All Forum Posts by: Brandon Johnson

@Sammy Lyon I found a local portfolio lender willing to do the deal and the seller took a second mortgage for the 20% down payment.  It only cashflowed about $300/month for a while until I paid off the 2nd mortgage about 2 years later and that instantly increased my monthly cashflow by another $485.

Both mortgages were put in place at closing.  Our title attorney, who happened to be very investor friendly and specialized in creative real estate transactions, drafted the contract language, the mortgage and promissory note for the seller.  A good, investor friendly title attorney is very important and you really just have to get on the phone and start calling small community banks until you find one willing to do this type of loan.

This was a duplex, and I asked the seller if he knew anyone else wanting to sell and he ended up connecting me with another seller of a fourplex that ended up being my second deal and was purchased with the exact same structure, loan terms and with the same bank.  I'm always sure to ask my sellers if they either have any more properties they would like to sell or if they know anyone else wanting to sell.

If I could go back and do it over I would have structured my seller finance note terms better in my favor if I could have.  Seller financed around $22,500 for 5 years at 7% interest.  The 5 year term really diminished my cashflow and if I could go back and structure differently I would have tried to negotiate at least a 15 year amortization with a 5 year term, as in a balloon payment due at the end of the 5 years.  I didn't know any better at the time as I was just learning what a balloon payment was!

It all worked out for me because I had a full time job at the time making over $100k/year so I wasn't depending on the cashflow, I just wanted in to this game and I wanted in badly even though I had no money to put down on the deal at that time.  I'm still paying on the 2nd mortgage on the second deal that was the fourplex, but it cashflows and real estate became my full time endeavor and source of income.  The J.O.B. income along with perfect credit was a huge factor in being able to pull off the bank financing at that time.  I was able to establish relationships with several small community banks in the coming two years before I left my job, and because of those relationships and the success I demonstrated, I was able to continue buying and refinancing properties with those banks without a J.O.B.  

Since those deals I have made my niche in no money down investing and using OPM exclusively. I've done several 100% financed seller finance deals since those first couple deals, but all came from other investors rather than motivated homeowners. I got up to about 30 units in two and a half years and with that in place I now pursue another business venture that I'm most passionate about. I also put the BRRRR rehabbing know how to good use and flip several houses a year for additional income. For me, real estate was always intended to be a tool to get me where I wanted to be, which meant not having a J.O.B. ever again and having the time and financial freedom to pursue other interests and other ways of creating income.

I did sort of update this on another similar post that was started by someone else and I didn't realize this one was still lingering with the end of the story untold.

https://www.biggerpockets.com/forums/432/topics/186918-seller-financed-down-payment

Good luck with your deal.  Post back here and keep us updated on your success!

Let me know when you find one who does what they say they will do!

@William Brown I gave your post one vote because that's all BP would allow me to give it.  Great response and I agree 100%!!

Be sure to hook into the BP Acadiana group on Meetup.com.  It is run really well and growing because of new blood like you.  Your network is your net worth and nothing is further from the truth.

Hey @Eric Ruscitti your best bet is to show up at our local REIA next week on Tuesday.

https://www.meetup.com/the-ring/

@Frank Klein his deal is actually in our backyard!  It's in Central.

@Ross Kerne my offer would be $150k for both buildings and I would take the seller finance that was offered at 6% interest with 10% down if you can afford the down payment and repairs.  Since he wants a 5 year loan, then structure the financing based on a 30 year amortization if he will agree to it, 20 year if that's the best he will offer, and a 5 year balloon payment.  I would even try to negotiate the down payment lower to 5% or even to zero since your skin in the game is the deferred maintenance you have to invest in right out the gate.  You can always trade off an increase in offer price in exchange for more favorable terms like this as long as the numbers still work.  Seller financing is easy and very attractive to me, just make sure you use a good title attorney that has done many seller finance transactions.  PM me for a local recommendation if you need one.   

I would BRRR these buildings and within that 5 year time frame and once the units are nicely rehabbed, rented and performing well is when I would do a cash out refinance with a bank. At that point you should be able to cash out all of your initial cash input plus some additional cash to take to the next deal if that meets your objectives.

My offer would be subject to inspections and I like the idea of requiring the seller to get the power and water turned on first so you will know what you are up against on your first deal.  If you find many deficiencies or if he won't or can't get the power turned on then that would be my bargaining chip to get an even better deal on the 2nd building.  

Bottom line I would pursue this deal especially due to the seller financing offered.  In fact, if you pass on it, please reach out to me because I would be interested in purchasing it and would be willing to throw you a few bucks for a finders fee!

I think you should go for it if you feel good about your numbers and I think it sounds like you have done your homework and are prepared to take this on with both buildings out the gate.  Congratulations in advance!

See you at the top!

@Basit Siddiqi , your answer rocked!

@Gary Enderlin Yes it would be recommended to use a licensed mold remediation specialist.  I've heard that if you have more than 10 square feet of mold in a home that it is supposed to be remediated by a licenses remediation expert.  Now if I have 10 square feet of mold, I'm probably just going to have my handyman cut out and replace the drywall in that area,  but if you have a flooded house you ever intend to sell then your best bet is to use a professional you can get documentation from.  There are lots of them out there so it would be in your best interest to shop around.

Around south LA most of the pest control companies were offering this service and including a termite treatment with it for around $700 for a 1500sf house.  You really can't beat that considering that's a typical price for a termite treatment.

@Kyle Regitz 

@Gary Enderlin

Best advice I can give is to make sure you don't buy a house where the owner treated it themselves and then put the drywall back.  If you don't have the mold remediation done by a professional contractor who provides some type of receipt or certificate for their services, it can bite you when you want to sell the house.  Make sure you can have mold remediation and microbial decontamination done by a professional.

@Kyle Regitz I'd buy and rehab a flooded house in Houston and have a ton of equity going in!  It would be a big undertaking for your first project, but the payoff would be huge and you sound like a smart enough fella to handle it.  It's just permits and mold and drywall, flooring, cabinets, appliances, doors, trim and paint.  I'm sure I missed a few items you'll need to address, but I would hook up with someone locally who is rehabbing flood houses and get them to help you make sure you cover your bases.  Also it would help to find a good GC who has already renovated a couple flood houses successfully.

See you at the top!