All Forum Posts by: Benjamin Shaw

@Michael Beeman Thanks!

@Ben Leybovich I could use as many angles on this as are available. Feel free to give your spin on it. I was hoping for a specific breakdown of that one sentence. For instance, what does it mean to hold both a note and a mortgage?

Hi BP!   So I'm taking a look at the eBook from @Ben Leybovich called 20 Ways to Buy an Investment Property with $2,000 or Less, which you can get here.

I heard ben on the podcast a few times, and his words really resonate with me, although I do not fully understand all of the terminologies that he uses so fluently. Take for example the excerpt shown below in which he talks about funding a deal via both a private lender and seller financing:

"OK – let’s say you are in fact able to find someone who’ll give you the money, but because you are such wildcard, they do not want to give you any more than 60% of the purchase price. In this case, you could structure the deal whereby the private lender gets a note and mortgage (deed of trust) in first position, while the owner takes back a note in second position."

I get the basic idea, but I do not fully understand the  last sentence "you could structure the deal whereby the private lender gets a note and mortgage (deed of trust) in first position, while the owner takes back a note in second position."

ELI5: What exactly does it mean for the "private lender to get a note and mortgage (deed of trust) in first position, while the owner takes back a note in second position." ?

Any chance anyone could break down this sentence so a 5-year-old could understand it?

I just found this thread on Newburgh that might be of interest.

I live 40 minutes from Newburgh. Although I have no experience with the area, I would be interested to hear what you find out. Struggling a bit myself with market research. It's a broad topic.

 Hi Craig,  Thanks for the reply!  

We are planning to fix and flip since buy and hold would tie up our limited resources. Then eventually buy and hold. Although I am very new to market research, I am not seeing anything indicating that New Fairfield is in decline.

We do have a private lender ready to work with us. He has some cash for a down payment, as well as pre-approval on a loan to finance a deal. Although we are not sure yet where the rehab costs would come from. I have been looking into creative financings such as lease options, or different types of loans that could tie in the rehab costs.

We spent a few hours again yesterday driving for dollars in the same area I originally found success. We found 3 more leads that had notices on the doors.

So you advise to find the owners and contact them, even though we don't have our financing completely sorted out, no contractor picked, no contracts went over by a lawyer, etc?

Do I just contact these people and see if there is any way I can help them right now?

Thanks again,

Ben

We are working on developing our search criteria by matching market research results with our current financial status and network. Due to the lengthy process, steep learning curve, limited finances, and our desire to take action now, we are also driving for dollars.

We live near the border between two towns, ours (Danbury CT) has a population of 84,000, the other (New Fairfield CT) 14,000. Our town's median home cost is $250k, the other being $325k. 

While driving our town, so far we have seen very few distressed properties. The other day I took a drive into our neighboring town of New Fairfield CT and found 12 within an hour. We are trying to figure out why this is the case. The area I drove was very nice, right next to a school, a nice lake, although a bit further away from Danbury where we have stuff like Home Depot, Target, and a mall.

So the question is: How do we figure out why there are so many distressed properties in New Fairfield? Should we pursue finding the owners even if we have not even developed our criteria yet?

Thanks for taking a look at this post. If you make it through the wall of text that follows, and you have even the smallest insight to offer, I would so very much appreciate it.

My wife and I are rapidly learning the ways of wise REI through the help of the BP forums, podcast, books, as well as attending local REIA meetings, networking, market research, and driving for dollars.

We've arrived at what I feel is a major pivot point in our lives, and are struggling with the multitude of circumstances life is throwing our way, trying to figure it all out, and set some reasonable goals so that we can move forward in a clear defined direction.

I'm going to lay it all out in brutal detail in hopes that someone can make any sense of this and possibly offer some guidance.

OUR CURRENT STATUS:

I have a day job as an engineer, a freelance business on the side in which I design products for clients around the country, as well as a fading IOS app development company.

My wife has a small house cleaning business, and she takes care of all the household management, as well as just being assigned as power of attorney over her Grandfather's estate.

We have zero savings, but are on track to be completely debt free in two years on our current plan. We also both have excellent credit around

We live in one of her Grandfather's houses that has been in the family for decades and are considering purchasing it as a 50/50 split with her brother. There are paying tenants on the third floor, my mother in law lives on the second floor, we live in the first. There is also a separate rental house on the property that currently has a disabled vet who's wife left him, so he is only paying the money that the government sends him. So that is a whole can of worms to be dealt with. I'm guessing he should have been served a notice by now since it's been a few months of him paying only partial rent.

We are likely to get the property for 75% of market value, with a gift of equity as down payment. We plan on then leveraging this property to jumpstart our RE business. Due to us living in one of the units, my mother in law living in the other, the property will only just barely cash flow, unless we end up getting a getter deal than expected.

So just to be clear, we are planning to buy a property with two houses, and we have no savings for any unexpected capital expenditures, although we do have around 40K of available credit, and my brother in law has 20k in cash, and more in credit.

MORE FUN

So what I did not yet mention is that my mother in law is disabled, and makes only a small monthly government check. She has been driving my 2000 Toyota Tundra for the past few years. Last week the transmission blew, and the repairs are estimated at 4k on a $3500 truck. She needs a vehicle so that she can go care for her father multiple times per week, otherwise, my wife has to continually loan her the car, and this is preventing my wife from starting to aggressively develop our real estate business.

I have about 4k in extra cash coming in from freelance clients. We can't decide if we should fix the truck (which my wife thinks will continually break, I think it might not since it's a Tundra), or my wife is strongly considering getting a job so that she can afford to buy a new car ($300 a month payments) so that we can give her paid off 2004 Acura TL to her mom to drive.

I think getting a job and a new car is possibly a mistake, due to the fact that we are doing ok right now, and she could use the opportunity to go full time into real estate. I think that if she does get a job, it should either be in sales or real estate so that she can network and develop skills.

WHAT WE WANT(ED)

The last time we really sat down and tried to set goals, we decided that she was going to spend her time researching and following the advice in three books. The Millionaire Real Estate Investor, The book on flipping houses, and the book on estimating rehab costs. Obviously, we will need to use some no and low money down principals as well.

We agreed that we were going to study as much as possible while looking for our first flip, and eventually turned it into a business we could partially automate, doing a few flips, then buying and holding, then a few more flips, while also developing a lead generation system that we could either use for flips, or wholesale deals. At the time, the financing was going to come from her brother, since he had the 20K down, and approval for a loan. So he was the money guy, and she ran the project. 50/50 split.

WHAT WE ARE DOING RIGHT NOW

Today she is applying for a job in which she would help people relocate to other parts of the country. So very remotely having something to do with RE. I think she is doing this so that we can afford to buy a new car so her mom gets her old car. This seems a bit hasty to me, since just last week the plan was that we are starting a RE business. (which she does still want, but I know her job usually takes it all out of her)

I am listening to as many BP podcasts as I can fit in a day (currently on episode 70). I've done some driving for dollars, and just recently found 12 distressed properties. She mentioned that she would start calling about them today, but does not want to talk to owners yet due to the fact that she thinks we have nothing to really offer them. I sort of agree. I could call and take the angle of trying to help someone, as I am learning there are a lot of ways to do so, but even if I found a solution, what then?

Is the next step to draw up a contract so we could be prepared to get something under contract? We could possibly scrape up the money to have an attorney review something for us. Would this basically be an hour of their time at $250?

We also continue going to REIA meetings, open houses, and networking. We did meet a woman that just opened her own brokerage and seemed very on top of her game. She is currently waiting for use to send our criteria, but when we do, I feel we would have to keep turning her leads down due to not being ready. Maybe we could send her our unmotivated seller leads? UGH.

CONCLUSION

So if you've got this far and have any hint of advice to offer we would so much appreciate it. Feel free to ask for any needed clarifications.

I feel that last week we went from having a decent plan, but now it is kind of falling apart and we are losing our way. Thanks for listening.

Ben.

 I did not know about the 75% equity cash out on the mortgage. I see that this is where the $125k number comes from.

As far as my other question "Don't you pay for it in the end" The posts above were making it seem like when you refinance it's free money you get from the difference, but really you are still paying for it by taking out a larger mortgage. Right?

Where does the $125k mortgage number come from?

Also, so when you do this, you get the $20K rehab and the $25k difference, but aren't you still paying for it in the end in the morgage?

Hi Keith! Awesome. We are actually already signed up for the CT REIA on the 20th. It will be our second time out there. See you then!

Also considering the one on the 22nd in White Plains.

Is there a time that would be best for you for a Danbury meetup next month?