too good of a deal? hard money
Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes
too good of a deal? hard money
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes@Terry Sutherland I love it.. here you are you can't buy it you know it will gone and its probably a smoking deal at 40k but you don't want to pay more than 5k ... cracks me up...
91 Replies
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Brent Coombs:
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
Terry, I didn't think you were upset with Jay - I just like making up stories. I also have no problem with Jay setting out terms of that get him either $15k in interest payments OR a smokin' property for 25k!
If Jay were to buy the property for $25K and then wholesale it to Terry for $40K, would you still call Jay's profit "interest?" That's essentially what would be happening, especially given that Terry has no obligation to buy the property from Jay (i.e., no obligation to pay any interest).
As far as I can see, calling it 60% interest OR $15k assignment fee makes no difference. It's a very good day at the office for Jay either way.
It's weird to insist that a markup on resale is an "interest rate". It's a mark-up, plain and simple. Jay would be selling the property, with a short term seller carry back loan. It's about profit on the resale. I sell everything I can for a markup. Nobody calls it an interest rate.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Terry Sutherland:
just spoke to realtor. Says nothing is wrong with home. Only disclosure is lead base paint because was built before 1978 (old portion of home only) . But no lead that he is aware of. Just went out of pending status due to financial reasons only so seller dropped price again just to unload it. He said another investor was coming to see it today.
That kind of discount isn't unheard of. We have family in Dayton that bought a large 4/2 REO 2 years ago, in the winter. It wasn't moving and they got it for $22K. Nearby comps were similar to the Hopewell property. Rehabs selling for $75-125K, and then lots of inventory under $50K just sitting. They sold it this summer for $80K. The market hadn't really changed, just that with some repairs and carpet/paint it could then go FHA to an owner occupant.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes10y
From the visual, it appears to be an REO (field service notice in window) and it appears that maybe a DIY rehab/addition based on the missing outlet at 6' on the far wall? Wouldn't meet code in Garner NC. Is that light installed through a beam? Hope it's not load bearing. See if there was a permit pulled (and through CO/building final;) for the addition.
Between Thanksgiving and New Years is sometimes a good time for obvious reasons.
If it's not in the flood plain (or have flood insurance), addition/renovation was permitted, you get hazard insurance, have lenders title policy, get an inspection from a licensed inspector, pay lender's closing fees, and give an equity (e.g. 50/50) or cash 'kicker' on a secured loan, you may get a private lender on BP to bite.
I hate lending on properties like this because they are out of my lending area, but you can probably make money on this. Too bad you don't have capital to buy outright.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes10y
Originally posted by @Terry Sutherland:
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
Sold in 2004 as a smaller house. I think 900 Sq ft. 1000 ft. Added with 2nd story then home sold for 143,000 then forclosed in mar.2015 at 100,359 then up for sale at 69,900 by bank
A red flag is that it appears that no permit was pulled for the addition, per county records that I saw online. ...assuming I am looking correctly, that this is in VA and I entered the search correctly. "As is" comes with some baggage.
I just want to jump in and say that one day, I'm going to take @Jay Hinrichs' money, pay him back in 60-90 days, and turn a hell of a profit. Good luck to the OP!
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Chris Martin:
Originally posted by @Terry Sutherland:
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
Sold in 2004 as a smaller house. I think 900 Sq ft. 1000 ft. Added with 2nd story then home sold for 143,000 then forclosed in mar.2015 at 100,359 then up for sale at 69,900 by bank
A red flag is that it appears that no permit was pulled for the addition, per county records that I saw online. ...assuming I am looking correctly, that this is in VA and I entered the search correctly. "As is" comes with some baggage.
You know, even with permitting issues, a $25K 4/2 that's relatively rent ready is worth the risk in my book. Buy it with cash, go without hazard insurance if you have to. I'd have more concern about the rental market in the area. Is it flooded with $750/mo houses? What are the real vacancy rates? Does the tenant pool reflect the relative poverty of the area? That kind of thing makes even a nice $25K house a total drag for me.
- Cedar Park, TX · Member since 2015 · 377 posts · 200 votes10y
Question about this based on some assumptions.
Assume the house appraises at $69,000.
Assume you take Jay up on his offer for buying it for $40,000.
With over 20% equity $19k difference between $69k and $50k), couldn't you get a loan for $50k, pocket $10k, and pay Jay back his $40k?
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes10y
Originally posted by @Account Closed:
Originally posted by @Chris Martin:
Originally posted by @Terry Sutherland:
Originally posted by @Wayne Brooks:
@Terry Sutherland Just following up...I looked up this property in Hopewell, and it's been for sale since June when they started at $69k. It's been at $30k since 10/01. Since it hasn't sold, this tells you it's worth less than $30k, for whatever reason.
Sold in 2004 as a smaller house. I think 900 Sq ft. 1000 ft. Added with 2nd story then home sold for 143,000 then forclosed in mar.2015 at 100,359 then up for sale at 69,900 by bank
A red flag is that it appears that no permit was pulled for the addition, per county records that I saw online. ...assuming I am looking correctly, that this is in VA and I entered the search correctly. "As is" comes with some baggage.
You know, even with permitting issues, a $25K 4/2 that's relatively rent ready is worth the risk in my book. Buy it with cash, go without hazard insurance if you have to. I'd have more concern about the rental market in the area. Is it flooded with $750/mo houses? What are the real vacancy rates? Does the tenant pool reflect the relative poverty of the area? That kind of thing makes even a nice $25K house a total drag for me.
I should have clarified. The red flag was from a lending perspective. But I don't disagree with your assessment... other than having hazard insurance for liability coverage.
This appears to be a recent flip. After the addition was done, it was sold with financing (presumably GSE (e.g FNMA) loan) at $143K and the lender subsequently foreclosed at apparently $100,359... probably balance of the first D-T.
If it were in greater Raleigh area (e.g. Garner, like the $19K house we bought, fixed up, and now is 'worth' $80K) I would have probably bought it already if I were the OP. Properties like this, where you can't get any traditional (and apparently some non-traditional) acquisition funding can drop significantly in price because there is no acquisition funding. This was the norm during the great recession, when having cash and cash equivalents provided the ability to score (longer term) bargains.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes10y
Originally posted by @Brent Coombs:
Originally posted by @J Scott:
Originally posted by @Brent Coombs:
...
...
Exactly his thoughts. Which is why Jay's ears might still be burning...
I think I can confidently state that @Jay Hinrichs is not experiencing "burning ears" - I think he is rather amused at this and chuckling a bit if not laughing out loud (LOL). I say that since I had the chance to sit with him and chat a bit a few months back, and one of the things he was amazed by (and I have to agree) is that those who are inexperienced and with no funding complain of the high cost of funding that does get offered to them. These new investors have no inkling of the risk involved - they aren't putting much into the deal so the lender is taking the big risk; and risk has its price. The insurance business also prices in added risk but in the form of higher premiums.
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes10y
@Steve Babiak, yeah, I know Jay's ears aren't burning. I was referring to the hypothetical situation where Jay offered to lend anyone $25k for any no-brainer pawned deal, so long as they coughed up $40k to redeem their item - and was SCREAMED at with the word "EXTORTION!" as their response.
Please, at $25k for this property, would Jay REALLY be taking a huge risk that he might lose money if he say, only charged the usual pawn fee of 5%/m?...
- Residential Real Estate Broker · Newton, NC · Member since 2015 · 13 posts · 17 votes10y
Hard Money guys are like "pawn shop" financiers. They also have a lot of "street knowledge" and aren't just making up what they tell you. It does seem low. Usually means something is wrong or they just don't want to fool with that low loan amount. The Credit Union is different but I am not sure what their problem is.
Try this...
Get the property under contract subject to financing the $25,000 for 30-days. Go do your own title search at the county court house (you need to learn how to do this anyway right) and study the title, also pull the building permits to make sure all those nice improvements are permitted. If all this checks out...then spring for a "Drive by" appraisal or BPO (Broker Price Opinion) and then propose to the Credit Union that they write you HELOC (Home Equity Line Of Credit) for $25,000 on the property once you own it. IF they will only give you $15,000 then have the seller carry a second mortgage for the rest at the closing.
What you want to do here is a "simultaneous" closing whereby the title flows to you, the HELOC is then secured to the CU and then the seller is given the second mortgage all at the same time (you'll need to explain to the attorney ahead of time what you want them to do for you here). You will have title to the property for only 5-seconds before the mortgages encumber it but this will give you ownership.
Nothing is like doing your Due Dilligence on your own. Learn to do title searches, septic tests, Heating and AC tests, roof tests, well tests and know what the deed restrictions are and most importantly WHO ARE THE NEIGHBORS---ARE THEY ZOMBIES?. Home inspectors are great but don't subordinate a good opportunity to learn to professionals until you have a working knowledge yourself of exactly what your doing and that only comes from doing it in the trenches. If you can't, hire them and follow them around and ask lots of questions, they wont mind and will enjoy your enthusiasm.
Good luck
-dr
- Residential Real Estate Broker · Newton, NC · Member since 2015 · 13 posts · 17 votes10y
Also, if the improvements are not permitted...you might try
looking for a "Certified Structural Engineer" to inspect the home first.
If they "Wet Seal" the home as to code...The County will likely HAVE to issue you a permit for the improvements regardless of when they were done.
In NC, anyway, a Certified Structural Engineer" out ranks a Building Inspector in every regard. Check your state as well and be firm in your resolve.
This is a technique I had to learn the hard way...but I never understood how building code "modulars" could be assembled in a factory with all the inspections like electrical and plumbing so I called them and asked how many county building inspectors they had on payroll to build all those homes and they said "None". I said, "How's that?" and they said we have on site CSE's we don't need building inspectors"
Put this little bit if knowledge in your tool belt, you will see this again...
Good luck...
-dr
- Homeowner · Dinwiddie, VA · Member since 2015 · 24 posts · 4 votes10y
Originally posted by @Douglas W. Rink:
Also, if the improvements are not permitted...you might try
looking for a "Certified Structural Engineer" to inspect the home first.
If they "Wet Seal" the home as to code...The County will likely HAVE to issue you a permit for the improvements regardless of when they were done.
In NC, anyway, a Certified Structural Engineer" out ranks a Building Inspector in every regard. Check your state as well and be firm in your resolve.
This is a technique I had to learn the hard way...but I never understood how building code "modulars" could be assembled in a factory with all the inspections like electrical and plumbing so I called them and asked how many county building inspectors they had on payroll to build all those homes and they said "None". I said, "How's that?" and they said we have on site CSE's we don't need building inspectors"
Put this little bit if knowledge in your tool belt, you will see this again...
Good luck...
-dr
Thanks for all the info @Douglas W. Rink
- Investor · Hickory, NC · Member since 2015 · 35 posts · 11 votes10y
Originally posted by @Douglas W. Rink:
Also, if the improvements are not permitted...you might try
looking for a "Certified Structural Engineer" to inspect the home first.
If they "Wet Seal" the home as to code...The County will likely HAVE to issue you a permit for the improvements regardless of when they were done.
In NC, anyway, a Certified Structural Engineer" out ranks a Building Inspector in every regard. Check your state as well and be firm in your resolve.
This is a technique I had to learn the hard way...but I never understood how building code "modulars" could be assembled in a factory with all the inspections like electrical and plumbing so I called them and asked how many county building inspectors they had on payroll to build all those homes and they said "None". I said, "How's that?" and they said we have on site CSE's we don't need building inspectors"
Put this little bit if knowledge in your tool belt, you will see this again...
Good luck...
-dr
Ha. Very useful info. Thanks from a fellow Catawba Valley investor.
- Montgomery, AL · Member since 2015 · 109 posts · 11 votes10y
It will depend on how many mortgages you have. For multifamily units up to 4, banks go by personal credit and frown on giving mortgages if you already have four. On the other hand, 5 units or more are viewed as businesses, and personal credit is not as important.
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