All Forum Posts by: Dory Peters

Great idea; I'll keep that in mind.

I'm negotiating on 5 4-plexes in North Las Vegas (89030), that I plan to wholesale. Supposedly, 4 of them have positive cash-flow (I'll need to verify this), and the other one requires some work.

I'll update this post as I get more details. For now, I'm just trying to get a head's up, and see if there's any interest.

Actually, although banks normally don't do assignments on REOs, I have heard of that Wells Fargo has accepted a few offers with an assignment in KC (and a few other markets).

However, the person who got that offer accepted, did state that he first got the offer accepted without the assignment, and added the assignment in later (as part of the negotiation).

Incidentally, I've had a few lenders accept offers on REOs with an EMD of $100-$300, and I know of others who have done the same thing. There aren't really any hard and fast rules; the banks are making it up as they go along; and the government is winging it too.

Actually, it's my understanding that land trusts are more for asset protection. It's more of a deterrent than anything else for anyone casually snooping around. A determined individual/group could take a few educated guesses and track the benefactor down eventually.

A land trust probably wouldn't work so well on any commercial properties purchased with a subject-to mortgage, because the underlying mortgage typically will get called in 3-5 years anyway.

I agree with 99% of what raz stated. However, a cap rate can be an interesting piece of information to have for the purpose of structuring one's deal with positive leverage (minimally with a spread of 2 points). Plus, I use .95 * .65 * gross rents (so my figure is slightly less than raz's), and I try to structure my deals mimimally with DCRs of 1.4 (occasionally I'll go as low as 1.2).

No offense, but actually I don't have to be familiar with the specifics of that market. Although I don't invest in AL, certain market dynamics are universal to every local market in the US. For example, given a sufficient amount of time and to do the due diligence, one can always find the following data: median sales price (MSP), absorption rate, amount of inventory, average cumulative DOM. Nearly 80% of sales in any arbitrary market--at any given time--transact within +/-20% of the MSP. Retail buyers go after roughly 75% of them, and the avoid the remaining 25%.

My point is that one can use a systematic approach in any market to find the kinds of homes that most other (retail) buyers don't want.

That's music to my ears, and that's exactly what I'm looking for: the homes with problems. Again, I target a subset of the remaining 25%.

Please let me know next time when you find one of these junkers! :D

Did you attend a foreclosure offer to bid on that home? The only time I'd even consider bidding on a property is at a foreclosure auction (which I rarely attend). Again, I won't compete with other buyers.


IMHO, you offered to pay too much; your margin on that transaction would have been at most $11K (assuming you paid cash). Depending upon your holding costs and provided you'd have not cost overruns with the rehab, you could have lost money on that deal. I probably wouldn't have paid more than $10K on that place.


Are you basing your appreciation play on any market fundamental data like: jobs, population growth, etc? Have you taken a look at a large enough sample of historical data on the sales in that area over at least 20 years? How can you be so certain about the appreciation in this case?

Before I get into the meat of my question, I just want to say that I saw a post elsewhere (http://activerain.com/blogsview/459350/Ive-Sold-and-Carried-Paper-Can-I-Still-Close-My-1031-Exchange) that shows the caliber of talent we have here on BP. :rock: The irony was that I just finished reading though 6 or so posts where Bill Exeter gave some great advice--only to have confirmed from another independent source that he knows his stuff cold. :cool:

Although Bill's advice (given indirectly) in that post answered my original question, I'd like to expound further upon his answer here.

The question (someone else asked the same one):

Increasingly, sellers are becoming more flexible and carrying paper (taking back a note) in order to close escrow on their investment properties. So, how does that work in the context of a 1031 exchange? Can it still be done?

The answer:
Sellers who have created a seller carry back note on their down-leg property (which is a good technique for getting top dollar and a quick close), have several options when moving into their up-leg property:

(1) Ask the seller to take an assignment of the note as part of the offer. Usually sellers are not too excited about this option.

(2) The up-leg buyer (note holder) could contribute cash into their own 1031 exchange (boot paid) in order to complete the 1031 exchange. Then they would get the note assigned back to them AFTER the 1031 exchange has been completed (boot received). The boot items net to zero so there is no tax issue.

(3) Sell the note for cash, which is then credited to the up-leg seller to complete the exchange. It's important to remember to have the exchange company listed as the beneficiary on the note. It would also be a good idea to consult with a note professional before you create the note so you know you can sell it for minimum discount.

I'm not sure I fully understand what is meant in statement (2) of the answer: "Then they would get the note assigned back to them AFTER the 1031 exchange has been completed". Is the up-leg buyer or is the end-seller the assignee? The "assigned back" seems to infer that the up-leg buyer is the assignee, but maybe I'm missing someting, because that doesn't appear to make much sense.

Additionally, I'd like a clarification on part of statement (3) of the answer: "It's important to remember to have the exchange company listed as the beneficiary on the note." Why does the exchange company need to be listed as the beneficiary on the note? I thought the beneficiary would be the note buyer. Am I missing something?

The reason why I'm asking these questions is that I'm actually working on a deal where I intend to use these transactions as part of my exit strategy.

I've also heard the same noise, and I ignore them. I submit offers that make sense to me. I almost always submit every offer as a multiple offers contained in an offer format: 1) one offer is with 100% seller financing, 2) one offer is all cash, and 3) at least one offer has some cash and some seller financing. I ask the seller to choose the one that makes the most sense to him/her/them. I learned this technique (sometimes referred to as transaction engineering) from one of my mentors.

I actually had a commercial agent in Dallas get pretty upset with me over the format of my offer. He told me that "in my [20+ or something like that] years, I've never seen an offer like this one" insinuating that it was too complex. Whatever. That mentor (who specializes on residential foreclosures) has been using them for years, and he's taught hundreds of people over the years to use this same technique. So, I knew I wasn't the only one using them, and I've been using them for a while nationwide on both residential and commercial properties. He didn't like my answer; I told him basically "it is what it is" and to let me know when he was serious.

By the way, that mentor also taught me to never defend my offer. After all, it's usually a waste of time. Most sellers (and their agents) don't care about the reasoning behind the structure of one's offer; they only care about getting their price. In the end, the seller will accept/counter/reject the offer anyway.

Originally posted by Robert Jenkins:

Another way is an AITD (all inclusive trust deed) or WRAP they'll call it. It's little more shady, but still legal.

AITD is a form of seller financing, and there's nothing shady about it--as long as it's structured properly.

Originally posted by Eddie Ziv:

I don't want to get into your analogy which I think is wrong, but I can only give you a real life example.
I was looking for a REO & HUD SFR ($25K-35K) in an incorporated area called Center Point near Birmingham, AL. I've been shopping around the area since November last year and had couple of deals that unfortunately fell through. The area at the time was flooded with properties in that price range. By April this year, the inventory for that price range dropped by 40% and by June it was down by additional 25%. Yes, there were some investors buying but lots of families, and first time buyer who jump in taking advantage of the federal incentives and what not.

That retail buying impact my ability to buy within certain price range. Those who bought these houses, by and large, still remember the old prices ( Some of those $35K houses was sold only three years earlier for $90-110K) and for them, it was a big bargain.

Eddie, it sounds like you like to shop for pretty properties. If that's the case, then it's no surprise that you have competition with the retail buyers.

Have you tried to look for uglier properties with cumulative DOMs >= 120 days? That's what I like to look at, and I bet I could count on one hand--minus a few fingers--the number of retail buyers competing with me on them. For example, I just made an offer on a property with a cumulative DOM > 1000 days; it has a jungle growing in the front and back; and it's just as jacked up inside as it is outside. Stated another way, this place is torn up from the floor up--just as funky as I like it.

Besides, another "hidden" benefit about that property is that a retail buyer would have to purchase it with cash, because no conventional lender would dare to lend on it.

I bet there's at least 1 or 2 of these kinds of properties in the markets in which you invest.