All Forum Posts by: Art G.

My response would be not interested (door closed).

You sound like an investor. People hate investors.  Pre-NODs are in denial there is a problem. Hope is eternal, they think they will get out of it. Its not till the formal process starts that reality sets in.

Try- I am looking to buy another house and saw potential in yours? Ever think about selling?

If yes- Fantastic! How is the condition of the house? Any recent updates?  I would like to make an offer but I need to know what kind of repairs are needed. Is there a time we could walk through? I mean I am here now, it wont take 5 minutes. Then i can write you an offer by tomorrow.  

If no- Well let me leave you my card in case you ever change your mind, please keep me at the top of your list, you can save money on realtor commissions with me.

You know they are in distress, they know they are in distress. Why bring up the most embarrassing part of their lives as a total stranger? 

By the way, 10am to noon is best time on weekends, especially Sunday, they are always in a good mood on Sunday.

Hi Earl, I know we just met on here. You dont know me, I dont know you. But can you please tell me all the details of your financial situation so that I can answer your questions and needs? I just need to know the most intimate details of your largest investment and want to inquire about any failures you may have had.

That feeling you just had, is the one you are about to impose.... Timing is everything. Talk to them. Listen, ask about pictures, things in the home. Find stuff they like that you do too. Bond.  Wait it out. Listen and dont talk.  They need to trust you.  Then... start with the deal. Tell them you may be able to help them if the math works out.  Talk to them about what they need to make a deal happen. Every sale has an issue, find it, solve it. That is where the signature is located. Then... say, I need to call the bank and research at county the details of the loan before I can give you a real offer and help you. Oh, unless you know that info, then I can get you an answer today. Just need to double check the numbers and I can present you an offer tonight or first thing tomorrow.  I can see you have had enough stress, I dont want to waste time and have you in this state anymore. 

That is how you get to the numbers my friend. Good luck

If those are your only two options, and all things being equal, then 100% the $2k over 10 properties. The answer is terribly simple. Its about the spread and risk management. Your spread on 100 is so tight, which means your risk is huge x's 100. Your spread on 10 is immense which means you have little risk.

As to part two, yes. A higher rent requires a more established earner.  But there is no guarantee they will pay or move or anything else.  But you are missing the real benefit to the higher renter property... it is more valuable land, thus your appreciation compound will be much greater over time. Thus resale will net you significantly more profits.

Assuming a couple of things... your parents are over 50, they want to see you succeed, and are willing to partner with you if you manage it.... Then here is the deal to make them. You all form an LLC, this is for personal protection of your own assets when renting. They give property to LLC, you then take out a refi at 70%, or LLC buys home for 70% with a loan, this gives them 245k tax free cash now. You then rent it out for market rents and split profits, or they give them to you as your fee for running rental and you are responsible for upkeep. Principle and interest payments on 245k @ 4% over 30 years is $1169.67/mo. You have to factor in your property taxes which are super high in NJ and insurance for renters as well as annual up keep costs. Then you know what your true break even number is. Investigate market rents and see if you can cover all and make a profit. If you can, then this is a good way to approach them.

I am confused by your exit strategy.... Do you plan to rehab and resale with 100% private money? Or rent it out and take a mortgage with private money as down? 

First of all, the experience level of the investor needs to be considered. If they have done this a lot you are fine. If its their first time as well, expect to be on the phone with them more than working.

If this is a 100% finance with investor, then you are going to take the terms they offer you. So you must get the house at 70% ARV less rehab. That will account for the interest to investor.

If you plan to use private money as the down, and mortgage the rest and rent it. Then your agreement with private lender should be as an equity partner. That means they put in the money as down, you get mortgage, you split rent profits 50/50. At resale they get their money back, then you split profits 50/50. Form an LLC with both of you as owners, write up agreement, use a lawyer, get the home. Advantage to investor is that risk is lowered by you taking loan out, and you brought them the deal. Advantage to you is no money out of pocket. Safer for all, profits for all. Split profits, split risk.

Always remember to vet the money just as hard as they vet you. Last thing you need is someone freaking out in the middle of your project....

Depends on local market for re-sale and renters market. If you have a hot rental market I would rent.

If you plan to rent, do enough to make it rentable. New carpet and paint, make sure it all looks nice and clean and safe. If you flip after a rental period, then rehab at that point in time.

If you plan to flip the rehab is much more extensive. Someone is going to live there for a long time. The commitment level to own requires a NEED to live there. So all details must be gorgeous.  A woman decides on the home 99% of the time. You must appeal to a woman's taste and convince her this is home. Kitchen and master suite is the focus.

Taxes- Consider this: if you live in home for 2 years as primary then you get 250k tax free for profits. If you just plan to re-sale in less than one year for flip taxes are 30%ish. If you resale after one year taxes are 15%.  You can live in as primary for 2 years and rent then resale within another 3 years and still benefit from tax free up to 250k. Calculate your tax impact when deciding your situation. Talk to a CPA or your tax guy to figure out your long term options.

To buy an REO, you must show proof of funds. The bank will need to see that you have the cash to close when you offer. From there, make an offer you would want them to accept. Do it according to proper investor math. 80% ARV less rehab. Ask to see the inside of property so you can estimate rehab properly. Ask for reports and any known issues, they may or may not have. How are you figuring foreclosed amount? Have you researched it at county recorder?

Research it, view it, properly estimate it, then do the math on your offer. If you have cash to close, then make the offer at what the math says you should be at. If it does not fit into math, then move on.  Do not be eager. Be patient.  

If bank wants cash (which they do) they will take a reasonable offer. They know investors do this for profit, so if you are within range of accepted losses they will work with you.

Yellow letters are better approach. You can market to a great deal more in less time. They review on their time and get back to you if interested.

Calling them, requires a good number, you barge in on their time, its luck if they are in mood to talk, and we all hate telemarketers so you are instantly in a negative starting point. If you mail them, they read and respond when ready. More positive scenario.  Less time consuming for you

IF this was Deal or No Deal, my answer is no deal!!  MY math comes in at you profiting $9k when you are done.

$210k less RE commissions and closing (6%)= 197,400 less rehab 10k= 187,400 less insurance 500 and less property taxes assuming 6 months to resale 800 (total 1300)= 186,100  now less 6 months of payments (assuming 20 yrs at 5% is 1154.92/mo) $6929 of which 2600 is for principle so subtract interest of 4329 and you have total left of 181,771. Principle is now, 172,400. Profits = 9371

This is assuming, you can actually rehab at 10k only. No permits needed no hidden expenses. And that your comps are accurate. Too close of a margin for the headache. Check your market rents and see is you could profit from being above your PITI though. Still might be able to work the principle down over time and make a couple hundred a month in process.

What terms do you seek on the owner finance?  Interest rate, payoff term (in years), down required?

Are you saying all the items you listed like roof, windows and paint/flooring are all NEW, but to add bath and bed is 20k?

How rural is the location? Close to any amenities or schools?