BiggerPockets

Now that we've completed the eviction of a dirt-bag tenant and have the Murrieta house re-rented to a nice family, we're looking at the next step in building our real estate "empire".

A recap of our profile: We live in Orange County, Ca and rent out a condo in San Diego (performing very well) and a house in Murrieta, Ca (been nothing but problems since we bought it last year, but things are looking up).

I would like to add more rental properties to our portfolio, but not sure the best way to go about it. We've built back about $15 - 20k in cash for our next deal and I can tap about $50-75k in equity from the condo, but only from a HML as traditional lenders ignore my 800 FICO score and agonize over DTI requirements (yeah, we don't make enough money to pay our bills according to them, but still manage to do it every month and put money in the bank). However, hard money would be at too high a cost for a buy & hold rental. I'm thinking maybe a flip to build up some capital/play money and invest that into a buy & hold.

I also have a friend or two interested in investing with me on a property (the last time they looked at the interest rate on their money market fund they wanted to puke). So I can maybe get $5 -15k from them depending on the deal. We're pretty much at 80% LTV on the Murrieta house and our own residence.

So that's the big picture. Traditional funding dried up? Must look out of state? Any advice, words of wisdom, constructive criticism, or magic spells to share? Thanks for any and all advice.

Have a great weekend everyone!

Thanks for the reply, Robert.

I can certainly see why so many west coast investors have thrown in the towel here and set up shop back east and in the mid-west!

The questions I have are can I still purchase one of these Atlanta beauties for 60 cents on the dollar using hard money at a double-digit interest rate and still turn a profit? What happens in 1 to 3 years when that loan becomes due?

Rehabbing in D.C. sounds great, except for one little thing. Well, 2,300 little things actually. Miles? Looks like I'll either be temporarily relocating or paying through the nose for contractors I've never met. I feel more comfortable keeping my flips within driving distance.

Thanks again.

Mitch, As you know, right now traditional lenders are tight with their money. While hard money is expensive sometimes it is a good short term solution. I've been able to use hard money for a purchases and then refinanced after seasoning. Other options might be a self-directed IRA or a 401K loan. Good luck

MItch,

I agree. Seller financing is a good way to buy houses without going through banks because they're a pain to deal with right now.

The other alternative, is to raise money from private lenders - not just the downpayment but the whole thing. Believe me - there are investors right now with hundreds of thousands of dollars they're willing to lend at 7-8% given that they're not earning that in money market funds and the stock market is too volatile for them.

I think you implied you would be OK with 10% interest if it were long term - There's some CA HM out there for longer term - say 9.9% 8 years fixed interest only 60%LTV.

The fix and flip HM - I know of 1 where you can pull off a $100K fixer with the kind of cash you have on hand - need about $30K per $100K borrowed and they lend 65% on future value which is rare these days.

It depends on your target property characteristics. There are also several on this forum that do well with out of state rentals.

will the safe act make all seller financed deals harder or just Hud properties.

I don't believe the SAFE Act applies to seller financing because the owner of a property who sells his house to a buyer does not meet the definition of a "loan originator". However, I'm not sure if this exception is restricted to selling one's primary residence or applies to any property the person owns, e.g., investment property.

Like everything legal, it's all in the language. Interpret yourself:

"The commercial context implied by the taking of an "application" is also absent where an individual seller provides financing to a buyer pursuant to the sale of the seller's own residence. The frequency with which a particular seller provides financing is so limited that HUD's view is that Congress did not intend to require such sellers to obtain loan originator licenses. Accordingly, state legislation that excludes from licensing and registration requirements an individual who offers or negotiates terms of a residential mortgage loan only to the buyer or prospective buyer of the seller's residence will not be found to be out of compliance with the SAFE Act. The MSL includes this exclusion in section XX.XXX.040(3)(c)." (emphasis mine)

http://www.hud.gov/offices/hsg/ramh/safe/smlicact.cfm

Thanks Trace. Once again, 99% of the homes for sale out here are upside-down. No equity for the seller to carry. Zero, zip, nada. Even purchasing "subject to" won't work in most cases, i.e., why am I going to take over a $3,000/month mortgage on a house that I can only rent for $2,000?

If you have some tips for finding these equity sales, please let me know. I'm afraid for everyone of them out there, there are 100 Realtors ready to pounce on them. :D

Oh thanks. I've been to their web site before. Have you worked with them before? Thanks again.

We may be able to assist. We have identified the best zip codes in the country for real estate investment. Within those zip codes we have purchased more than $20 million in real estate in the last 2 months. Purchase prices are between 50% and 70 % of current market value. If you have an interest to participate, then let me know.