Tuesday, October 26, 2004

I Just LOVE Passive Income!

I got home yesterday and found a nice surprise waiting for me in my mailbox – a check for just over $1,000! This was a semi-annual disbursement from a private, closely held company I have invested with. The company buys foreclosures in the San Francisco area, fixes them up, and resells them. The principles raise a couple million dollars from private investors then form an LLC. The LLC exists for a period of three years, after which it is disbanded and the investment capital is returned to the investors (assuming there haven’t been losses). Disbursements of profits are made every six months. This was the fourth disbursement for this particular venture and with it, they have just topped the one million dollar total profit mark in this LLC. I have received a total return of 33.9% so far, which works out to an annualized return of 16.95%. Not bad for a completely passive investment!

I’m currently invested in two LLCs with this group. Each distributes profits every six months, so I receive a check approximately every three months. I hope to be able to increase the number of LLCs I’m in to six and that the disbursements remain staggered (something I have no control over), so that eventually I’ll be receiving a check each month.

What is there to learn from this? Network! I never would have found out about this investment group had it not been for someone on the message boards. Of course, I did my own due diligence before deciding to invest with them and the investment is not without risk – I have a half-inch thick prospectus that details those risks in exquisite detail. However, so far it has turned out quite well for me. The returns are less that what I would get flipping properties on my own, or even renting a property on my own, but given that the total time I have invested in this is the time it took to read the prospectus and write a check (a couple hours, tops), I think this a good return.


Anonymous said...

Where can I find opportunities like this?


Shaun said...

As I said - network. I was referred to this company from lesgee on the message boards. I gave him a phone call and spoke with him for about 10 minutes. Basically, I had to interview before he gave me any information. He asked about my real estate experience, my financial experience and my future plans. Why? Because he (and I) are interested in helping people learn. If someone throws money at an investment because they are told it will give them a 10%+ return but they have no idea what the company does or how it does it, where is the learning? How has that person's knowledge increased? How have they made a step towards self-sufficiency? But if you understand how the investment will generate those returns, if you've done it yourself, then you have the knowledge and have learned something. And if you've learned something, you have earned the right to participate in similar ventures.

I should also point out this particular company is not currently accepting new investors. And when they do, the minimum investment is $10,000.

Empty Spaces Inc. said...

yup, networking is key.

i've currently invested 10k in another investor's project at 24% interest payable monthly. he's doing a condo conversion and will be making a ton of money. enough to justify paying out 24% monthly!

Zeke said...


I recently contacted a real estate investment company that works a lease purchase program with new construction builders in my area. In theory everything seems like win-win-win. I will be arranging a phone interview shortly.

I'm a bit new to REI, in particulary entrusting my money to other people. I'm curious if you have any website links to a page that might have the basics as to what I should be looking for/ asking and what might be a red flag. I just received RDPD in the mail but haven't had time to read through it yet. Is there possibly a section in there that might be helpful for me to read through prior to me speaking with the investment company on the phone so I know what to be looking for/ questions to ask? Thanks so much.

Thanks so much to opening my eyes up to the possibilities of passive REI income streams.

Shaun said...

Zeke - I strongly suggest you educate yourself before investing any money. I don't know of any places to send you off hand. I just learned by reading lots of books and articles and websites for a long time. Start with the discussion forums over at RDPD, the book, won't give you any detailed information - that is a frequent criticism of it. Think of it as more of an inspirational book that gives you some starting places to further your education.

Justin H said...


As I read through more of your posts, it's clear you have some background (either formal or informal education, as well as some kind of experience in investing/finances) even prior to investing in your first property earlier in the year of this post (2004). Is that true? To what degree?


Shaun said...

I have no formal education in finance. Prior to getting into REI, my only investment experience was my 401(k) at work and, when I changed jobs, rolling that into an IRA and picking stocks there. I do a lot of reading. I think I spent about a year reading the message boards at before I started in real estate. I also read all the Rich Dad books that were out at the time (I haven't read the last two or three) and bought and played Cashflow 101 and 202. You can learn a lot from reading, but you learn even more by doing.

Unknown said...

Hi Shaun,

Just found your blog and wanted to touch base. I live in the bay area and am always looking for hard money guys. What are your rates and terms? I can also bird dog some properties if your interested? The market is great right now as you know. I focus on properties that give me two outs. I do mainly fix and flip or fix, rent, and refi. Hope to hear back from you soon. Feel free free to call or email me at 415-310-0066 of luck with your future endeavors!

Shaun said...

Right now we're loaning at 12% interest only payments with a LTV of not more than 75%, 1 year balloon. We're just lending right now, so we don't have a need for bird dogs. If you are still interest, let me know.

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