWH and other turn key investment opportunities?
Q: So, I am the bank in this transaction?
Q: How do other turn key investment companies and guru's work?
Q: What is an assignment and how does it work?
Q: Where do I sign up?
Q: Who can invest?
A: Any person, corporation, LLC, and self-directed IRA is able to invest with TWH.
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Q: Is there a maximum?
A: There is no maximum. If an investor wanted multiple properties (Notes) we would devise a custom schedule to allow multiple purchases over time.
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Q: What if I need to sell my note?
A: There is no restriction. The note is liquid and can be sold or assigned at any time to anyone or entity. It should be mentioned that these Notes are more liquid generally than the house that secures the Note.
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Q: Will I get my equity participation if I sell my note prior to maturity?
A: If you sell the Note early the Equity participation follows the Note. Most Investors are able to sell the Note at a higher face value in order to achieve some Equity Participation if the Note is sold early. As a side note, TWH is always willing to buy the note back and assume all the terms of the note. However the Equity participation would go to TWH.
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Q: What is equity participation and how will it work?
A: Equity is the amount of money left after a sale’s costs and payoff of the Note to the investor: Upon resale of the property, the Note investor is paid all principal and interest that may be due at the time of sale. Sales commissions and any other 3rd party closing costs are paid. The Note holder and TWH split the remaining equity 50/50. Since TWH is buying these properties already far under value and with some anticipated inflationary pressure we feel that 3 to 5 years from now the equity before splitting will be in the $20 to $50k range per property. 50% of that is the Note so Equity participation depending on Market conditions will be in the range of $10,000 to $25,000 per Note.
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Q: What do you mean "vested interest" and "skin in the game"?
A: The heart of our TWH program is that every key member of the company is an owner. From Founders Jay Hinrichs and Mike Hanks to our Jackson Division with Brad Miller and Michael Collins we are all owners. We only receive compensation when rents are collected and when the properties are sold for profit. This is the ultimate skin in the game or vested interest.
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Q: Who pays for maintenance and taxes?
A: As the owner, TWH pays for all operating costs associated with the property. We are relying on the cash flow for income and the preservation of the property for future value and appreciation. TWH is fully vested in making sure these properties operate at peak performance. TWH is responsible for paying the annual property tax payments and you will be provided a copy of the county land roles stating that the taxes are paid and current.
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Q: When I buy a note from TWH how do I get paid?
A: You will get paid each and every month via ACH or Check.
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Q: What happens if the property that secures my note has a vacancy with no income?
A: TWH will continue to make your monthly payment regardless of the performance of the property. Therefore, you will receive your payment even if the property is vacant. It is like owning a rental property and never missing a single rent payment. This gives every incentive for TWH to make sure these properties are performing long term. The long term success of these properties is how TWH will generate their revenue.
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Q: Maintenance and repairs?
A: You will never have maintenance or repair calls. You are the Note holder. TWH is the property owner, and as the owner, we are responsible for all repairs and maintenance. Unlike owning a rental property on your own, with TWH you are not responsible for the upkeep of the property. From over 30 years experience, I have found that sellers of investment real estate consistently underestimate what it takes to maintain rental properties. It is very common for an investor who is trying to do this on their own to unexpectedly have large repair bills throughout the year and the life of the investment. These large, unexpected maintenance bills can drastically lower the return on investment for the “do it yourself” investor.
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Q: Are the homes insured?
A: TWH has a commercial policy and you, the investor, will be named as the Beneficiary of the investment and will be listed on the Mortgagee clause. In the case of a total loss by fire you will be paid first.
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Q: What is the difference between TWH and other turn key investment opportunities?
A: The key difference, and the most critical, is that TWH does not buy wholesale and mark up to retail like many other Turn Key companies. We give the passive investor the benefit of our years in the market place and our ability to source these properties. This is a full time job involving skills that are learned over years of investing. In addition because we are only going to make our money upon the successful running and resale of the properties we have strict guidelines for what we purchase, how it is rehabbed and who rehabs our properties. Like the owners, our Partners on the ground (the property managers and the rehab contractors) only get compensated when these properties perform. This creates a true win-win and team environment for the investor and TWH.
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Q: So, I am the bank in this transaction?
A: Yes, that is exactly what you become-the bank, except you always have participation in the instant equity and any further appreciation from these record low real estate values. Upon sale of the property the net equity will be split 50/50 between the Note holder and TWH.
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Q: How do other turn key investment companies and guru's work?
A: In most cases “The Turn Key” companies are large marketing company located usually in CA, FL, or UT. The wholesalers where the properties are located are local investors. Construction crews rehab the homes then refer to a local property manager. There is significant cost involved with a high profile and expensive marketing campaign. The wholesaler will usually have one to two other investors that they need to pay to get the properties. Then of course the contractors need their profit. And the property manager, usually a reputable property manager, takes over management. The marketing company has received their substantial commissions. Wholesalers and their middlemen have gotten paid. Rehab contractors have done their work and make some profit. By the time you pay all the middlemen the price to the investor has gone up $15,000 to $50,000 from the true wholesale price.
The marketing companies that sell these homes in almost all cases have NEVER seen the home other than videos. They also do not have a deep understanding of the market they are selling in. They are marketing companies.
With most turn-key investments once you own the home you are on your own to manage your property manager. When a property goes vacant you still need to pay tax’s insurance and if you have a mortgage you still have to pay the mortgage. Any repairs that come up during the year (and there are always repairs) you will pay for out of pocket. If an investor is not right on top of the day to day operations of their property a successful outcome is very seldom achieved.
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Q: What is an assignment and how does it work?
A: In most cases if you have bought a home in the last 20 years you have been in a transaction with an assignment. Remember when you closed your loan with your mortgage company then a few months later you were informed that your note was assigned to another bank or servicing company? The assignment is how mortgages change ownership from the original lender to whoever is purchasing the Note. This is what TWH does. Portland Funding LLC makes the loan to TWH and when you as the investor want to invest with our company you will be assigned the Note and Deed of Trust from Portland Funding to you or whatever entity you choose to have ownership of the Note. All terms and conditions follow the Note through the assignment. In addition, the original lenders title policy is assigned to you, the new Note holder.
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Q: Where do I sign up?
A: Go straight to our Contact page or give us a call.
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If you have any more questions about Real Estate Investing with True Wholesale Houses, LLC, Please use the question form at the top of this page and we will be happy to answer them for you.
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