All Forum Posts by: Gilbert Dominguez

I have done these types of deals with my friend/investors. First I found the deal, I arranged for and took care of doing the walk through and listed repair items and got bids from subcontractors. We agreed that my work was worth so much per hour and we set up a time clock I punched in and out of. If I was unable to make it to work then we had a substitute GC on call and he would get paid his bid price or an otherwise agreed upon per day price while he was on the project. We actually made similar arrangements with about 5 other GCs to make sure one or the other could come work on our project. I did not need money every week so for every day I did not collect pay we counted that as my monetary contribution to the project beside my labor. 

Once the project was over we agreed on a 50/50 split of the net. If we were to take a loss then the loss would be paid off or taken but both of on an equal dollar for dollar basis. 

I never handled money. That is very very important. My partner was the money man so he took care of all the money, I presented bills and receipts and he paid or reimbursed me. We both had copies of every contract we had with every subcontractor and I presented the inspection reports signed off by city inspectors and he paid. If I used my own vehicle and paid for gas we agreed how I would be compensated for that. If I provided my own tools for the job we calculated that based on local tool rental fees. Since he owned several properties on which he was constantly having work done we simply agreed he would get any material surpluses to use on his rental properties. 

What were the advantages? He had a GC that would always give priority to his projects. He was also the beneficiary of my many years experience as a contractor. I did allot of the leg work finding deals, purchasing permits, designing project plans, meeting with engineers and handled all affairs with the city building and planning departments. By me providing so many services which are normally and otherwise paid for up front he was able to defer paying for those service until he had a project which had earned him a profit. 

What was the advantage to me. I had a money man to buy projects which I could otherwise not afford and therefore might be spending some months out of the year without work. Plus I was earning money for services which others might not hire me for even though I also had to wait until the project was finished to get paid for those services. However the contractor services I did provide were to be paid, at least a certain percentage of those service was paid to me on a weekly basis. I could not work for long without anything to cover my ongoing living expenses. 

Things worked out well for both of us. 

Well so far I cannot find anything to the affect that it is illegal to do a criminal background check in North Carolina. What I did find simply states you have to give a prospective tenant a notification in writing as to why you did not or would not pass them based on your background check and if you do not provide this written notification the prospective tenant has a right to sue you in court but the fine is not much $100.00 plus attorney fees. That is all I could find as of 7/15/2015

Well its nothing out of the ordinary for an owner financier to make such an offer. All they are after is earning money on their money so they maybe offer an interest only loan for 3 years. However that I know of owner financing cannot ask for a balloon payment in their terms unless they are selling a house to an investor not an owner/occupant. Owner financing must now be an offer for a full amortized loan. For example they can amortize the loan for 10 year, 20 years, or 30 years and be due the payment only with interest if they want or they can offer an interest only loan. The terms of the loan being for only 3 years maybe be possible or even legal but I would verify this with an attorney that is familiar with Dodd Frank and the Safe Act. Which are basically consumer protection laws. 

I would not sign any owner finance loan unless I have an attorney review it. 

Lets say you do buy a $100K house and you do get $1K per month in rent. You will still have some closing costs, insurance, and maybe some maintenance cost associated with owning your rental house. When you go to refinance that house most banks will not lend you 100% of your equity but may limit what they will lend to between 65% to 90%. 

Let us say that you find a lender that will lend you 80% so you can take out $80,000.00. You will not get exactly $80,000.00 because there will be loan origination fees and other fees you will have to pay. So then now the rents may cover your payment plus your other expense, any taxes, insurance, escrow fee etc. 

Essentially you can accomplish the same with your very first rental house. You just need to find a lender to work with you on your terms. It may take a while but you need to shop around. I honestly do not see the issues you are referring to since you own your house outright and you also have $100K in cash available to you. 

In any case you should be able to count your rental income as your income after about 2 years.  I would say that with you owning your own home outright and a good credit history would put you in an ideal situation to keep purchasing more properties. 

I think you are not providing anywhere near enough information. However I think you are talking about an owner financing deal where the owner financed the house with simply interest only for 3 years and then now is calling in the loan. So the owner/financier is now asking the borrower to refinance the house or pay in full cash the loan. Am I correct or is there something more to the story?

Well if you are about to start a job and you feel strongly you will get that job you might hurry and try to get some money somewhere to at least start making the payments on your mom's house. Do something, whatever you can and try to save this opportunity for yourself and also try to see what you can do to help your mom. Try to find someone you can make some kind of offer to in the mean time that will buy you more time. 

You can even try a hard money lender to get a small amount of money to get you over the hill while you start your job. Then work something out but think of what you can do. 

First of all you would never count what you pay for your living quarters as rent. It is not income it is just a cost of doing business. This is an investment property for you even if you are living in it or intend to. If you are lucky and can keep a tenant in the other unit you are doing good. Then if you want to rehab the other side you have to work something out with that tenant or wait until they move out to rent it after repairs. That I know of there is some kind of insurance that protects you against lost rents. I am not saying you will get paid the rent you otherwise would collect because of needed repairs but it is something you might as an insurance guy. 

I will not say anything in this case because the only thing equitable is to consult your attorney about it and your insurance company. I would not try to weasel out of it but learn what is the correct, legal and fair thing to do. 

What about your mother selling you the house or doing a subject to and you take over the payments? If you are unemployed however, or cannot afford the payments on your own then this will not work. You may try to do a lease option and have someone provide your mother a down payment for the option and rent the house to them. 

Whatever you decide though I would not wait going 6 months without making payments I would think the bank will be come knocking on your door any minute now with a notice of default to begin the foreclosure proceeding and in fact I would be surprised if she has not received a notice of default already. The Above suggestion by @Travis Lloyd is ok but I would worry if you have enough time to pull that off but it is something to think about. 

Not only are you not accounting for all of your transaction expenses just simply by calculating the debt service only against NOI your numbers do not work.

While your cap rate may be at 10% your cash flow will not jive based on your debt service, that is your expenses will be too high. Remember cap rate is calculated independent of your own personal financial situation. 

I would say for someone who has $84K to $90K of their own money this would be a good deal but since you are going to borrow or thinking to borrow the $84K your personal finances are too weak and this building as a business will not do you any good. You have to look around for something with a cap rate much higher maybe closer to 16% using the same private money of $84K. Anyway the numbers have to be good including your cash flow not just cap rate.