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Letters of Intent: What They Are, How They Work, and Why You Should Care About Them

Summary

Today we’re talking about LOIs — Letters of Intent. LOIs are kind of like you and the seller are dating — you’re testing the waters and have the intent of moving forward with a relationship, but not the obligation — you’re still shopping. When you sign an LOI you don’t have inclusivity but it can help you lay out the basic business terms of the deal and get it moving forward.

This episode we discuss everything we know — and think you should know — about letters of intent! From the major points of the deal you should include in the LOI, the bullet points we make on our LOIs, and some of our real world examples using LOIs.

Key Takeaways:

[:28] What is an LOI? Information on the non-binding, legal document.

[2:27] The key part to an LOI for us, as buyers. And what’s the next step after a LOI?

[4:14] About the inclusivity of a LOI (from the both the real estate and private equity side), and when exclusivity is reached.

[7:19] So why should you care about a LOI as an investor?

[10:26] The major points of the deal you can include in the LOI.

[11:23] Key terms in the LOI; the price you’re going to pay, how and when you’re going to pay it, how much is going to be seller financing, debt, or equity.

[12:02] About the recent deal we got under LOI.

[13:55] The bullet points we make on our LOIs.

[14:38] Exclusivity in a LOI? The binding element we could put in an LOI.

[15:55] One of our first deals that we put under LOI, signed up the purchase contract — and the seller still backed out, proving that contracts are a step towards closing the deal — but they’re not set in stone.

[18:27] Summarizing LOIs: When you want to see them and when you’ll use them.

Mentioned in this Episode:

The Alternative Investors EP.05: Don’t Get Bernie Madoff’ed: Avoid Ponzi Schemes and Fraud

Don’t Get Bernie Madoff’ed: Avoid Ponzi Schemes And Fraud – EP.05

Tips and insider advice on how to avoid the Bernie Madoffs of the world. Brad and Grayson cover how to protect your alternative investments by doing a little due diligence up front. For more episodes go to thealternativeinvestorshow.com. 

Today we’re talking about how not to lose your hard-earned money through fraud. One of the advantages of alternative investments are that they are less heavily regulated by the federal government — but that also means you have to do more work when you’re investing in alternative assets to make sure you’re investing in a legitimate opportunity.

This episode, we discuss a few things you can do to to minimize your chances of getting involved in a fraudulent scenario. We share our general tips and tricks to making well-informed decisions, what you should be looking for when initially investigating a sponsor on an alternative asset, and the actionable steps to take pre-close and post-close on a deal.

We hope you get access to many great deals — but don’t be a sucker. Before you put your money into a deal listen to this week’s episode.

Key Takeaways:

[1:15] A few things you can do to minimize the chances that you’ll be getting into a fraudulent scenario, and the two ways of accessing alternative investments.

[1:54] Some things you should be looking for when you’re investigating a sponsor on an alternative asset.

[4:58] Pre-Close: What do on the deal before it closes (and before you wire that money over!) to help avoid fraud.

[11:03] Post-Close: Steps you should take after you’ve closed the deal to make sure you’re not being subjected to fraud.

[15:34] General tips and tricks to be smart while making these kinds of deals.

Please sign up for our investor insider list, where you’ll gain access to our latest findings within the world of alternative investments.

Case Study: Buying An Operating Business – Private Equity Investing – EP.04

The guys go deep on what a private equity investment in a operating business looks like. Grayson tells the story of how he purchased Birdwell Beach Britches, a beloved surfer brand that was underperforming relative to its potential. This episode covers the how the deal was identified and closed, how the investors analyzed this private equity investment and how they formalized their ownership. For more episodes go to thealternativeinvestorshow.com. Sign up for our investor insider list, where you’ll gain access to our latest findings within the world of alternative investments.

How To Invest In Great Alternative Investment Deals – EP.03

In this episode, Grayson and Brad go in detail on how to put your money to work in alternative investments. They cover how to source investments from your network or online via a crowdfunding platform. They also compare the trade-offs between investing in a fund (private equity, real estate, venture capital), which is a pool of investments vs. investing directly into one off deals.

Want More Yield? Why You Need To Invest In Alternative Assets – EP.02

On today’s episode we review all the benefits of alternative investments and why retail investors should take the time to learn and evaluate alternative assets.