All Forum Posts by: Andrew Bosworth

Welcome to BP @Taina MacDonald!  

Hi Lawrence,

I don't do any wholesaling when it comes to real estate investing, but I am in sales in the 9-5 job.  As with anything in life, I think you just need to dive in and start getting the reps, so to speak.  

The first call (first 1,000!) might feel awkward, but the more you do, the more comfortable you will get, your confidence will grow, you will start to learn what works and what doesn't and, ultimately, the more successful you will become!  I promise.  

You can do it.

Michael,

I've used creative/seller financing to purchase a number of deals.  In ever case it has been a win-win for both the seller and the buyer.

Benefits include:

-Faster closing
-Lower down payment/less out of pocket
-Better deal terms
-Fewer "hoops" to jump through
-Allows you to scale faster (if that's your goal)

I've been willing to pay slightly more for a property (which the seller loves) in exchange for a lower down payment or better terms.  There are additional benefits to the seller, too, as they are receiving interest on the payment and there are some tax benefits as well (I'm not an accountant!).  

Every deal is different, but I've found that sellers who are willing to offer financing love these deals -- though they can be hard to find and difficult to initially convince a seller to do if they weren't previously familiar with the strategy.  

Generally, in my experience at least, most sellers are comfortable with a 2-5 year hold period before they want a balloon payment.  This works out well as it gives you, the buyer, time to improve the property (force appreciation) via physical improvements and/or improving the management.  At the end of the hold period you can then refinance into a long-term mortgage on the property and pay the seller in full.  

I've done this with multifamily and self storage and highly recommend using creative/seller financing.

I am considering a 12 unit multifamily property in my home market of Harrisburg, PA. 

I am looking for recommendations for best financing options.

The owner is considering financing it, but until they agree, I am planning as if they will not do so.

The local credit union I use, who is very investor friendly, is unable to lend on properties larger than 4 units right now.  Other local lenders I have used recently do not have very favorable terms.  This is limiting my options.

I have never utilized the multifamily lending products offered by Fannie, Freddie, etc., so I would be interested to a) hear other BP members' lender recommendations for this sized property and also b) other members' experiences working with Fannie, Freddie, etc.  

This is a fully stabilized property, with upside in rent in a B+ location.  The loan would be $1M+.

Let's assume Mr. Property Owner offers seller financing on, say, a 20 year term and he passes away 10 years into the term.  

Question: Upon death, do the capital gains zero out for the sellers family, or will they continue to be responsible for capital gains on the remaining balance?  

In other words, does anything change for the sellers family from a tax perspective when the seller dies after offering financing?  The family hasn't inherited the property (unless the buyer defaults and it returns to the family), but they are now benefiting financially via monthly payments from the buyer.  Will this now be viewed as ordinary income for the family?  If it is considered a capital gain for the surviving family, would it be viewed as a short-term or long-term gain?

These are questions for my accountant (as I clearly am not one!), but I would appreciate others' feedback as well.  

Have you run into a similar situation?  What was the outcome?

@Rob Lawrence

To be clear, was the HELOC on an investment property or your primary residence?

@Jim Miller

I am an insurance agent and investor in PA.  If I can be of help, please let me know. 

@Paul Moore Thank you for the kind words.  I'm excited about the opportunity!  Your book and podcast interviews have played a big roll in providing the knowledge and confidence to take this step.  Thank you for all the value you bring to the RE community.  I'd love to chat sometime.

@Joe Mathew

I posted this elsewhere on BP, but here is my story about recently jumping into self storage:

After focusing primarily on single and multifamily rentals since I began investing a number of years ago, I became increasingly interested in self storage over the past year. I did some research and homework and began calling local mom & pop owners in the Harrisburg, PA area where I live.

Believe it or not, the very first person I called I ended up purchasing from! It took more than one call, but this was an unexpected start. As a fan (nerd) of sports statistics, maybe I should have stopped with this one call and finished my career with a 1.000 batting average...but I digress!

I targeted smaller facilities that would provide me with a bit of a runway for learning the business. The property I purchased is 36 units. I purchased it for $400,000, but with nothing out of pocket thanks to utilizing a 1031 from the sale of a few other properties. The seller is providing financing at favorable terms.

The property was very well run and maintained, though the owner moved out of the area years ago, so rents are below market. Because of this, I would call it a light value add - at least in comparison to what I am used to in the world of apartment value-add projects.

The value-add component will come operationally by increasing monthly rates as units become vacant, adding a website that will allow tenants to browse and rent units, sign leases and pay rent electronically. I am also working on rebranding the property with a new name and logo. Security cameras will be added to increase security. I anticipate increasing existing rents over the coming months and taking a dynamic pricing approach to units as they become vacant.

Once rents are at market rate, my GOI will increase by roughly 41%, with very little increase in my monthly expenses.

In baseball terminology, I would call this a homerun single. I won't retire on this property, but it has a lot of upside, will allow me to learn the business on a small scale before growing (if I choose to) and I anticipate it being a solid, long-term hold for my portfolio. The seller and I have formed a good relationship and he will continue to be a point of contact when I need it. I am excited and blessed!

Feel free to message me with questions or to chat about RE.

@Bob Vollmer

Thanks for the message.  

Are you looking for SS primarily in your area?  What size are you targeting?  

Feel free to reach out any time.  I'm happy to share my experience and would love to hear how things go for you.