All Forum Posts by: Jason Dillard

Now you are talking!  Your equity is stagnate.  Activate it by offering paper secured by your property for the new property.  That works really well if you have anything that is free and clear.  Paper is easy to exchange.  It's not as good as cash, but it's close.  So just create some and start making offers.  Create it at terms you want and can truly afford.  Then just repeat to buy the next one.  Use the new property as collateral for you next deal's paper.  If the seller takes paper secured by your property in exchange for thier's, then you now have a new free and clear property to use again.

Check out this "Pyramid of Value" I stole from a smarter investor:

Yes, we have.  Buy the property and give them a note and mortgage that is due upon sale.  Make the agreement that you will repair and put on market and leave on market until it sells.

If the property is free and clear then:  Make the note equal to their price plus a percentage of the net proceeds of sale minus your expense to rehab.  In this case you could even give them a 2nd and borrow the rehab in 1st position from your private lender.

If they have debt:  Make the note equal to the their price minus debt plus a percentage of the net proceeds of sale minus your expense to rehab.   In this case negotiate who will make payment in mean time.

Free and Clear Example:

Asking price is 100k

ARV is 200k

Repairs 40k

Debt is 0

How to buy:

Go get 1st for 40k from private lender (get this to accrue/no payments).

Give seller a 2nd for 100k plus 50% of net proceeds of sale.

At close the 40k goes to 1st...100k goes to seller...and if there was not cc or interest then 60k is split between you and seller.

You make 30k.  If you can squeeze the cc at 1st closing into the 40k(reduce rehab cost a little), then you did it with no money out of pocket.

@Deepak Sharma gotta get up to 1m to get a Fannie Mae small Ballance loan on multi-family. 30 yr, fixed for 10, I/O for maybe 3 years, and no recourse. It's goes up to 6m.

@Alec A. Don't buy it. Just cover the expenses out of your pocket. If you can't afford that, then let parent get a reverse mortgage. It makes more sense to keep property taxes low, avoid gift issue, and allow your basis to step up when you inherit it.

Something hit me that may help new investors understand what a private lender is.  

The word private in this case means that no one knows.  If you keep something "in private" its like a secret.  Private is the opposite of Public.  If a lender is publicly look to put money out, then they aren't keeping it private.  That "private lender" is more like a hard money source.  A true private lender is not in the business of lending money.  They are approached about considering lending and they decide to lend to the person that approached them.  Private lenders used to have money in CD's or were riding the wave of stock market/mutual funds.  A private lender is happy to have a fixed return that's safe.  They feel good about a 8% return that is fixed and secured by real estate that's value is substantially more than the loan they made.  They aren't professionals.  You have to be careful to protect them with the title insurance and hazard insurance that they deserve.  Always have a closing with title agent when getting the loan for their safety.  Meet them at the house and make sure they understand what their collateral is.  Explain to them if your office explodes and kills you and your partners they will get to take that house.   They lend on value of house with out an appraisal.   They may not know what points are.  They may allow the loan to accrue.  You have potential private lenders all around you.  All you have to do is start asking.  I have been doing this for a while.  However, I had to find my first private lender.  He wasn't a family member of friend.  He happened to be a seller.  Money follows deals, deals don't follow money.

I am afraid yall are missing the point.  Maybe this can help:

Purchase info of 50k and loan amount of 85k from private lender.

Current Listing is UC at almost full price.

http://greenville.paragonrels....

That's not nice calling all my private lenders idiots. They have made it possible for me to do be a full time real estate investor for almost 20 years. I would never take advantage of a lender. We give them a 1st that's well below the ARV. We escrow the money to do the work. They get big 1099's every January. I have had problems from time to time and have had to use my cash to keep them whole. Overall, 95% of the deals we have nothing in them. You have to treat your lender like they are gold. The key is to always get a good deal for them to lend on. In this market, it's hard to find a deal. It's not that hard to find money. I don't use banks for houses unless I just have to. Having private debt opens up doors for future deals. Some lenders have become partners on larger deals. Lenders refer me more lenders. If you aren't spending as much time "making offers" to find private lenders as you make offers on deals, I believe you are missing an huge opportunity.

They don't know that they are private lenders.  They are people and their SDRA's that want a fixed return with safety.

Gotta make a ton of offer to find a great real estate deal.  In the same way, you have to make a ton of offers to potential private lenders to find one that will lend more than you are paying.  If you make enough offers to find money, you will eventually get the terms you need.  We have done over 300 deals where the lender provided the cash to purchase and rehab the house.  

The best thing you can do is educate yourself first.  I would recommend taking some CCIM courses to get your knowledge base up.