All Forum Posts by: Art G.

Yeah Yeah yeah.... Why does it always happen when you misspeak that is when the internet decides to be a punk... obviously I meant asset value, the math shows that is what was used.

@Account Closed OP said Total rent roll: $3,050 a month

Multiply that times 12 months you get the annual NOI divided by the annual mortgage payment. He mentioned no regular expenses, so no deductions were made.

When you say wholesale contracts... do you mean a contract to assign to your investor buyer? or do you mean the contract you acquire the property with from the seller?  They are totally different animals.  

Your assignment contract needs to be short and sweet and totally protect you & your original contract with seller, it also should list the total sale price to investor that comprises principle, assignment fee and down payment. As well as state that payment to occur at time of escrow disbursement.

As for the contract with seller, it should be VERY simple. No strong legal language. Be as concise as possible yet cover every important term of a deal. Like: Parties, address or property, legal description, sale price, terms of price, earnest money deposit amount, title clause, inspection clause, damage to premises, closing date, what closing costs are covered and who pays them, taxes current, date for possession, access prior to closing, and a space to right out any special stipulations. Then signature lines.

Just google real estate contract forms. You can make a new document and mix and match what you like from them. When you are all done, have an attorney look it over to make sure you cover all the important parts and that it makes sense.  Then you are good to go.

Good luck

Excellent deal my friend! Good find for sure. My analysis says its a home run and a bank should loan you money on that in a heart beat.  I had to assume a couple of things, like your only operating costs were property taxes at 1%  ($2700) and your loan term was 30 years. Otherwise numbers used below were $3,050/mo income, $192,375 total loan amount @ 3.85% over 30 years = $10,822 annual mortgage.

$36,600 NOI; Cap rate= 14.3; Loan Constant= 5.63%; Spread of 8.67%; DCR= 3.13; BER= 36.95%

If the numbers you gave us are accurate... then this deal is amazing!!! Rock solid

I would do just a basic enough job on cleaning it up to make the renters not want to leave. Why raise the rent and risk vacancy when you have numbers this good?

Condos are the next step up from mobile homes and apartments. But it all depends on the kind of community. Call the local police station and ask them if they get called out to that location. That will give you a good idea of the quality of renter.

So far your numbers look good, assuming the HOA gets deducted from your total rents then:  $4,417 NOI x 12mo = $53,004 NOI/ $270,000 = 19.6% Cap rate

But without knowing the terms of the loan itself its hard to fully analyze if the deal is solid. Seems to be a pretty close margin so far based on a $706/unit average per month. And with only 9 units that does not leave a lot of room for vacancy as that relates to risk on the overall debt.

How long is the term and what interest rate? Would it be amortized or interest only?

Hey Cody! Well we are birds of a feather... owner financing is my passion. Unfortunately there is a reason it is the grail of real estate investing.  They always want to cash out.  

I love what @Jennifer S. said and think that is solid advise. Here is my experience. 

I have tried a variety of different approaches to it and have only had luck three times. I live in So. Cal so the property values out here are a bit ridiculous. If you dont mind me ranting for a bit I will tell you what I have tried.

I drive around and look for homes in bad condition and really neglected yards. I then research them on realtytrac.com (paid membership to get the really good details). You would be amazed how many neglected homes are free and clear. I note the address and stats about the home.

Then I send yellow letters. I get calls back and talk to them.

I also go and knock on doors too. Unless there is some rule about that in AZ, it is totally ok to ask someone in person if they want to sell.  Although, this method is more time consuming compared to a ton of yellow letters so I just reserve it for the ones I am really interested in. The letters seem to be getting higher results as I can send out a lot of them.

When it comes time to talk price, you have to have two offers for them. One is owner financing at a higher number with good for you interest. The second is an all cash offer but at 80% of ARV less rehab costs. When you give them two options they forget the third option of no thanks is out there. When you give them one option, their options are yes and no, (sadly when I get so excited and only make one offer that is the end). If they elect cash, then you can turn around and wholesale the deal to a rehabber and make a good chuck of change for your effort. I personally take 10% of the equity I preserved as a finder's fee.

Now the problems I have run into with owner financing mostly come down to them not understanding it. In the end I always say, So you will be the bank! And the benefit to you is that you end up earning 2/3 more off the sale of the home because of the interest.  They always like this... until they hear 30 years. Then I lose them. I have found that offering a balloon payment in 10 years seems to get them interested again (in 10 years you can refinance or sell it out right). But in the end they chose the cash offer.  Either they just don't understand the concept or they dont like how long it takes to get all the money.  I have tried explaining to them that I will pay them 3-5% interest on their money while a bank will only pay them .25% interest... but I just get the I would rather have cash response.

The 3 scenarios it did work: 2 of them were from the midwest and were totally familiar with the concept and jumped on it.  The other one was a vacant lot over looking a beautiful valley and they couldnt sell it for 2 years, so I told them I will do interest only for 5 years then a balloon payout for balance at 5 years. This way I can build with little cost on the property and rent the unit out to basically pay off most of the land then refi.

Just keep in mind that what ever deal you work out MUST be less than market rents when including all expenses and PITI.

If you find any methods of convincing them to do owner financing I would love to hear about it.

All top notch advise. Just read everything you can, do not buy programs from gurus (they all sound amazing), see which area of real estate really gets you excited and learn everything you can about it. Be PATIENT! Rushing into the wrong deal can kill your career in this game. The right deal will find you. If the math doesnt work out, then move on. Math is your best friend here, over eagerness and impatience are your worst enemies. 

No matter what you do... please read The Wealthy Code by George Antone. It will teach you how to structure any kind of business deal the right way and how to recognize when a deal is set up the wrong way. Its a short book, complex at times, but it makes sense.  I am reading it right now and it is blowing my mind.  Actually, I am attending one of his classes this Sat & Sun and already my whole mind set has changed just from the book... all I can say is wow.   Oh and if his accomplishments mean anything... he set up the largest network of private investors in California, then the U.S. and then the world. 

Good luck to you!

Yeah well I was told CA was very free and easy going.... can't believe I let myself be born here. But glad to have met you, I know who's couch I am crashing on next Vegas trip @Ross Greene

Man you get quick lien searches and bright lights of Vegas.... rough life dude...

@Ross Greene keep them good points coming bro!! 

Personally... I scout for beaten up homes and make a list of them. Then I go to realtytrac.com and look up the equity ratio. If underwater or really no equity to work with they get crossed off the list. I find out about free and clears and mark them as priority finds. Then I send out my yellow letters.  That way I don't go through the whole song and dance and find out no deal can be made.  

Then when it gets down to deal time, I go to the county and look up liens.  We have to do that in person in CA and its too time consuming for all the houses I send letters too.