Flipper/Rehabber · Dallas, TX · Member since 2017 · 174 posts · 157 votes
So I bought this house in Montgomery Alabama sight unseen on eBay for less than 4k$ it seemed like a good deal not in too bad of shape a previous duplex a few miles from Alabama state. I've worked construction my entire life and done 1 live in flip and one extremely extensive remodel where all we saved in the house was the floor and the exterior walls . So knowing I could easily drive from California where I live to Alabama to fix up this duplex and sell it or rent it seemed to be a no brainer. After I purchased the property it took me about 7 months before I had the time to fly out and see what this place really looks like long story short on the drive there we passed 4 bail bond places going deeper into hood. I wouldn't say I was afraid to be on that street in the daylight mostly because 90% of the houses were completely ABANDONED! By the time I pulled in front of my house I knew no one would ever want to live here. The house wasn't in much worse shape than I thought I could have easily fixed it up but I have since decided to cut my losses and sell it on eBay never buying sight unseen again! I mean unless it looks like a really good deal lol
Sorry to hear that it turned out that way. If you have a process, this can work, but for the average person -- especially new investors -- I believe this is a bad idea.
It’s a method to sell otherwise undesirable houses In Sketchy areas to the locals that can’t get traditional loans . Very Profitable and removes the burden of managing the property . I’d like to try it myself some time
Going to need to partner up on this one. Owner finance it to another rehabber/flipper that specializes in this kind of thing. Yeah you got $4K into it, that's beer money. It's going to cost a lot more than $4K to fix it up. There are a couple ways you can structure it between the two of you, but you want to find somebody that knows something about this whole owner finance thing -- we'll get to that.
Now all your partner has got to do is make it good enough that it can be inhabited. Might be just foundation work and a roof, maybe a good front door so that it is safe and secure there in the hood. Ensure it has running water and electricity. Do a trash-out and that's it. It doesn't need to pass any inspections, because YOU are the bank. Now you got a blank page to color on.
Then you guys sell that to somebody 'dueno a dueno' as they say around these parts (owner to owner). There is a whole segment of the population out there that are just never going to 'qualify' for a traditional bank mortgage. They are always going to be renters. Some of these are sketchy types, but many, a great many, are good people that hit a rough patch in their life -- divorce, or lost a job or whatever -- but they do have stable income. Maybe no W-2 job, maybe they are contractors or they are in sales. Some aren't here legally, but most are. Many don't have a SSN but they do have a Tax ID number of some sort.
They put 10% - 20% down, and pay an interest rate like 9 or 10%. You charge more also for the house.
Don't try to qualify these people yourself. Get a RMLO to do that. There is a method to this, that will keep you compliant with Dodd-Frank laws and what not. So find somebody over there that is already into this, and see if there is a way that you can partner with them. I know a handful of folks here in Houston that do this, and there are plenty I haven't even met yet.
I'd bet you $20 that this person is here on BP... for sure there is somebody like them.
Read up on a guy named Mitch Stephen, he has built a small empire doing this over in San Antonio. I hear he was real popular here on BP back in the day.
I haven't done anything with thos yet I'm just holding it for now I dont have boots on the ground in Alabama and have since moved to Dallas to flip houses....maybe when I have the money and time I'll try this owner financing thing but it's like 35$ a year to hold so not breaking the bank and don't regret it ..I've bought worse properties lol ..
@Mark Sewell
Thanks for the advice that's definitely the plan when I find my boots on the ground
Here's a wild card: Have you considered section 8? I know in Ohio there is such a shortage of section 8 housing that you can rent just about anything that takes vouchers. You would have to invest more in it to qualify, and it's kind of a pain, but maybe once it's rented you could sell it to another investor who wants the guaranteed monthly cash.
Some years ago when my grandfather died, my mother inherited a mill house in a very small town 40 minutes southeast of Montgomery. She did exactly what Dennis suggested. The guy paid it off and was only late on one payment in 10 years.