All Forum Posts by: John Gamboa

@Mac Usher,

Sounds like a potential winner. For me, I need a bit more info and I can give you my opinion on what I would do.

Let's look at them individually and see where we can make it win-win. Answer these for each property and let's see what we can do.

Are the properties paid off - if not, what are the balances? Is the owner willing to sell with no down payment? What's the lowest monthly payment he is willing to take? What are the going rents for similar properties? What's the market value of the houses? What is the lowest price he's willing to take for the houses?

@Frederick Jackson, how are you buying it? Cash or?

Great find, @Mike Watkins is suggesting with the 1003, mortgage broker, and DTI is to prequalify your lease option buyer so that you feel comfortable that they are able to make the monthly rent and close on the property within the 2 years (or 3-5 years) or can fix whatever issues they have that's preventing them from buying now so that they can close within the terms of their option. I would advertise the house for sale as he also suggests so you can have a list of buyers and take your pick from them.

I would do this deal as follows.

Buy with a lease option it for $65,000 and $600 a month with a 5 year option term, minimum 3 years, rights to sublease, etc. 

Is it in need of a lot of repairs? How much in repairs. If not, or not much needed, then I'd advertise it for sale for $110k price. I would NOT take less than market rent. That's monthly cash flow! $3k for up front is good enough for me if I don't have much closing costs to pay for.

Do you have an attorney that will help you with the contracts and closings? I suggest getting one.

@Brandon G.,

Each lender has their own criteria. With regards to rents and lease payments, some want 2 years "seasoning" to count a percentage of rents. Some require less seasoning as @Adam Bartomeo mentioned. Meet with a mortgage broker to see what kind of loan programs they offer and what they count towards income, then you'll know what you can structure to help the sellers out. 

See what seller finance options are available to you to buy their property. Some lenders will take your payment to your seller in full rather than a percentage compared to a lease payment. This is also a question you can ask you mortgage broker.

@Evarine Karanja,

I'm in the same boat as you with 5 kids of my own and work more than full time. It wasn't very hard to decide how to go about getting into the REI business. It would take forever to save for a down payment so I chose the creative route but to find creative opportunities consistently, you'll need to have a marketing plan and/or budget. Where can you cut expenses? Can you get a part time job to pay for marketing and save for closing costs when needed? What strategies fit your situation and location?

From your list of items, I think #3 should be your first step in addition to learning creative strategies like what @Rob Brautigam and @Chiagozie Fawole suggest. 

Read @Brandon Turner's book so you have the creative low money down strategies in your bag of tricks. Also look up @Brian Gibbons in the forums. He knows a lot about creative strategies and coaches investors in those methods. Listen to @Wendell De Guzman #65, Aaron Mazzrillo #37, Karen Rittenhouse #2 podcasts because they talk about sub-to, seller finance (creative) deals, among other great topics. There are a ton of podcasts that have great ideas, but those stand out in my head. 

Hi @Amanda Reynolds,

I think @Gerardo Dominguez has good ideas - look into lease optioning it or buying it subject to. Buying it subject to will require you pay closing costs, most likely, but if you have zero cash then, sandwich lease would be an option.

First, do you have an attorney who will work with you? IMHO, you will need one especially if you plan to creatively buy this one. Each locale has different laws you want to make sure you abide by.

What is the ARV - the value of this house in good condition? I posted a little quick way to get ARV on this post. What are the seller's current payments (PITI)? What type of loan do they have? What is the market rent for a house like this one? Is the seller willing to sell for what they owe? Are they current on their payments? Does it need repairs? About how much do you think it'll cost to repair it? Not cosmetic stuff, real repairs like plumbing, roof, any damage, etc.

@Jason Fraser,

All of the following is IMHO...

I would buy with seller financing but get the price lower citing the repairs required. I would buy it under LLC or land trust - check with an attorney. What are the rents for that type of property? What's the seller's T&I on a monthly basis?

My exit - Sell on Lease Option or wrap or land contract if the numbers give you a profit. (I don't know what is common where you are so speak to an attorney about what's customary between wrap or land contract). 

Work your numbers and see if this deal makes sense. Your sales or option price minus your purchase price + closing costs should be positive. Your incoming seller finance payment or lease payment minus your outgoing PITI to the seller's mortgage company should be positive. Your option fee or down payment from your buyer minus whatever you give your seller down ($10k in this case if you decide not to negotiate it down) should be positive. I would tell the seller that I won't close until I locate a buyer so I don't have to put any money down myself.

I agree with @Account Closed, no room for a wholesale deal.

Hi @Jamael Reed

I think you can learn do your own comps. SFR sales are listed in Zillow or Trulia. Sales are what count, not listed, not Zestimates, only actual sales. Don't ever use Zillow's Zestimate.

Here's how I do it. Look for recent sales near your subject property (less than 90 days, within 30 are great), same bed and bath count, and close in square footage. Close in distance is important. Beware of dividing lines like major roads, railroads, streams, strips of empty land, city or county lines, etc. Crossing a major divider can drastically affect price.

The more similar and the more recent then the better the comps. Try to find 3. 

If the houses are too different or sold too far back in time, then try to find the $ per square foot for near and recent sales then multiply by your square footage. $/sq ft is listed on recent sales on Zillow.

Beware of distressed sales or REO sales which can skew your prices lower. MLS listed homes are best to find retail prices. All of this, of course, IMHO.

Hi @Shawn Connors,

You can ask her to go lower and explain it however you want. If she balks, and says she accepted your offer in writing, you have to perform or back out and lose your deposit. The worst that can happen, she says no deal, and you either buy it, hopefully wholesale it, or you fix it and sell it, or walk away and lose your deposit. The good thing is that 2.5 years got her nothing. You are probably her only option at this point.

I would try and see if you can find another way to get her what she wants and for it to make sense for your business. This is business but you're also trying to solve her problem. Try for a win-win. If you are losing with the offer you made then I think that's not good business.

Say you really want to make it work for the both of you and let her know after reviewing the numbers your offer no longer makes sense for you. Then ask, "Are you open to discuss other solutions/options, Mrs. Seller?"

I need more info. What's the ARV? How much in repairs? Is the house livable? What are the rents in the area for a house like hers. Does she need some money up front or does she need all of it now? My preference is no or little money up front. Is it free and clear? If there's a mortgage, what is owed and what are the payments? What are taxes and insurance.

Can she take monthly payments, no money down, until the purchase price is paid off in full? Can she take payments for a number of years - say 3 to 5 years - then get the rest in a balloon payment? Maybe you can offer a seller financing deal and pay her a monthly payment as you put a lease option tenant-buyer in there who'll pay you market rent plus a little more (because you're giving them an opportunity to buy without bank qualifying). Their payment should be high enough to cover your monthly outlay (hopefully cash flow a little bit), and then work with them to buy and cash you both out within a year or 2 for a price higher than what you promised your nice lady seller. 

Hi @Nicole Smellie! Welcome to BP. 

Are there any houses for sale in your area that are fixers with the sellers asking for all cash buyers? If there are, what are the prices like? Call them up. Do they have enough spread in them for repairs, holding, selling, and buying costs? Look up MAO here on BP and brush up on the math if you're not sure what a good deal is yet. If they look like decent buys for a fix and flip and they are listed by the same seller or have the same contact info then you probably found yourself an active wholesaler.

You can also visit your local REIA and you might want to ask around for recommendations of good wholesalers. That's how Aaron Mazzrillo started. Listen to podcast #37 here and hear him explain how he found his wholesaler which got him his first fix and flip.

How to find them? Market like a wholesaler. Direct mail (good podcast by Michael Quarles here, magnetic signs on your car, pass out business cards. Mail to expired listings. Ask Realtors for help with getting that list. If one doesn't, ask another. Call for rent ads and see if they'd like to sell on a lease option. (I'm preaching to myself with all this advice!)

Good luck!