All Forum Posts by: Austin Fruechting

You've run the numbers on the conservative side (60% expenses), with a 15-yr note, and you'll still cash flow. Good on you! Go for it!

Oh, or there are many other creative ways too if the seller won't carry back. You could get a HELOC on the duplex you live in. You could use the zero percent cash advances from some credit cards (usually charge a one time fee and then zero percent for 6-18 months). Or you could use a private lender/hard money lender.

@Matt Masulis - thanks for checking out the blog!  It could be worth asking for just a carry back.  Some sellers that would never seller finance may still do a carry back because they're getting the majority of their money upfront and have much smaller exposure than financing the whole thing. 

Say bank will lend with 20% down.  The seller can carry back some, to all of that. Sometimes banks will still want you to come in with some to have skin in the game.  So say 5% from you, 15% seller carry back, and bank 80%.  Or maybe 10/10/80.  On a $100k property he's still getting $85-90k to pay off his existing mortgage, put cash in his pocket, be done, and still get some monthly payments.  That's a much different scenario than a seller getting a down payment of even $40k and financing the other $60k. 

See if the owner will do a carry back. He'll still get the purchase amount minus the amount he carries back. Then the amount you would be saving up can go to making payments to him.

Cash flow per door is a weird metric...  Let's say I cash flow $200 per door, but that door only cost me $12k (20% cash on cash). Someone else cash flows $400 per door but that door cost him $40k (12% cash on cash). What's the better deal? Who will actually achieve financial freedom the soonest?  So why worry about how much per door you are cash flowing as compared to others? 

I gauge my investments by their cash on cash return, which is much more important if you are investing for cash flow trying to gain financial freedom.  If you're investing for appreciation that's a different ball game. 

Ppro-formas are junk. Income is usually right, but expenses are usually way under-stated.  Learn the real expenses for any types of properties you would be interested in and create your own spreadsheet for analyzing deals. 

Many (but not all) REO situations I have been involved with don't negotiate. They just take the best offer, or will ask for best and final offer if multiple bids. I would say just offer what you are willing to pay. If they ask for best and final stick to your offer. But if they do just take the highest bid don't risk losing a good deal when you would have been willing to pay a few thousand more and didn't offer it. I've been there and kicked myself for not putting my best offer up and wondered if I would have gotten it. Also, if $80k is where you want to be, consider offering $80,500 in case others have $80k as their bid.

If you were in there shoes what would you want? For something that will be 3-6 months I would say around 10% APR with no points should be solid for short term private lending without giving up too much. You want to make sure they're happy with their returns and keep lending. If you keep doing flips and they keep lending where they're lending year round 8% no points would be solid.

Edit to add: I just gave a private lender 12% with no points even though they may have done it for 8%. I only needed $50k for probably 3 months. They'll get $500 per month. The difference from 8% to 12% doesn't make much difference on this to me, but makes them happy. 

I'd go with the 25 AM and have an extra $9,500 per year cash flow.  Use that to add value and force appreciation or use it towards the next investment.

@Katherine S. -  Best of luck on your offer, hopefully we both get good news tomorrow!  Speed is definitely a key in a strong market!  That's another advantage of looking at numbers very frequently.  It gets easier and easier to confidently move quickly.