All Forum Posts by: David Dey

And now the answer you've been waiting for!!

My business partner and I have done beaucoup deals in New Orleans after Katrina, and we have discovered the magic formula for mold remediation as per FEMA.

I never hire the mold company for the remediation, who would charge me $1000's of dollars for the service.  Instead I do it myself and then hire them to do the testing. (Passes every time)

Wanna know the magic bullet?  Here it is.. drumroll please....

(Dadumdumdumdumdum)

1)  Get a 1-3 gallon pump sprayer.

2)  Fill it with bleach

3)  Add one bottle of dawn dish detergent.

When you pump the spray on the beams, the bleach kills the mold and the dish detergent holds it to the beam till the job is done.

This is what FEMA prescribes, it does work, and best of all, it's cheap!!

@Michael P. terms including seller financing, who pays what at closing and when, what comes with the sale, etc...

Pretty much anything that can be negotiated should be negotiated.

And it doesn't matter if it's not the traditional terms, if the seller and buyer agree on it, it can be added to the contract.

The thought process is, what can be negotiated to limit my cash out of pocket and or cashflow once operating the property.

I once negotiated the purchase of a MHP where the seller carried back all but 100k in a second mtg, with no payments and no interest for 1 year.

Not only did the fact that the seller carried back his financing in a second make it work that it was a no money down deal.  (So money out of pocket covered)

But for 1 year, I ran a 240 unit MHP off the basis of 100k.

(Obviously the terms were satisfactory after that to make sure the place cash flowed)

In a smaller deal, I bought a single mobile home on land for in the 20's.  

By negotiating the transfer of all items in and around the house, I acquired 13 cars with it. For 6 months, I was in the buy here pay here business but by the end of that time, I had made enough money that it paid for the home.

In many cases, I do not include a price tag on my contracts.

They read, "payoff of all liens and incumbrances plus ----"

This way, if I can negotiate a lien, mtg, encumbrance, etc.  I benefit.

Sometimes, in the course of problem solving, which is what we are as RE investors, (professional problem solvers) solving the problem may not include a dollar amount.  The contract may look like this:

"Payoff of all liens and encumbrances plus 6 months rent in blank apts." or "plus 2016 Toyota truck." Or "plus moving company from blank to blank."

The skies are the limits when it comes to terms, only limited by your imagination.

Hope this helps. 😀

Go with the 5 year.  Take the cashflow after all the bills and apply it toward your principal.  

Who knows how much you could pay down in 5 years.

At $250 a month, in 5yrs you would have paid 15k down plus the overage on interest you are paying each month, plus the the actual amortization of the loan as well.

That being said, if you are paying well and not causing the seller issues in collection.  He may very well be willing to let the mortgage get modified to extend the balloon or even amortize the loan out.

Hope this helps!! 😀

P.S.  Make sure to include a clause into the mtg to have a first right of refusal to buy the mtg, should he try to sell it.  

You never know what kind of discount he may take.

generally speaking, if there is no equity then there is nothing for the wholesaler to sell.

The majority of wholesalers are selling to other investors.  If the seller has a lien already at 90% why would an investor buy it at that amount, let alone with another fee to the wholesaler on top of that.

Now of course, you can always try to short sale the property and get the lien reduced.  Or, if the property is current, you could always take the property "subject to" the lien and sell it to an end buyer that cannot get their own financing.

For most wholesalers, however, those types of deals are not low hanging fruit, so they go for deals with plenty of equity to be able to sell the spread.

Hope this helps.  😀

I'm doing a quiet title right now on a similar situation.  

The property is in ex- husband and wife's name.  

Both people abandoned the property.  The husband leaving the country and disappearing.

From contracting with the wife, we brought our attorney into the situation and filed a quiet title on the property on the grounds of abandonment with the property being blighted and liens causing undue damage to the wife.

The husband was just defaulted a week ago.

Our last step is final judgement and the wife will be 100% owner.

Hope this helps. 😀

I am a Christian and do investments.  I love people, I enjoy this business.

I understand the issues on both sides.  The number one key to this business and faith, keep your word.

If you have decided to purchase a property renovate it, raise the rents... keep your word.

If you have signed a contract with your tenant promising to exchange housing in good order and repairs when necessary for rent paid on time on a monthly basis... keep your word.  

If your agreement says that if they don't pay their rent in a timely fashion that you will evict them from the premises... keep your word.

The most loving thing you can do is listen to the leading of the Lord.  And keep your word.  And do everything to the glory of God.

It could be that your raise in rent woke up a tenant who had gotten lethargic on moving forward and now with this wake up call, they are now opened up for a new blessing.  (Maybe home ownership.  Maybe they need to move from the area?  Who knows?)

You be obedient in your actions and let God take care of theirs.  (That is the most loving thing you can do)

This strategy works best for hard money financing or private lender financing.

Most institutional financing will require the downpayment be sourced and or seasoned, (in other words, they want the down payment to come from you)

In hard money or private financing, the primary concern of the lender is Loan to value. (LTV)

In cases where the lender doesn't care where the downpayment comes from, seller financing is a phenomenal option.  The more the owner will "take back" in financing, the less out of pocket you'll have to spend.

In my negotiating with the owner, my one two punch regarding this issue, is asked in 2 question.  (I already am going for high equity deals, so let's say the seller owns the property free and clear)

Let's say this is a 4plex that I'm looking to get in the $100k price range:

(I first go for price)

Me: "if I pay cash and close quickly, what is the least you would take for your property?"

Seller: "I don't think I could take any less than $100k for the property."

Me: "Ok, I think I can do that."  "Let me ask you, would you be willing to take any of your purchase price in payments?"

(At this point, they will either say, "yes" "no" or what do you mean?" "I than explain to them about if they take all their payment in cash, how there could be large tax consequences.  But if they take, say 50% in cash and 50% in payments they only get taxed on what they make per year. Plus it gives them money they can use monthly as cashflow)

Notice I didn't say anything about interest?  That's because, if they don't bring it up, neither will I.

What this does is bring us to a wonderful scenario called, "blended interest."

If you have 50% of the the price at 8% (this is the 3rd party financing) and 50% at 0%, (your seller financing) then you have a blended interest rate of 4%.  (Not bad, eh?)

Disclosure:  make sure that your contract makes it clear that the seller financing will be   subordinate to the 3rd party financing.  Not many lenders will go into second position.

Hope this helps.😀

If you have additional questions, feel free to ask.

Short answer:  it might or it might not!!

Explanation: I have always had my own saying, every opportunity can be a good deal if you look at it the right way.

Back to the basics:  there was a game that I loved to play as a kid called othello.  The tag line was very catchy, "a minute to learn, a lifetime to master."

Real estate is the same.  It is not rocket science.  

There are only two ways to make money in real estate.

Buy and sell or Buy and hold.

In buy and sell: very simply, if you sell the property for more than you spent in the acquisition and preparation of sale, then you made a profit.

In buy and hold:  if your income exceeds your outgo, you made a profit.

That's it!!  I just unraveled the mystery of real estate!!

(Of course, the intricacies of how you get to either of those profits is what will take a lifetime to master.  I know, after 19 years and over a thousand deals, I'm still learning it.)

So, to your question, if you paid 1 million dollars for a wood frame duplex in the heart of my inner city, that is rented for $500 per month per side (long term tenants) with taxes and insurance at around 200 per month and maintenance at an average of 100 per month and 100 per month for management, would it be a deal?

(Here's a hint, the answer is yes)

Heck yes it would, if the terms for the $1 million were: $0 down and $0 interest, non recourse, non qualifying, non qualifying assumable, no balloon and fully transferable owner financing, with payments at $1 per year for a million years.

With those terms, the million dollar price tag is just an arbitrary number.  

Bottom line is, it boils down to ROI of money out of pocket and of cashflow of income that matters. Many times terms are as important if not more so, than the price.

Anyway, hope this helps!! 😀

Dave that is a great question and one that doesn't get the respect it deserves.  Most people just go with the generic private money advice, "start by asking your friends and family for money to do your deals." 

(Sounds eerily like those MLM pitches)

More family and friend relationships have been bolstered or ruined over this very issue.

You've probably heard the old saying, never lend friends and family money if you want them to remain friends and family.

The truth is raising private capital, whether from family or standard private lender is very personal transaction and should be treated with respect and honor.

Think of it this way, if you borrow money from a bank and don't pay it back, do they take it personally?  No they don't.

They may sue you, may take your collateral, may even garnish your wages, but it's just business.. nothing personal.

On the other hand, if you borrow money from a friend or family member, or even a private lender that worked his/her entire life building this nest egg, and don't pay that money back, do you think they'll take it personally? Absolutely!!

That's why you need to treat this transaction with its proper respect.

1) Just because they are your friend or family, don't feel that they owe it to you to do this loan.

Approach the situation as a true business transaction and treat them with the respect you would give a standard private lender.

2) Ask yourself the question, "would I loan my hard earned money on this deal?"  

(Don't think of it from your view point of how much money YOU are going to make on the deal.  What would they do with the property if something happened to you?  What exit strategy is there available to them as the lender?)

3) Make sure that they are the right person for the deal.

(If the people have an absolutely low risk tolerance, or this is over extending their savings, credit etc.  this may not be the deal for them.)

4) For low hanging fruit, (easier success rate) 99% of all private lenders fall into 3 categories, business owners, professional licenses holders, (like doctors, lawyers, etc..) real estate professionals.

All three have something in common, they think differently than your average wage earner.  They think cash flow, multiple streams of income, predisposition towards increasing of assets.  With real estate professionals (i.e. Realtors, appraisers, surveyors, and good old fashion investors) having an additional understanding of the power of real estate.

5) every lender asks 2 questions, whether full scale bank, private lender, or friends and family, every one asks the same 2 questions... And if you answer both of them to THEIR satisfaction, they will fund your deal every time.  (On the other hand, if they didn't fund your deal, look at these 2 questions, this is where you blew it!!)

Question 1) What's my security?

Whether a bank asking for your 10-03 form listing your assets and liabilities, and asking to see your tax returns, or a private lender asking you how much skin you have in the game and what your track record is.  They are all asking the same question, "how am I not going to lose my money?"

You really need to be able to answer that question to your lenders satisfaction, not yours!!

Now, I have asked many real estate professionals this question.  

You're standing in front of MR Moneybags and asking him for money to do your deal.  He asks you the question, "what's my security?"  What's your answer?

99% answer, "the first mortgage on good property with at least 30% equity behind it."

Or they will simple answer, "the property."

99% answer this way, and 99%are wrong.  

The mortgage and the property are not the security, they are the collateral.

The security is YOU!!

If they like you, trust you, believe in you, honestly believe that you will take care of their money as if it is your own.. then 99% of the convincing is already done.  Now all you have to do is show them a good property and answer their second question.

Conversely, if they don't like you, trust you, believe in you, they're not gonna lend to you at 10%LTV.

So when you are presenting your opportunity, don't just pitch the property, pitch yourself.  Your track record, your exit strategy, their exit strategy and your commitment to making sure that their funds and returns are secured.

Question 2) What's my return?  

Make it fair!!  Look at it from their side. What will be a fair return for the risk they are taking?

In closing, make sure that you are clear with your explanation.  Just because, you "get it," don't automatically assume they get it.

A great strategy is to ask your friends and family to assist you in putting together a list of questions that a potential lender would ask that you can answer for that potential lender.  This will do a couple of things.

1)  it will get them to ask questions in a non threatening setting.

2) it may whet their appetite to either do something themselves or may inspire them to refer someone in their sphere of influence to you.

Hope this helps!!

@Shaun Dockery absolutely!!  And no, it does not necessarily take the refi off the table.  

Down the road, if you see that the property is something you would rather keep.  You can always renegotiate your agreement with the agent and maybe in good faith pay him his fee or a discounted fee for his trouble.

And of course, if you see that you are flipping it, then you already have your agent ready. 

Hope this helps!! :)