All Forum Posts by: Charles Worth

@Cinde Moore

More important than will you, why would they give it to you? You have no skin in the game and for that level of risk why not just buy the property themselves? If you think they don't know the contractors and can't get the deals they could. if you default they are basically left with the same property they could have just bought themselves and been in a better position because they would know the area better if they bought it themselves. 

Assuming you are doing only a few properties there are ways to get 100% financing:

1) find another asset that is worth something and put that up as collateral. Best if it is another property that is free and clear. 

2) Find family/friends, etc. and sell your business or the deal itself. Probably the easiest option considering your experience and that i assume you have a fair number of people you know. Its not well-known but a lot of really good operators use a lot of private lenders like this so don't think of it as a bad thing.

@Scott Trench have to agree with @Chris Martin  here though I will say I do understand what you are trying to say and I know people who did buy in the height of the euphoria and actually have made a boatload of money here in NYC because while what they bought was overpriced at the time it has only gotten worse, maybe Denver will be the same no one knows and that is the problem no one knows.  

What I do know is that jumping into the market just because it went up before when it looked overpriced can lead to very bad things.  As an example people were saying the tech bubble was way overpriced way before it crashed and the same for the mortgage market. I remember listening to presentations just like you see in the Big Short from everyone from college professors to fund managers. Guess what many of them ended up buying a home and jumping in at just the wrong time. It is those who jump in at the tail end when it looks like they were wrong and everyone else was right that lose the most. 

Thats not to say you are wrong for all I know in 5 years Denver, despite looking like its overbought, will be even higher just like NYC is today. There are certainly arguments that support this stance though I may not agree. However, I do think the logic you are using is beyond flawed and if you used it in every market it would lead to ruin. End of the day without the benefit of hindsight investing is about process and odds and in my opinion its not the right thought process  and pure odds (meaning if you had enough observations and did it all over the place) would lead to bad outcomes. 

As for dollar cost averaging that only works over very long time periods its rougher to do in RE than stocks because of the larger dollars involved and it assumes your bankroll lasts long enough to hit the bottom. I assume that came from books and sadly none of those books account for numerous factors such as the fact that if your broke you can't buy at the lows anymore nor can you do so if you get so beaten down that you stop buying. It also typically looks at an index for studies about dollar cost averaging. An index doesn't have tenants that are broke because the economy turned down and move out in them middle of the night, it doesn't have pending refi needs, it doesn't have to pay contractors in between etc. 

@Account Closed is she accredited? There are syndicated deals that can utilize 1031. I have never looked at one because I am not in your fortune situation but i have seen them out there and the added benefit is that  you can deploy more precise amounts.

Course you also lose one of the best parts of those types of deals because you will probably have to put all the eggs into one basket.

Course, there are problems with the approach of buying into cash flow properties too which is you have to find the right operator and if you never invested before out of state you can easily get hurt real bad putting that much money to work right away esp with larger multis being sold at lower and lower cap rates.  

@Andrey Y.

Your thoughts on the industry are true in relation to some but most life settlement players would not play in that market. Most are dealing with people who do not have a life threatening illness since the former is where a lot of issues happen, the outcome is far less certain and the prices are obviously higher. Most are just doing pure math in terms of life expectancy and those are more in the range of 8 - 10 years . 

@Carolyn Morales

It can never hurt to ask and if its a small bank you may even have luck but its doubtful for a number of reasons including:

1) Banks can't just do what they want, they have processes and a fiduciary duty. Unless you are worth it on their books (i.e. a lot of money) they have no reason to deviate from their process and I can assure you its not typical to sell performing notes at a discount back to the person on the hook for it.  I would also say there are possible legal and regulatory issues here which are not worth it for them to even look into unless they are going to make a habit of doing it (a lawyer will charge them a fortune just to look into this). 

2) Even if it made sense bank may not want to set a precedent. In short, if they say your note is only worth 90% of value why wouldn't other notes in the same area be worth 90% too? By creating that number it could cause an auditor to make them mark the whole portfolio down costing them a lot of money and causing regulatory capital issues. 

3) In most cases your bank doesn't own the note. If not, you are dealing with a servicing company who services the note on behalf of investors who they may not even know. In short, there is no way a servicing company is going to do this unless its part of the larger program like a loan restructuring program they already have in place. 

In short, I think its tempting to think about this as just an issue where you want to buy your note but I would say its more an ecoystem and that is why its just more complicated. 

@Walter Jones thank you. I know them well. I don't think they lend against notes but if you have seen them do it let me know. 

@Saira Khan

Why 1980 or newer? Many properties in Chicago are brick so the outside is solid and people redo the entire inside so its like new at least on the inside. So a gut rehab might achive the same objectives. What areas in Chicago are you looking at? I am active in Chicago and happy to help 

@Matt R.

Would be curious which companies you looked into?

@Christine Wagner sorry to hear that happened to you.  I got a bad feeling when talking with Mack so I never invested with them (though I did invest in Chicago heavily). @Jay Hinrichs and @Brie Schmidt have created a site http://turnkey-reviews.com/ that may have helped you find an alternative provider. I have talked with many of the top rated companies on there and generally think many of those are amoung the better operators. 

Does anyone know about or have any advice related to obtaining financing using private loans as collateral when your total portfolio is going to be below a few million but you have enough assets and liquidity to support the loan?  I know in the old days a lot of banks used to do this but it seems most of them stopped during the crisis and new regulations have not helped. Curious if anyone else is doing this or has any leads for the Chicago area.