Any other chicken investors out there?

14 Replies

New member here

Wondering if there are any other investors who are too chicken to get loans for your real eatate investments like I am. 

I realize leveraging seems to be the name of the game, LO, wrap around etc etc.   

I just happen to prefer buying out right fixing up and selling with owner finance. 

So anyone else out there prefer this sort of investing?

Originally posted by @Aziz Raji :

Hello @Michael Plante great post. Honestly I think all new investor have some sort of fears.I believe in taking calculated risk and making sure your number work.

Well been doing it 30 years so not quite a beginner :) 

Do the numbers.  Here are the one's you need to use to tell yourself which way to go:

If you are holding the property, or flipping it, the basic formula is the same...what changes are the specific applications and items those numbers are applied to and come from.  Here goes:

1 - Take all the cash you invest in a property and add it up.  Don't leave anything out.  Don't round anything off.  Don't guess.

2 - Subtract all the cash you get back over your first year.  Don't rationalize any numbers, or use anything other than cash (i.e. equity, appreciated gain, tax deductions, ...) since those other items are NOT CASH.

3 - If you have a negative number, that means you get more cash back in your deal, within the first year, than you spent (so in this case...used)...and you have a winner.

4 - If you have a positive number, that means you have spent money to buy this property...your money.

5 - If you fall into the #3 category, you have recovered all your initial cash (seed money).  Congratulations!!  Now go and repeat what you just did.

6 - If you fall into the #4 Category, and you are holding the property as a rental, then you divide the Cash you put into this deal (only cash) by the yearly cash flow you are receiving (no rationalizations here...CASH ONLY).  The number you get, is the number of years it will take for you to recover all of your cash.  Until that time, you are behind, so the shorter the period of time the better.

7 - If you fall into the #4 Category, and you are flipping, then you just told yourself you are going to lose money if you follow through on this deal...so walk away.

thank you for all the replies 

 They are all much appreciated 

I wasn't asking for advice I'm happy with what I'm doing 

I was asking if anyone else out there does the same thing

Nope not chicken at all. Got a HELOC dropped a manufactured home on some land sold for 50,000 profit net and doing it again. Market is turning up now is the time. I missed the last one won't miss this one.

@Michael Plante

That is an interesting strategy but unless you are already wealthy and have a lot of cash to invest that strategy is very limiting.

How many properties have you acquired using that method and how much did they cost?

Originally posted by @Anthony Gayden :

Michael Plante

That is an interesting strategy but unless you are already wealthy and have a lot of cash to invest that strategy is very limiting.

How many properties have you acquired using that method and how much did they cost?

I've spent a little over 1 mil

Properties are worth approx 1.7

Not rich well not yet lol. Look into FHA construction loan 3.5 down great way to get in. Just do your home work and make it work for you. Take profits be creative and move forward. I'll post more with my outcomes to help others as I learn and move forward.
Regards/ Mike

Originally posted by @Michael Plante :
Originally posted by @Anthony Gayden:

Michael Plante

That is an interesting strategy but unless you are already wealthy and have a lot of cash to invest that strategy is very limiting.

How many properties have you acquired using that method and how much did they cost?

I've spent a little over 1 mil

Properties are worth approx 1.7

 That is a lot of cash to have locked up. I'm sure the cash flow is good though.

My father had a similar strategy. He bought inexpensive homes cash and sold through owner financing. He got the monthly cash flow, but when the homes were finally paid off, he lost the cash flow and had no equity. So he had no wealth build up.

The only way I see your strategy working is if the properties are never paid off or if you are buying properties that do not appreciate at all (mobile homes). Otherwise you don't get any equity gains and you lose out on mortgage pay down as well. You also lose out on some of the tax benefits.

Originally posted by @Anthony Gayden :
Originally posted by @Michael Plante:
Originally posted by @Anthony Gayden:

Michael Plante

That is an interesting strategy but unless you are already wealthy and have a lot of cash to invest that strategy is very limiting.

How many properties have you acquired using that method and how much did they cost?

I've spent a little over 1 mil

Properties are worth approx 1.7

 That is a lot of cash to have locked up. I'm sure the cash flow is good though.

My father had a similar strategy. He bought inexpensive homes cash and sold through owner financing. He got the monthly cash flow, but when the homes were finally paid off, he lost the cash flow and had no equity. So he had no wealth build up.

The only way I see your strategy working is if the properties are never paid off or if you are buying properties that do not appreciate at all (mobile homes). Otherwise you don't get any equity gains and you lose out on mortgage pay down as well. You also lose out on some of the tax benefits.

 Great points!

And something I am concerned about

The land the houses are on is appreciating approx 5% a year. Which of course even with balloon payment due in 5 years then I wouldn't have enough mo eye to buy something with the same cash flow 

I have 7 more properties I am thinking of selling.  I would rather not be a landlord 

If you were advising your father at the start what would you say to him please?

One thing that helps is when we sell the properties they go for 20 to 25% over market value because were willing to hold the mortgage

@Michael Plante

I personally believe that while being a landlord is not what you want to do, it is the best method to go about doing business, even if you continue buying properties cash.

I would have told my father to be a landlord. He had to deal with many of the exact same issues; non-paying tenants, turnover/foreclosure, and even repairs.

Just as an example, he had a lower income couple buy a home from him and they had a bad storm come through and damage the roof. They could not afford the deductible to get the roof replaced. My father saw that if the roof was not fixed, the property would be severely damaged and he realized he had to pay to fix it. He ended up adding the cost onto what they owed him.

A good example of appreciation lost is a house he sold that took the buyer 10 years to pay off. The value of the house more than doubled in those 10 years. They sold the home a short time after paying it off.

thank you again

If your father had sold the property owner finance and the roof went bad what was his concern

  The property is in the buyers name and they have a mortgage committing them to pay 

 I have the same situation but they paid $30,000 down the roof should be repaired but that's up to them 

 I can't see them walking away from something that they put so much money into but who knows 

A foreclosure in Florida cost approximately $2500 I'll do that.   The house should still sell for what they owe me if not I would bid the high bid, get the property back, fix the roof and do it again

as I said we have found with owner finance I can sell the property for 20 to 25% more than current market value so when the balloon hits in five years and they pay it off I have enough money to do it again with a similar property. 

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