All Forum Posts by: Bob Derwin

You could be hundreds of thousands of dollars out of pocket before you start to recoup your investment.  You need to aquire land.  Go through the zoning and subdivision process, where you will need, at the minimum a civil engineer, surveyor, and environmental consultant.  After this you need to install infrastructure, roads, sewer, water, gas, cable, and phone.  The above, if all goes well would take at the minimum a year, and likely longer.

I have a separate Capital One 1.5% cash back card for each of my LLCs (3 right now)

I found my seller, because the house was up for tax sale. The home was vacant, but the tax sale did give me the person's name. A google search provided an email address. The email address turned out to be the right person. When I contacted her I was lucky, as she had moved on with her life, she was ready to sell, and there was NO mortgage on the home. She did owe back taxes of 13K, plus another 7K in municipal liens. Based on this, I knew I would have to give her some money at closing. The home had years worth of clutter, plus a very strong pet urine smell, but structurally (except for leaking skylight), my contractor found the home to be solid. Note that none of the utilities were on, so I had no way to test plumbing, furnace, or electric, but I used this to my advantage in negotiating. I offered 80K as the house stood (she could remove whatever belongings she wanted, and leave the rest for me to deal with), or I would pay 90K if she got the utilities turned on so I could do proper inspection to ensure everything was working. She was at 100K, and I was at 80K/90K. I told her based on the work needed on the home, that the 80K/90K (30K cash/50-60K owner financed), was my best and final offer. I knew she would need at least 20K to close, plus I figured if she walked away with some money in her pocket, she would be more apt to accept my offer. The next day she contacted me and said she would accept the 80K "as is" offer. I had my real estate attorney (all he does is family law and real estate) draw up a seller disclosure (required in PA), a sales contract, a note, and the mortgage document. I provided her these documents for her attorney to look over. She required a few minor changes to wording in the sales contract, but 4 weeks later (there were some other minor title issues that needed to be resolved, or we would have closed in 2 weeks), we closed on the home in my attorney's office. I had the deed recorded in my LLC's name, and she had the note and recorded first position mortgage. I am paying 3.5% over 5 years on 50K. I actually just returned from there as we had the water turned on today (gas and electric were done before Christmas). Other than needing a new pressure relief valve, the plumbing is good. At this point, we are down to just flooring and paint to finish up. I should be all in at around 95K for home with an ARV of 160K. Already have a tenant lined up for Feb 1 at 1350/mo rent. So I have positive cash flow of approx 190/mo. Please note this does NOT include any maintenance reserve, CapEx, or Management. I have 3 other residential rentals, plus a commercial building, that I already manage, so adding on another SFH to manage is no big deal. The reason I structured the deal for 5 years rather than a long term (and more immediate cash flow), is that my twin daughters will be graduating high school in 5 years, so I'd like to have as many of my rentals paid in full by that time as possible. Plus, I figured by her getting a higher monthly payment, she would be more willing to accept my offer.

I just closed my first seller finance deal. I found the home listed for the county tax auction. After performing my own title search, I discovered that there was no outstanding mortgage, but there were 3 liens on the property. I could tell the home was vacant, but doing some internet research, I was able to locate the owner living in another town about an hour away. I contacted her and asked if she would like to sell, rather than take the chance of losing the property at the tax sale. After looking at the property, most of the work that needed to be done was cosmetic in nature, so I offered her 80K (the ARV is 160K), 30K in cash (so she would have money to settle the liens and pay the back taxes at closing, plus put a few dollars in her pocket) and her needing to carry a note for the other 50K. She accepted the offer. I've put 15K in the home to make it rent ready, and now have a cash flowing property, that I will own outright in 5 years.

I use Reality Income (Stock Symbol 'O') for reliable monthly income.  It is a Real Esate Investment Trust, so it is required to pay dividends.  It has paid 577 consecutive monthly dividends.  Additionally, that dividend has increased in 77 consecutive quarters.  As of the end of the year, the dividend yield was 4.2%.  Over the last year has traded in the 50-70 dollar per share range.  I would either dollar cost average in, or wait for a pull back in the price.  I am not a broker, nor a financial advisor, so please consult with someone before making a large investment