All Forum Posts by: Art G.

I dont think you will have any luck with that. Besides, that is a super risky way to do business. Your loan constant will be at or above your cap rate.  At the very least your are cutting into your margins at a dangerous rate. You should look into locating an equity partner.  Give the partner 50% share of the deal, they get 50% profits at sale they get their down back and split profits. The benefit to them is that you brought them a deal, the benefit to you is that you got the deal with no risk.  Look to put about 20% down and finance the rest. This will greatly reduce your risk level on the deal.

What loan are you using, terms, interest rate?

HOA is responsible to correct code violations, if you buy you can take legal action against them and force them to fix it. They are dealing with owners in bad faith if they take money and do not upkeep and protect the community. I dont like hearing there is already legal problems with a sale, unless you can use it as leverage to get a way better price.

But you have a good Cap Rate at 20.7%. 

Assuming you are all cash, you are putting a lot at risk on a legally deficient property for only a NOI of $7240 annually. Which would take you 4.8 years until you get your 35k back and thus eliminate your risk and begin to actually see profits from the deal. Seems like with 35k cash you could leverage that and find a more profitable deal. Also factor in no real appreciation and you are missing out on where the real money is at in real estate.

@Brent Coombs you do raise a good concern and it is important to know the correct way to advertise and market your wholesale deals.

so @Ruan De Nysschen let me explain some basic things you can do to protect yourself. First of all you should have collected a list of buyers by now, and know what range of deal they are interested in. Then you contact them directly with your deals. Secondly, you NEVER advertise you are selling the land unless you are on title. Third, a safe method is to have the owner sign a "memorandum of contract", have it notarized, then file it at the recorder's office. This gives you a legal interest in the land and clouds title so that it cannot be sold until you remove it.  And finally, and most importantly ALWAYS keep in mind that you are in fact selling the right to have the contract assigned. You are not selling the land, you are selling the right to the contract to buy the land.  There is a huge difference.

That being said, it is one thing to be right about the law and a whole different thing to have to explain why you are right to a court. That costs money and stress.  Its best to have your buyers lined up so you can contact them directly to purchase your assignment right, without having to publicly advertise the deal. But your insurance is to have the memorandum of contract on file with the recorder's office.

There is no magic answer in So Cal. They are all unrealistic around here. I have found that people with huge interest rates and high payments want out, and absentee owners are good. Absentees see it as a business investment. Try to talk to FSBO and For Rent By Owner. The rent ones are great bc they are currently paying a mortgage with no rent to cover it and may be sick and tired and just want out. Call and ask if they would like to sell or lease option it.

I have found its a volume game. You just have to keep at it, endlessly... The leads will come in. I drive around and look for bad condition homes then research them online, if they have 80% LTV or better I send them letters. Through sending out 900 letters to homes in bad shape with good equity I have generated a number of good leads; closed some, still finalizing others, and some just didnt work out after the offer was made. You just have to keep going.

Probate can be good but you are dealing with the wrong kind of emotions, either they cant let go, or are too greedy. Pre-foreclosure are just in pure denial of what is happening.  Absentee is the strongest of your list.

That is a very convoluted question. With lots of risk and unknowns through out your scenarios.  I honestly dont even know where to begin to answer the multiple parts. So I just went to the beginning of the problem and thought how I would solve it. Its actually pretty simple. Its no home run for anyone but it gets both of you cash asap and gets their money freed up.

Retail is $110,000 times 80% = $88,000 subtract out repairs and you are left with a deal for an investor at $76,000.  Tell the owner you will locate a rehabber for them and split the assigment fee of $6,000. 3k for each of you. They made money on the investment, you made money for your time.  if they agree. Take a picture, place it on top of a page, type in details like re-sale value after rehab and cost to rehab, then show the profit margin for them of $22k and the cost for them to buy the deal.  Go to your local auctions and present that page to the auction buyers. Make sure you offer it to a few at once so they panic that they will lose the deal. You will have it sold by the time you get into your car.

You can try to figure out a complex way to make more out of it, but this is the fast and secure way to do it with out any risk to you. Avoid using your personal home as a finance tool for any deal. Always keep in mind that a deal could go south and your home is on the line.

Good luck

both @Jeff Rabinowitz and @Thomas S. make excellent counter points to the issue. I have seen both sides to the equation and tend to think Jeff is more correct. I have done Greg's method and just told them how it would be and they shut down. Flexibility seems to show the seller you are willing to consider their terms and needs. Just like every deal, there is no one right way.  You never know what someone's needs are till you ask, they could be lower than you thought. 

Thanks to both Jeff and Greg for raising solid counter arguments. 

My pleasure buddy

@Jeff Rabinowitz made excellent points. Saved me the time of writing them out lol!

To add to his thoughts, on a situation like this, try offering a balloon payment in 3-5 years or even 1 year. Tell them that you cant finance the house in its current state and that you need to fix it up so that you can refinance the house (or sell it).  So you need to do seller financing during this time.

I always offer 3% to start and feel them out.  Already do your calculations and let them know how much EXTRA money they will make with the seller finance option because of the interest that is added to the sale. If you are going to pay them out in a year then a low rate is reasonable. Before agreeing to a higher rate make sure to run it through the calculator and be sure the monthly payments are in your budget for the rehab.

I offer no money down to start and say that I need the money to get the house repaired so I can get them the full payout.  Also along with what Jeff said, just ask them, sometimes all they want is moving expenses and first and last on new place.  Also by not offering a down to start you can use the down as leverage to get interest only.  "I can give you $5-10k down (what ever works in that market) but then I need to do interest only payments until the balloon payout.  You will make even more money as the interest level will stay the same."  The benefit of this is that it makes your payments during the rehab VERY low, and gives you more room on the interest rate.

Start low, no down, 3% interest, 30 year term... then if they counter, use that as a way to get other things you really want, like interest only, low interest, or what ever makes the deal better for you.

Thats why its good to have a few offers ready, so that you seem flexible.

Good luck

I use realtytrac.com you have to pay but the volume of information is mind blowing. So much better than zillow, although zillow is great to check on recent sales and figure comps.

Otherwise go to the county admin building. Go to the Assessor and look up address, go to tax collector and see what address is on file for taxes, or go to Recorder with address and they will tell you who is on title.

From there you can look up the contact info for that bank here.

That is one of the main things they say to never do! Do not go behind the agents back!!!

Ask the seller to look at the listing agreement and see if there is a clause that allows her to sell it if she brings in the buyer.  There may be a cancelation clause too, but then if agent sees seller got rid of it right after, she could try you both up in court.  Your best bet is if there is a clause allowing her to sell if she brings in buyer. Its called a non-exclusive listing out here.

Otherwise if the deal is good, just pay the agent her commission and move forward making your profits.