All Forum Posts by: David Braut

@Jon Huynh Yes I think it will be right up your alley.  If you've been flipping, consider this strategy like you are flipping the property to yourself, to be cashed out in 6 months or so from purchase, all the while cashflowing and continuing to own an appreciating and cashflowing asset.  (at least we hope it appreciates and if you hold long enough, history teaches us that it is bound to appreciate.

@Kenny M. Lewis But to be clear the hard money should be used as the original "purchase money" loan to buy the property in the first part of the "brrrr" strategy- "buy".  Then after you rehab and rent you should refinance into a traditional loan or private money loan.  Hard money loans are best used for short term or transactional financing because of their high costs.

@Kenny M. Lewis Yes.

A short sale is when a homeowner is in pre-foreclosure but agrees to sell the house to a buyer who then presents the offer to the bank.  The amount owed on the loan/house is more than the amount of the offer.  The bank will often accept a "short payoff" as "payment in full" for a loan that is in arrears to avoid the foreclosure process.  This process can take a long time.  Usually months.  Many buyers are unwilling to wait that long and so the pool of buyers is not as large for short sales as for traditional home sales.  This can offer potential deals for investors willing to wait and jump through the banks hoops.  I once made over $40,000 assigning a short-sale contract to a cash buyer that I negotiated with the bank myself.  On another deal a 2nd lender accepted about $4500 as payment in full for a defaulted note of $64,000.  Keep learning.  Keep trying and the fact that you are cold calling, taking action, and asking questions here means that you are already ahead of the curve!

 Do you mean doing brrrr without the refinance part?  As in Buy, Rehab, Sell on owner finance, Repeat?

I ask because if you are brrrrr'ing the traditional route, then there will usually be a bank loan attached to the property- hence the "refinance" part of the brrrr strategy.  So if you were to sell on owner finance and create a note, the original bank loan would be called due and payable in full using a "due on sale" clause or an " alienation of title" clause.  Am I missing something?

Investment Info:

Single-family residence wholesale investment in Des Moines.

Purchase price: $285,000
Cash invested: $500
Sale price: $332,500

Short sale that I negotiated with the bank myself. They agreed to 205k payable within 14 days. I advertised the property with signs and on c-list. It was a fixer and needed work but was large and had good bones. I wholesaled my contract for an assignment fee of $47,500. The buyer wanted to close at a real estate attorneys office of his choice. I agreed. The attorney told me it was the largest assignment fee he had personally seen and he congratulated me!

What made you interested in investing in this type of deal?

I wanted to learn more about short sales and liked the excitement, negotiating, and the good profit potential.

How did you find this deal and how did you negotiate it?

I found it by going through the notice of default list from the county. I called the owner and asked him if he would sell it to me as a short sale if the bank agreed. I negotiated with the bank using comps and since the property was in poor condition, the bpo came in low. The loss mitigator called me back with the final number they were willing to accept and I said ok and then I got to work marketing my fixer deal.

How did you finance this deal?

I wholesaled the contract and I wrote a check for the earnest money out of my personal bank account.

How did you add value to the deal?

I cleaned trash up from the yard and hauled a few pickup truckloads away. Other than that I marketed it properly and agressively. Signs, flyers, craigslist, newspaper ad etc. I helped the homeowner avoid a foreclosure and also was able to get the private lienholder paid off in full. The private lienholder was the in-laws of the homeowner. They had loaned the original down-payment to the owner so it felt good to be able to get that back to them and I believe it helped heal their relationship

What was the outcome?

I made $47,500 in about 3 weeks from the signing of the p and s to close.

Lessons learned? Challenges?

I learned that a loss mitigator will sometimes tell you their payoff amount. I learned that investing was better than being an agent. I learned that there are still foreclosures even in hot markets and that I didn't have to invest a large amount of my own money to make a handsome profit.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No.

Investment Info:

Single-family residence wholesale investment in Des Moines.

Purchase price: $285,000
Cash invested: $500
Sale price: $332,500

This was a short sale that I negotiated with the bank myself. They agreed to 205k as a payoff payable within 14 days. There was a private party lien on the property that would not agree to a discount so I agreed to pay them off at closing. I advertised the property with signs and on craigslist and there was quite a buzz. The house was a fixer and needed a lot of work but was large and had good bones. I wholesaled my contract for an assignment fee of $47,500. The buyer wanted to close at a real estate attorneys office of his choice. I agreed. The attorney told me it was the largest assignment fee he had personally seen and he congratulated me!

What made you interested in investing in this type of deal?

I wanted to learn more about short sales and liked the excitement, negotiating, and the good profit potential.

How did you find this deal and how did you negotiate it?

I found it by going through the notice of default list from the county. I called the owner and asked him if he would sell it to me as a short sale if the bank agreed. I negotiated with the bank using comps and since the property was in poor condition, the bpo came in low. The loss mitigator called me back with the final number they were willing to accept and I said ok and then I got to work marketing my fixer deal.

How did you finance this deal?

I wholesaled the contract and I wrote a check for the earnest money out of my personal bank account.

How did you add value to the deal?

I cleaned trash up from the yard and hauled a few pickup truckloads away. Other than that I marketed it properly and agressively. Signs, flyers, craigslist, newspaper ad etc. I helped the homeowner avoid a foreclosure and also was able to get the private lienholder paid off in full. The private lienholder was the in-laws of the homeowner. They had loaned the original down-payment to the owner so it felt good to be able to get that back to them and I believe it helped heal their relationship

What was the outcome?

I made $47,500 in about 3 weeks from the signing of the p and s to close.

Lessons learned? Challenges?

I learned that a loss mitigator will sometimes tell you their payoff amount. I learned that investing was better than being an agent. I learned that there are still foreclosures even in hot markets and that I didn't have to invest a large amount of my own money to make a handsome profit.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No.

hey Bradley. I live in Penn Valley. I'm planning on going to the next meetup in sac but now I see there's one in Roseville. Good luck and maybe I'll see you there!

Andy,
There is a lot to learn if you want to close short sales and not just "work on them". There are right ways to do them and ways that will just waste your time and end in frustration. This alone makes this niche worthwhile since many try and most just end up frustrated since they don't have the proper knowledge.
To answer your question, you may record a "notice of option" at the county recorders office if using an option contract or a "notice of purchase and sale agreement"/"memorandum of agreement" if using a p and s agreement. This will cloud the title and prevent someone else from "stealing" your deal.
For more info on how to be successful with short sales, contact me... Good luck!

Mog,
This is my first post on BP. Disclaimer: I am not an attorney.
It is my understanding that you need to disclose in your p+s agreement that you are purchasing with the intent to make a profit. (some people even say "substantial profit") and that you "may immediately resell the property". Remember, this is the Republic of California so CYS! (cover yourself)
Yes, you may use the standard Realtors agreement but make sure that you use an addendum with all the language needed to "cancel out" any of the unwanted language that is pre-printed in the Realtor's contract. You can also make your disclosures in this addendum. Hope this helps. Good luck!