All Forum Posts by: Jeff Rappaport

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@Allende Hernandez, I should preface this by saying I have not rehabbed a house in about 10 years. However, as a wholesaler I know what numbers rehabbers need to make a deal work. I don't mean to be critical but that is a deal I would not even consider to rehab. Actually, based on the numbers you listed above my offer to the seller would be about $145K. I would want to sell it to a rehabber for about $157K. Even if the property only needs $5K in rehab I would not try to sell it to a rehabber for more than $165K. Now, that offer is based on the Utah and Idaho markets where rehabbers are paying up to 80% of ARV minus repairs. I know Florida is a hot market but you cannot pay much more than that unless prices are going up so fast you expect multiple offers for more than the after repaired value.

I am making some assumptions here since I don't know how you plan to buy or sell this property.  Most rehabbers I know borrow a portion or all the money to purchase the property.  Some are able to borrow the rehab costs as well.  Will you be using hard money, conventional financing, private money or your own?  Do you plan on selling this property for full retail value on your own or with the help of a realtor?

I have a property I just advertised on BP that is located in Boise, ID. The ARV is $380K and needs $10K in work (all it needs is some carpet and paint in a couple of bedrooms and landscaping in the backyard). I never estimate a $10K rehab but this house needs very little. I am selling it for $285K. When you calculate two sets of closing costs, hard money origination fees, holding costs, rehab costs, the murphy factor (never goes exactly how you think it will) and realtor commissions there is still a $30K profit. I think most rehabbers would say this deal is a little tight! If this deal is tight what does that make the deal you are working on?

I don't mean any offense but before you jump into that deal make sure you know your numbers!

Purchase price -$285K!

Terms:  Cash

Am in possession of an assignable contract on the property.  Will be assigning it prior to closing.  

11988 W. Alliance Ct Boise, ID 83713

6 bed/3.5 bath

3812 sq ft

3 car garage

.21 acre

Built in 1990

Taxes: $2,866 (fairly low since I am selling a 1600 sq ft home in Boise that is taxed at $3,050)

Needs:

Carpet in downstairs bedrooms and flooring in great room or home theatre

Paint in some bedrooms

Backyard – has a big above ground pool. Needs either the deck to be finished or torn down. The seller was going to landscape the rest of the backyard but is getting divorced instead. Some money needs to be spent on landscaping. I figure $10K for everything.

Kitchen and bathrooms are updated with granite counter tops.  Flooring in the rest of the house is good.  Roof, furnace, electrical, plumbing and air conditioning all in excellent condition.  

Don’t have many good comps for the area due to the size of the house. Most houses are considerably smaller. Everything I have seen would tell me that this property fixed up will sell at a minimum of $95-$100 per sq ft. 362,140-$381,000.  It could easily be more than that. You could probably turn around and sell the property as-is for $320,000.

For more information please contact Jeff Rappaport 801-209-2945 or at [email protected].

@Robert Ferrell, one of the things you are looking for to get someone to finance with no money down is debt relief!  Is the property vacant and costing them money every month? Is there little to no equity in the property preventing them from listing it without coming out of pocket to get the property sold?  It is really about motivation!  No money down can also come in several forms.  I just structured a home with owner financing with $8,000 down and am selling it with $28,000 down.  The $8,000 did not come from me so in essence I structured a no money down deal.  

Listen to @Wendy Patton when she suggests making sure you know the rules and laws in your area.  Owner financing is great but you need to make sure you aware of all the pitfalls.  

@Giacinto L. there are a number of ways to present your offers to sellers.  I like to make multiple offers.  When I prescreen the seller on the phone one of the questions I always ask is "would you consider taking payments for your equity."  If the answer is anything but "no" I put together a multiple option Letter of Intent.  Depending on the situation and what the seller wants, I try to put together 3-4 different options for them to choose from.  Two of them are usually owner financing, one is a rent to own and the last one is a cash offer.  I then follow up with them so we can determine which option best suits their needs.  I find that the seller is much less upset with me in regards to the cash offer and sometimes they even take that option.  Once they see the different options written down they tend to like getting their price for the property.  That means I get owner financing on the property.  

You could also just ask them.  Something like "I can pay you blank for your property in cash but I could pay you significantly more if you are willing to wait on the balance of your equity for awhile."  You can always make a cash offer and when that gets turned down move to owner financing so you can offer them more.  

Some suggestions I think would be helpful:

Do not ever mention "would you do some owner financing."  I find that terminology has a negative impact on sellers.  

Don't say "would you look at doing some creative financing."  Another term sellers don't understand or like.  

The last suggestion is that I would never start throwing out numbers.  For instance, a seller tells you that he/she might consider taking payments for their equity.  They ask you "what does that mean," or "what kind of down payment are you going to come up with."  New investors seem to get totally side tracked when sellers start asking questions.  Numbers and ideas start shooting out of their mouth.  How can you possibly answer this question unless you have done some due diligence on the property?  Have you found out what the seller's needs are financially?  Keep in mind everything you say to a seller can create an expectation.  If you give the seller a unrealistic expectation you will need to overcome that later or lose the deal!

You will never get a property with no money down or no interest unless you keep your mouth shut until you know what the seller needs.  If you spend the time, build rapport and ask the right questions most sellers will tell you what their needs are and then you can structure something that works for both of you.  

Hope that helps!

@Andy Cross, Not sure what you are trying to accomplish.  Are you trying to buy the property so you can rehab it?  The next question is can you buy it cheap enough to even make it a deal?  Based on the markets I work in I would need to buy the property for cash at about $130K.  I am not sure what rehabbers will pay in your market.  That might be the first thing you want to know.  However, lets look at some scenarios based on my numbers:

1.  Cash - purchase price of $118,300.  This gives you some room to negotiate if necessary.  You could assign the contract to a new buyer for $135K-$140K maybe even a little more depending on the market.

2.  Owner financing - purchase price of $125K.  Down payment of $50K with a seller carryback of $75K due in 8 months with no payments or interest.  You or your buyer would borrow the $50K in 1st position on the property and would only have to come up with the rehab costs.  Any lender would loan $50K in 1st position against a property that could be worth $250K.  If you have a good lender and you could work it out with the seller you may be able to borrow a $100K on the property and even have most of the rehab money.   If you were going to assign the contract the price would be $140K with $65K down.  Make sure you let the seller know you will be borrowing a little more on the property than the $50K or make the buyer pay your assignment fee out of their own proceeds.

3.  Owner financing - Purchase price of $130K.  Will give the seller $10K and secure the balance of $120K with a 1st mortgage or trust deed and note with no payments or interest for 8 months.  At the end of the 8 months the entire balance is due and payable.  You assign the contract for $25K down and a purchase price of $145K and give your buyer a property that has built in financing with no need of high interest hard money.

That's just a few scenarios.  I am not sure why you would want to stay in the middle of this project.  You mentioned you have no capital.  Why not structure a deal, assign the contract and get paid about $10-$15K in a couple of weeks?   If you wanted to actually do the rehab (I don't suggest) find a hard money lender that will lend the entire purchase price and rehab costs (not likely since you don't have a track record).  Bring in a partner with some cash and get one of the owner financing deals accepted.  There are ways to do this just not sure why you want to.  

@Evan Thomas, Not only is it a good idea but a great idea!  The best deals are found off market and by marketing to these people you can find some great deals!  I am mostly a wholesaler (although I will keep the ones that fit my criteria) and I sell a bunch of properties to investors that are looking for buy/hold opportunities.  There is no problem needing a mortgage except you may not want to advertise that you can close in 30 days or less.  

I market to absentee owners, owner occupied, multi-family, vacants houses, high equity and little equity.  It really depends on what you are trying to accomplish.  I create multiple offers to just about every lead I speak with and get a number of properties with owner financing.  If I can create great terms I can either sell my contract to another investor or keep it for myself.  Just make sure if you are going to deal with any creative financing that you are clear about the many rules and guidelines you must follow.  

When I started in real estate back in 2000 all I did was find propeties I could take over "subject to" the mortgage with little to no money down and then I would rent to own them to a tenant/buyer.  I would collect a non-refundable option deposit from them up front, create a cash flow every month and if the tenant/buyer exercised their option down the road got paid again.  If they did not exercise their option then I had a buy/hold where my tenant was responsible for all utilities, maintenance and repairs.  All I had to do was collect the rent and watch my principle balance of the property go down every month.  

So, when you say you would need a loan from a bank to buy properties I would tell you to start educating yourself on the world of creative finance.  You might like it!  

@Wes Rowlette, I should start by saying it is absolutely fine to work in another market away from you live.  I actually work in your market but live in Utah.  With that being said, there are certainly deals in Meridian, Mountain Home, Boise, Nampa and surrounding areas.  If you are looking for cheap rentals look in Pocatello, Idaho Falls and Mountain Home.  

The real question is what are you trying to do? Are you planning on finding a deal that you can put down 20% and finance through a bank? If that is the case, you may have to look outside your area or at least start trying to find off market deals (properties not listed on the MLS).

My real suggestion is to start learning more about creative finance.  Learn how to take over properties subject to the mortagage.  Create owner financing through the seller.  Use rent to own to control properties.  You can actually acquire properties without any money down and not have to qualify for any conventional financing.  There are even ways to be in the middle of a transaction making a very nice monthly cash flow without any maintenance, repairs and tenants.  

Make sure you also read up on the Dodd Frank Act and the SAFE Act.  You don't want to violate the law while doing these type of transactions.  

If you choose to invest out of state make sure you know what you are investing in.  Become familiar with the area including the crime and employment rates.  Are people moving to or from that area?  Any new big employees moving to the area soon?  Close to a College or University?   Know the values of the neighborhoods you are dealing in.  Be clear on your goals!  Are you in it for the monthly cash flow or the appreciation over time?  Some areas definitely appreciate quicker than others.  Some areas are more stable rent wise than others.  What I am truly saying is make sure you do your due diligence.  Don't take someone's word for it.  Do your own research!

Hope that gives you something to think about.  If you have further questions pm me and I would be happy to chat with you.  

Great 24 Unit Apartment Building in Pocatello, ID! You won't believe the price and Owner Financing Available!
Huge upside! Great cash flow! Cap rate could be 11-12%!

We are in possession of an Assignable contract and plan on assigning it to an end buyer! We are marketing the purchase and sale agreement on this property.

Pocatello rental market is still very strong with a high demand for rentals. The lower income units are fairly easy to rent. This property is already approved for Section 8 tenants.

723 W. Lewis Pocatello, ID 83204
Close to the University and downtown
24 units - 11 studio, 12 one bedroom and 1 2 bedroom units
Approximately 10,000 sq ft
Built in 1940
Taxes $3,492
Separate meters - Tenants pay heat and power
Owner pays water, sewer, garbage, snow removal, landscaping and common area maintenance.
17 Units occupied - 7 vacant
Community washer/dryer - small additional income
Repairs - Needs a new roof; some foundation work (cheaper and easier than you think); cosmetics; chipping stucco on the exterior.  Units are small so the cosmetic work will be cheap.  Most units have new carpet, paint and appliances.

Current income:  over $5,200
Pro-forma income:  over $7,400 with occupying vacant units.

Value play - Increase rents by $30 per unit - rents will still be the lowest in the area! Will put the gross income to over $8,000 per month or $96,000 per year. Will increase the value of the building to $650K+!  Use 45% of gross income for expenses and you are still left with $52,800 net income.

Terms:

Purchase price - $425,000

Down payment - $325,000 can borrow this money against the property in 1st position.  You may be able to borrow the entire amount!

Seller will carry the $100,000 for 2.5 years with no payments or interest.

For more information contact Jeff at [email protected] or at 801-209-2945.

@Zachary Singer, Good for you to start in real estate so young!  I would like to preface these suggestions with I am not an attorney and am not familiar with the laws in Pennsylvania.  You should consult with other investors and a good real estate attorney.  I am currently doing several deals just like you mentioned.  

I would prescreen the seller and find out some info on the property and the situation.  Most importantly, what is the house worth, what do they want, how much do they owe, what is the monthly payment, what are they currently getting in rent and what kind of condition is the property in.  

I would then construct several offers and present them in the form of a LOI. I would probably include two owner financing scenarios, a rent to own and a cash option. I would go over each one and ask them to pick the one that best fits their needs.

Once they tell you which offer they are interested in I would be clear that you will not be living in the property.  You will either buy the property according to the terms agreed upon or you will be finding the buyer that will be occupying the property.  You may want to buy the property if there is little to no money down, a monthly spread and some equity to be paid to you at the end of the term.  The money does not need to come from you.  It can come from your buyer! Tell the seller you need 30 days to do your due diligence and to test the market.  If at the end of the 30 days you have decided not to buy the property yourself or find an end buyer that you will either walk away from the deal and the seller will owe you nothing or you will continue on until a suitable buyer is found.  You will spend your time, resources and marketing budget on making this a win/win situation for the seller.  

Keep in mind you should not be saying you are marketing the property.  You will be marketing the contract you have with the seller.  You can even let the seller know that you would be happy to let the seller have final approval of the buyer or renter.  

The last thing I would mention is have a working understanding of Dodd Frank.  These are rules set up for owner financing and rent to own can also fall under the guidelines.  If you are going to be assigning the contract to a new buyer you have to make sure the seller has not done any other owner financing in regards to other properties within the last year to owner occupants.  You don't want to put the seller in a position where they can get in trouble for violating Dodd Frank rules.  

If you have other questions pm me and let me know specifically what I can help you with.  Good luck!