All Forum Posts by: Champak Shah

Seems liek a small lot --it depends on configuration --do you have access for second drive way --at least 20 feet wide --to go back for second home --just divide the lot or build as duplex --keep it Fee simple Not
Condo --so you do not have to maintain --- check with some architect
student at engineering college

A. First --if you are an Investor / Rehabber --why do owner Finance ? Use all money to buy --fix and sale two or three houses and make over 25 % return. B. Second -- Why use RE --if you want to do owner Finance --advertise as such OR put a big sign --Banner at the house --up the price $5000 more and ask for 20% down -- C. Third option is to do Lease / Option --take $5000 Non Refundable deposit --and rent for one or two years -- with option to buy -- let them get Conventional Financing or take 25 % down with owner financing -- The way you have --10% ( $6500) down and you pay $5000 back -- You have NO leverage -- Do not accept the offer.

Its been done all the times since 70's -- I am aware of. Lot easier with SFR. Specially now --many folks getting old-- its better than Reverse mortgage - if they are down sizing or moving to assisted living --if you are good at convincing them --for Seller --its better than 1% interest at the bank --you may structure at 6% or 8% interest only --for Five years -- you may give $10,000 down -- also you can do two mortgages --one short term and one long term. You need to study and get good grasp on NOTE buying -- if seller wants more down payment --for whatever reason -to buy another house or car -- you can sell partial note --say for three years worth of payments -- proceeds go to seller --you make payment to Note buyer --after three years Seller gets the payments.

Its been done on Commercial also -- I have seen my clients --do that on Hotels and Gas stations ( C stores ) --many many times -- even I have Brokered one of the Seller Financed NOTE and made $5000 for making two phone calls and sending in papers by mail. It is very common in small Independent hotels --fully paid for --- others do --if for any reason frustrated and wants to get out -- make ask for 30 % down - Some times --
they take a second mortgage(10% ) -- behind bank loan ( 75% LTV).

As far as the Process--its simple --have attorney draw up NOTE and Security deed to be recorded at the court house. Use amortization schedule --even include tax and insurance escrow in monthly payment -- there are many Title Companies --act as Escrow agent --

Hope it helps --but confusing ....

Hardest part is to find Motivated Seller -- who is willing to do Seller Financing and understands how it works --some times he may know more than you -- he may have checked around for his safety --

One clarification -- 12% to 16 % is an annual rate --so if you take four months to fix it up and sell the house --you pay only 1% ( if rate is 12 % ) per month or 4 % ( $4000 ) total interest.

Also the points --most times they take it out from proceeds of loan -- so -yes - they will take out $5000 and give you $ 60,000.

Now --you have to buy the house for $60000 --minus rehab costs minus some emergency --contingency funds.

Some lenders will only give you the purchase price ( 100% ) so you can close the deal and keep the rehab money in an escrow -- as you finish the work and submit invoices --the escrow agent will release the funds.

If you want as your primary residence --first decide how much you can afford and qualify for the conventional mortgage -- say $150,000. Then determine ARV of the house --estimate rehab costs --you are a rehabber --so get good idea -- then get survey done --separate 5 or 10 acres you want for your self with your house -- buy that much for $130,000 and balance of the price for the remaining land. Now, the balance of farm producing any income ? if there is income -- you can get USDA
( business loan ) -- pretend that you will a farmer for few years -- OR have seller get loan on that portion of farm acres -- and give to you to fix up the house and pay up back taxes -- meanwhile have your current house on market for sale -- now go buy that fixed up house and move in -- then --if you wish, divide the land in several small parcels and sell at some profit and pay off the loan -- keep 30 -50 acres FREE and Clear for your future -- Retirement income -- you can lease one or two acres parcel to local people to grow their own vegetables --You are No Longer a Farmer. NOW you are a Landlord ( of vacant land ) without any headaches and maintenance - but with great cash flow -- make sure to have a verbage in contract to allow you to subdivide -- and have Owner financing for 3 to 5 years .

Something missed here --It is not Wholesale or Flipping --the way you describe here --it is Fix and Sale -- First you have to take title to the property and have to pay all cash -- or take loan to buy the property --then contractor can come in and do all renovations --then what is the exit strategy ? --many investors buy AS IS to get at discount price --and many Rehabbers like to fix themselves -- that leaves only half the buyers --other investors who want to rent out and hold it --then why not just wait few more weeks and sell to the end buyer ( Owner occupied) at higher price --of course less than retail, and make more money -- you have to make sure to get 15 % to 18 % return on your investment --- how much interest are you going to pay contractor --if you do not sell as soon as he finishes the work -- make sure to do the numbers --for interest , carrying costs and profit.

Missing the points--Seller wants to Retire --so may be old person -does not care about credit or buying another house in future.....

Also-- the mortgage balance is $150K -- How can you do Seller Finance ?
some one has to payoff existing loan --

Yes-- best to do a Lease Option ( new concept ) long term lease --3 or
5 years -- qualified tenant ( see response from Ms Rolanda above ) --
then hopefully price will go up and he/she ( tenant ) can refinance --make sure to give tenant a credit for 50% principal reduction --

And add 3 % to price and put in contract --that seller will pay for closing
costs -- i.e. credit 3 % --if tenant buys --

You --as wholesaler Flip ( Assign ) the L/P Agreement to tenant.

You collect only 5 % and keep as your fee -- keep 5 % in an escrow
or give to current owner --

Do not forget to give Credit for 10% down payment -- in writing in
contract ---- may have to pay interest on 10 %

Who will pay for the Repairs --- during the 5 year lease term ?

Good Luck --keep posted here --what happens

yes- some good responses by Joel its different for each location as well as particular brand ( flag or franchise ) --

What is the purpose of this question ?

Some lenders require minimum 50% or 60% occupancy --I have also seen - mom and pop - independent hotels --more profitable in some locations -then franchsie like Days Inn or Super 8 for similar size -- say 60 units --

Also upscale hotels --like Hampton Inn, Hilton , Holdiay Inn Express has much higher occupancies in most locations

Howeevr, due to economy --and less leisure travel --many hotels lost occupanices and vaccancies are much higher and
many hotels are going in foreclosers--

Also many lenders are satying away from financing new construction at this time --and many lenders limit to only 65%
to 70% of value for refinancing whereas --few years ago 80% and 90% was common.

Some times it's worth to pay commission --negotiate with Realtor and pay half commission now and half later as promissiory note to pay on monthly installment -- then meet the owner face to face and instead of subject to do a master - lease --with banks approval --pay any back payments and take over management -- then improve cash flow and vacancy if there is problem - make sure there is no major deferred maintenance ie major repairs required --then sell or rfinance in two years -- other option is to have good real estate attorney call the bank and make an offer to buy the Note ( mortgage ) at discount then work with the owner or foreclose

Hello and welcome Adam -- Depending on wehre you live and what is your gaol-- everything depneds on you and your motivation - go slow and steady -- first expereicne is very critical in real estate investment. If you succeed you will like it and stay in for long term -- Some comments by Laura are good.
I am engineer - and had four ( 4) rental homes --for over 18 years while still working full time --Consider as Busienss not just investment --this is not stock which you can buy and sell at any time --yes-some times confusing, frustrating and time consuming --

My best suggestion is buy a single family home -- best time to buy now --bank foreclosures-- if you have a college or hospital near by -- buy a 3 or 4 bedroom house and rent to three --students or female nurses ( single) -- find local students or young kids to cut grass and have a lawn service to spray checmicals --get an older retiree for minor repairs and maintenance --and dont be greedy --keep tenants happy --
buy hosue --around $50,000 cash --which should be $80,000 to
$100,000 current retail value - do some homework on pricing -
Refinance the hosue after 12 months --get cash back and buy another -- if you buy one house every year or every two years
and let tenants pay for mortgage --you ahev five hosues in ten
years and get paid in next ten years --you will have over $1 million net worth--all paid for Free and Clear Five hosues-- for retiring in 20 years or early --you do not need cash flow now --keep the job if you like the job -- good luck