All Forum Posts by: Dion DePaoli

Oh, I see. Didn't understand the short hand.

The two largest mortgage investors are Fannie Mae and Freddie Mac. Those guys are the definition, literally, of "conventional conforming mortgage". Most lenders originate loans to sell up into those two GSE's. Most brokers can broker to a lender who sells to Fannie and Freddy. Even banks sell up into the two giants. When I say 'most', I mean in the 90th percentiles.

It seems you are looking for a broker or lender who can "originate" (not service) a Non Owner Occupied loan at 85% LTV. That is a standard residential investment loan offered under Fannie/Freddy underwriting guidelines. Fundamentally most lenders and brokers can offer you this program however some differences will be present with rates and fees.

I would suggest you post over in the "Bankers, Lenders and Mortgage Brokers" forum to get a better response to what your looking for. Your not selling anything or buying anything so I don't think you really need to be in the marketplace and I am not sure the brokers and lenders here on BP spend too much time in the marketplace forum. Cheers.

@Todd Shampoe

As you mentioned, you are new and as an inexperienced newbie it is good to explore ideas and options because you are right, you don't know. This is simply your first of many questions and ideas that you will end up exploring and that the BP community can help you with.

To play devils advocate for a moment, to the mentor program, you asked and they said you could speak to another client. To be technical, there is no way to know if that person you speak to is actually a client or is in on the payday. Also, allowing you to speak to another client of theirs doesn't mean you actually will nor does it meant that if one is out there to talk to, they have achieved the advertised results.

You will find that mentor programs like the one you mention and many guru type courses do not sit well with the folks here on BP. Frankly, rightfully so. Most of the time, they are inflated claims or complete shames. In addition to the lack of promised results, the mentors are not really as knowledgeable as they would want you to believe. The difficulty is it is hard for the inexperienced to cut through the sales pitch and evaluate the degree of actual knowledge and experience. It is probably not too far from the truth to say, that just in this thread alone you have been touched by more experienced folks than this mentor program could ever offer you. Or as I like to say from time to time, many of the folks here have likely forgotten more than what the mentor program even knows.

The money being requested as payment to get into the program and the solicitation of the program in general has issues. It's not clear if you pay the $10k and then have to also invest in the assets with additional money or how the assets which will be acquired as vehicles for your profits are actually paid for if you give any portion of that $10k to the mentor themselves. There is something missing from the details but as most of these types of programs, they are not worth spending time figuring it out. There is no magic in this industry nor is there really any 'new' secret formula that anyone can have. Real property and it's related assets have been trading and being used as sources of revenue since the dawn of civilization, as such most of the new stuff is closer to 3,000 to 2,000 years old. Although, we do seem to be somewhat more civilized nowadays.

Anyway, I just wanted to soften the message a little bit from us in regards to the response of the program and make sure you understand it's not you, it's them (mentorship) that is the issue with us here. If you ready to rock and roll, then stroll on over to the New Member forum, introduce yourself and chat about your goals and plans. Browse the threads, read the comments, heck you can come right out and ask the direct question ("What do I do with this $ and no experience") and sit back and enjoy the ride.

Welcome to BP.

Nice job and congrats Derek. You can search public record or use a service for such to find what appears to be private owners opposed to institutional owners. Then make contact with letters and such. You can likely also head to some REI meetings and make it known what you are looking for. To that extent, some of the detective work looks much like trying to find off market properties. Of course there are also institutional sellers and qualified brokers who can also assist. Some have mixed portfolio's of private and institutional loans for sale.

Just to help manage expectations, when you mention you gave enough money to fix the lady's car, that doesn't make it seem like the purchase price is all that high. This may be more of a unique situation, a diamond in the rough if you will, as depending on the value of the home and the balance of the loan you may not be able to find many first liens with what seems to be likely a large discount, even for non-performing loans. (I am speculating due to lack of information in the post) Second liens offer some of the largest discounts and reinstating those loans can create some pretty nice cash flow and windfalls since they tend to trade for such low prices. First liens trade for more since they are in first position. My point is, while seemingly a win-win for you and Seller, not all Sellers may be as desperate or perhaps aware of the value of the loan which might be barriers to getting a deal done if you plan to earn super large returns. They are out there, but they are few in between, economies of scale are the difficult part. Again, to some extent, the same as finding a home owner willing to sell a property at a considerably lower price than As Is market value.

Paying down principal is indeed earning equity. You can also earn equity through property appreciation. That earned equity is not realized until the liquidation of the asset.

What you would simply do is figure out your amortization schedule. Go to the period where you plan on selling and look at the principal balance of the loan. Subtract the principal balance of the loan, along with all costs of the sale transaction for your NET gain. Clearly you would then be speculating on what the sale price will be which is fine. The sale price assumption will take into account appreciation.

All net income, from cash flow or from sale is your total net income. Divide that by the cost basis and you will have your ROI.

In the above example, it only looked like you were trying to find the ROI on the cash flow.

More than likely you will have more than one year of net cash flow. You would add them all up plus the net gain on sale.

ROI does not take into account time. It is simply the total net income divided by the total investment. Your 10.3% ROI above is only on your cash flow. Any gain on sale will increase that number.

We didn't really say anything different.

Bennet, do yourself a favor and stop speculating on what others, who you don't even know, may or may not do. Let's not pretend the current owners of the units don't know a unit was being foreclosed. This is one of those things where all you can do is plan for the worst and hope for the best.

You would not be able to take title subject to the refusal right. No sense even thinking about that. That would be a huge problem for the bank that they don't want. The concept is out in the open, somebody messed up, it is an inconvenience for all involved but nonetheless, it is what it is.

Hope for the best and plan for the worst. Good luck.

Not to steal Jon's thunder but you would have the first bank in the last 5 years which doesn't have a special addendum to their contract. Perhaps someone messed up twice. Hard to imagine though. In any manner, the contract itself calls for clear and marketable title be conveyed.

Secondly, the first right of refusal is a deed restriction. Jon points to title as there is where the concept comes into play. Title is not clear of encumbrances if the right of refusal has not been exercised. The HOA's claim, through first right, is superior to yours.

Now, before this goes from molehill to mountain, why not simply talk to the bank or agent and tell them that you are willing to extend the closing date so they can properly give the HOA the right of their refusal. Create an addendum to your contract which extends the closing date and expressly state you are entitled to all of your earnest money and reasonable costs if the contract is canceled due to the HOA excising their rights.

Just because they can purchase the property, doesn't mean they will.

That made me laugh out loud.

ROI = Return on [YOUR] Investment

Your cost basis is your investment that does not include any principal from a loan. The money you spent out of pocket including down payment, closing costs, inspections, etc, etc.

Figuring out the ROI is straight forward. The NET proceeds of the asset divided by the cost basis of the investment. Since ROI (and most other return calculations) are all NET numbers, there is no need to include interest or principal payments on loans since those are expenses against your Gross Income.

[Gross Income] minus [Expenses*] = Net Income
[Net Income] \ [Cost Basis] = Return on Investment

*Expenses include all expenses related to the asset such as payments on debt service (principal and interest), taxes, insurance, repair, closing costs, etc, etc.

Gross Income = $21,000
Expenses = $13,224
Net Income = $7,776

ROI = $7,776 / $75,000 = 10.4%

I reread your post before posting mine and I see you wrote:

"do you eliminate the principal portion of your mortgage payment since you are essentially paying yourself?"

If you are your own Lender, you actually didn't Lend anything, you invested all the money. Would you eliminate the principal if you were your own lender? No. It is a part of your total cost basis. How you pay yourself back is another matter but it still is factored into the ROI.

If you have a third party lender, then I have no idea what you mean by 'paying yourself'. You are paid the Net Income.