All Forum Posts by: Eric N.

I have done further research into the topic. The biggest hurdle in the Scott's model is the Deed for Contract. When complaints were filed due to major issues raised, some states prosecuted the companies for depriving buyers of ownership rights and outright deeded the houses to buyers (regardless of breach of contract and default on loans), with huge restitutions to be paid to state and end buyers. It should be noted that the cases were prosecuted against companies that owned and sold thousands of properties nationwide, not against small time operators, but anyone who attempts to follow the model is better off hiring a well versed in the subject matter attorney and be aware of state specific restrictions (like in NY, Wisconsin and others) on Deed for Contract agreements. 

Quote from @Duncan Forbes:

Hey Everyone!

Hope all is well. My name is Duncan Forbes, I am starting my real estate journey in Westchester NY. I am not necessarily that new in the Real Estate industry because I have a place in Tulum Mexico, Condo as a short term rental. 

I am planning on selling my Condo in Tulum, and looking to buy a fixer upper in westchester. About Westchester, NY:
- One of the most expensive places in the US, maybe the world
- Supply is VERY low
- Houses are no less than like $600k-$700k, I'm also getting outbid a lot.
- Now Foreclosures may be a good discount but at the same time I already know that there is aLOT more risk to this.

I already have a real estate agent, a mortgage broker, and am getting connections to contractors and so forth.

My few Questions are:

- Do I need a real estate agent in this process for foreclosures?

- Are there any resources / you tube vidoes/ or additional BP Videos I should be looking at

- If anyone is so kind, would anyone be able to give me a tutoring lesson for any hour, and if so, I am willing to throw a little money for their time. Thank you!

 If you do foreclosures make sure it's legal in your state to target them. Some states passed laws after the last housing crisis which impose huge fines and liabilities for targeting sellers in foreclosures. Check out Marty Boardman online who teaches classes on how to pursue foreclosure sales. 

Quote from @Dennis Knapp:

so I am driving around looking at not-so-nice homes and looking up to see if mortgages are left on the property because I'm looking for seller financing possibilities. the problem is the software i am using does not give me the seller's phone number. Does anyone know any software that provides this information? I really appreciate any help you can provide.

You can subscribe to Intelius to run single skip requests, or just submit your request to Batch Skip Tracing. You must be using a Propwire, which provides prop., mortgage and owner related information, but wouldn't reveal their phone number unless you paid for it. If you want to skip trace for free, run searches on sites like TruePeopleSearch, FastPeopleSearch and etc. Quality wise you will get what you pay for. Free skip tracing will yield least accurate results, while some of the top (and expensive) providers in industry will provide most accurate data.

As poster above mentioned, sending hand written or any kind of notes may not work. Simply because the owners may not live and may not collect the mail at the subject property. So, calling them could be your best best. But here is word of caution. #1. Don't text. SMS is a thing of the past, unless you don't mind being hit by huge fines for solicitation/texting without recipient's opt-in. The new regulations went into force this year and you can Google them online. #2. If you use skip tracing service such as Batch Skiptracing, they will automatically flag numbers in DNC. Do not call those numbers. There are actually people out there who add their numbers to DNC and then wait for unsolicited calls to lodge complaints and sue for money. Only call the numbers that are not flagged under DNC column. 

Quote from @Jay Hinrichs:

I agree, there are people who want to rent and don't want to own. But you don't want to sell to those folks. You want to sell to those who want to own a home, but can't. I briefly spoke to a guy who was a student of Scott and who is currently employing Scott's method. He said most of his buyers are on a fixed income, can't qualify for a traditional mortgage, others have good, stable income but low credit scores and low income on paper and etc. 

Quote from @Jay Hinrichs:

 Good for you too, Jay, for closing and funding so many transactions. I am glad things worked well for you over the years. But Scott is doing something other than what you do, which is seller financing owner occupied homes. You don't lend to owner occupiers. I read @Dan Deppen's earlier response on this thread and I think what Scott might be doing is employing RMLOs to originate his loans, loan servicers to collect the payments and attorneys to review his contracts and make sure he is compliant with all the laws and regulations. 

You are right about high risk of default. I guess a lot of Scott's buyers are under water the day they sign a loan, so he must be regularly evicting and reselling some of those houses. There are ways to mitigate the costs and protect yourself to the extent possible. For instance, if he paid $40,000 to buy a house and sold it for $80,000 with $10,000 down, he could keep $10,000 in reserve  and tap into it to hire attorney, file eviction case , remove defaulting buyer/tenant and continue paying off investor loan (if he used PML to buy that house) while looking for the next buyer to sell it. He takes the same risk as any landlord out there, since a lot of renters would not qualify for a mortgage and default anyway. But he has clear advantage of getting much larger deposit (landlord in most jurisdictions is limited to collecting 1.5 or 2 months' rent payment, which he must place in an escrow vs. $8000-$10000 Scott can collect and use for any purpose the next day). 

Also, if you consider the fact that his 30 year mortgage is $100-$200 less per month than what local folks pay for rent, then it's not as predatory as it may sound at first. Someone who is paying $900/mo to rent a 3 br apartment is given an  opportunity to pay $700-$800 mo with prospect of owning the house, if they never default. They could also fix it on their own (as some of Scott's buyers do) , increase the value and sell it at higher price than bought, pocketing the difference. 

I agree with @Nicholas L. and you, that 99 out 100 people who try this won't make daily home runs and won't retire in Bahamas. But I see no reason why this can't be done by someone like Scott, or anyone who is successful in any real estate endeavor. And if someone tries it, without paying for classes or programs, they can either net a deal or loose X number of hours of their time trying it. You don't have to spend money  out of the pocket on searching Redfin, making some phone calls, making offers and posting ads on Craiglist or whatever local media you want to use to sell the property. Yes, you will need a cash or PML to buy the house, but it is true of any real estate transaction with the exception of wholesaling. 

This is obviously not a get rich quick scheme, and like with any business out there 99 out of 100 who try it will fail at it. But it doesn't seem to be riskier and more doomed to fail than BRRRR and other types of long term holding/land lording.

Quote from @Jay Hinrichs:

Let me break your post into parts, as each concerns a different subject and as such requires a different response.

1. It should be evident that so far he led me to ask questions , how to be in legal compliance while following his model, rather than jump off the cliff blindfolded, believing that the "deals" are hanging all over the trees down the abyss, waiting for me to pick. 

2. As to effort, most of his students find those deals on MLS. They go on Zillow or Redfin and just look for properties that meet the criteria, put them on spreadsheet, analyze the potential deal, pick up the phone and call listing agents. It's not free, you have to spend your precious time to do this. But it does not require DM campaign or SEO.

3. Why do you think you have to live where you do these deals? Why can't you do it remotely?

4. Big profit spread in this model is not a result of lucky strike, like with probates or desperate seller who is dying to get ten cents on a dollar and needs it yesterday. Usually, the price you pay for the  property is what the lowest per sq ft listings appear to go for on MLS. You may rightfully ask: Are sellers of those properties idiots? Why can't they sell it for double the price Scott pays to buy them? And Scott's answer would be: because no one who wants to buy a house in those areas has 40,000-50,000 cash sitting in their bank accounts. Banks don't lend so little on traditional mortgage and hard money lenders don't go there , so no option for average Joe to get a qualified mortgage or for Jim the Handyman to finance it. But there are John Does who pay monthly rent in excess of what would it cost to finance a purchase of home bought for 70.000-80,000. So, you basically sell this home to a proverbial John Doe, who signs a contract to pay for 30 years little less in monthly payments than what he currently pays anyway to rent apartment where he lives, with no prospect of ever owning it.

5. I would go ahead and buy his training, rather than ask questions here, if I was hyped up and looking to sign up with the program.  But I do the opposite :) And it doesn't cost me money to ask questions on BP. Nor do I see any costs involved (other than time spend searching for properties and making some phone calls) if I ever wanted to try it myself. My only concern is to make sure, if I ever do it, to comply with Dodd Frank/TLA/Safe Acts. 

Quote from @Nicholas L.:

@Eric N.

I totally agree, hitting home run is not as easy as watching a Youtube video :))

And it's generally true for any endeavor, there is one Lebron James for thousands of wannabes. That's the reason there are few successful entrepreneurs, most fail rather quickly, and the rest of the population is working 9 to 5 jobs. 

I will note though that Scott's "slow flip" pitch is that you don't have to do any rehab at all. I looked at his videos and I could locate similar houses at similar prices on Redfin, the ones that need rehab but are not in horribly dilapidated state. You will not find them in Pittsburg, they are more in rural areas, away from cities like Pittsburg. 

Quote from @Jay Hinrichs:

 Why this Youtube "BS'er" How I sold a $36k Slow Flip for $169k in Virginia has not been sued for all the false, misleading information and incitement to violate laws?

In the real world we live in you can't get away with massive crime and massive publicity at the same time, unless your name is Hunter Biden or you donate big bucks to you know who.

Quote from @Nicholas L.:

@Eric N.

there are a lot of properties in Pittsburgh for less than $50K.  some are even in decent neighborhoods.  they are just very old and need big rehabs.  ask me how I know =)

 How do you know? :))

Here is one of flips Scott shows that definitely needed a rehab, but he sold it without touching it: How I sold a $36k Slow Flip for $169k in Virginia

RE: house prices. I searched Redfin by random target zip codes, even in those states where median house prices are relatively high, and still was able to find scores of properties listed on MLS for less than $50,000. I searched for SFH, with 3 or more bedrooms. And many of them looked in decent shape, not 200 years old structure ripped to sticks.