LLC Update

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Well! It's been quite a while since last we met! A lot has been happening. Let's get caught up...

Probably the biggest news is that I'm back to work after a year and six weeks! While the original plan was not to take another J.O.B., the reality of my financial situation did not make that possible. The new job came along just as my money - the last of my life savings - was running out. October would have begun the bankruptcy and foreclosure phase of my life. Now, we can forestall that for the time being and keep building the LLC's credit!

On the LLC front...

Where this is at: we're ready to start building store/vendor credit and get our D&B profile put together. So, that's the next step. The LLC has everything it needs to be recognized as a valid entity: An EIN, a real address (though that address needs to change - part of the story I haven't told here just yet) a checking account and its own phone number (with Vonage). That makes it a "real", recognizable entity in the eyes of potential lenders and creditors.

As relates to the LLC's purpose...

Here's a real gem I picked up recently from a REIA leader:

Y'know how the Real Estate investment gurus always tell you to make offers and they claim it can be done without tying up gazillions of dollars in earnest money? Well, here's how you do it: this works for "commercial" real estate (which, for purposes of this discussion, we define as "large" multi-family residential, 12 units or more) and may work for some single family income property. The "secret" - if you want to call it that - is to make a distinction between an offer to purchase and a "Letter of Intent", or "LOI".

An Offer to Purchase such as you or your agent may submit to a seller for an given property requires an earnest money deposit and is a binding contract once it is accepted.

A "Letter of Intent", or "LOI" is just what the name implies: it's a letter to the seller indicating your intent to negotiate to purchase their property. It is NOT binding on either party, so no earnest money is proffered. The LOI is merely a vehicle used to open the lines of communication. For any given seller or property, the LOI might or might not lead to negotiations which yield an offer to purchase. The LOI may undergo revision as the negotiations, if any, proceed before the seller accepts one of the proposals contained in the LOI. The accepted proposal then gets written up as an offer to purchase, earnest money is put forth, and the seller accepts the offer at which point the offer typically becomes a purchase contract which is binding on both parties.

The fellow giving the presentation used examples of LOIs wherein he actually makes three proposals in each LOI.

The first proposal in the sample LOIs is usually 100% seller financing. He indicated that this is seldom accepted, but it has happened. The first proposal is usually structured to be the most lucrative to the seller, having the highest purchase price of the three proposals, and highlighting is used in the letter to make that stand out, such as using a larger, bolded font to indicate the total amount received by the seller through the end of the financing period.

The second proposal in the sample LOIs typically includes some kind of cash to the seller in addition to seller financing. He showed examples where the second option is presented less attractively with fewer details and no highlighting, since the most desirable scenario is the 100% seller financing proposal. The purchase price is lower than the first proposal to reflect the buyer's (your) additional overhead (finance charges on the money that will need to be borrowed to provide cash to the seller).

The third proposal in the sample LOIs was simply an "all cash" offer. No details provided or needed. The purchase price for this proposal is the lowest of the three.

That information there would normally "sell" for at least a couple of thousand dollars at a guru's seminar or in their books-and-tapes "course" they might sell from a table at the back of a hotel banquet room. You just got it here "for free". I paid $20 to attend that presentation, and I was a half-hour late because I forgot it was happening that evening.

Here's a tip you might pay to get from a marketing guru:

When sending your Letters of Intent, it's o.k. to print the letter off of the computer. In fact, you want to look as serious and professional as possible. Remember to sign the letter in your own hand, of course.

To get your letter opened, however, HAND-WRITE the addresses - the property owner's address and your own (return) address. Research shows you stand a much better chance of your letter being opened and read when the envelope is hand-written. Otherwise, you just look like more junk-mail.

So, in the "course" of this blog post, I figure I've not only helped enable you to make $millions, I've saved you $thousands in money you'd otherwise pay to gurus to attend their events or purchase their stuff, most of which is fluff intended to motivate you to buy even more stuff, most of which is fluff intended to motivate you to buy even more stuff, etc., etc.

Since the purpose of the LLC is to buy and hold income property, I thought it appropriate to include that here in my LLC update.

Tune in again soon. Now that I'm able to get the whole credit building project onto the fast-track, there will be more news more often.

We'll talk again soon!

Take care - be well!

Much Success!