All Forum Posts by: Joshua Nudell

@Account Closed,

No lender (institutional, private or hard money) is going to finance a deal 100% for a newbie real estate investor.  You're going to have to find a way to come up with some of the money (family loan, line of credit) to show you have skin in the game.  Otherwise, what's to stop you from walking away when things don't go your way, or get "too hard" to continue working on the deal.  It wasn't your money anyway right?

If you're really interested in getting started, join the local REIA, talk to people, network and maybe offer to provide some sort of service that's useful for investors who are already doing deals. Get some experience under your belt, and you'll find it easier to obtain financing from private lenders and hard money lenders.

@Account Closed,

I'm not sure if anyone addressed this yet, but the interest charged by a lender (private, bank, hard money, etc) is calculated annually (99% of the time), hence the term APR (annual percentage rate). So that 11% is not divided by 3 for your initial question, it's 11% per year, which is how @Chris Simmons gets his numbers for the interest only payment due on $80K.

Hi @Claudio Golia,

What are your goals?  How much would you feel comfortable investing to start?  What kind of monthly resources would you be able to put towards your real estate endeavors?

Depending upon what you would like to do, you could get started with low or no money down (see @Brandon Turner's book on this!).  If you want to discuss some strategies feel free to PM me, because I have some suggestions in this area, but they depend on your answers to the questions above.

@Dave B.,

As @Bill Gulley mentions EVERYTHING is negotiable with seller financing, which means there is not a "typical" anything with seller financing.  If you have the opportunity, meet with the seller and have a discussion about what they are looking to do.  Are they retiring? Do they need steady monthly income? Do they want more cash out of the deal, or are they happy holding a large note and collecting a monthly payment? What are their plans once they sell this property?  Are they willing to do 100% financing (no banks involved)?  What is the least amount of down payment they would take? Etc, and so on.

If you're a good people person, and can form a rapport it will go a long way in making negotiations for the purchase of this property seem like a breeze.

Do a forum search on BP for seller financing and see what other people have put together.  I'm sure you will discover ways to make a deal that never occurred to you.

It sounds like an interesting deal, and I hope you find a way to make it work for you (and the seller).

@Micheal Rieves,

You are forgetting:

Maintenance @ 5% ($4,551)

Property Management @ 10% ($9,102)

Capital Expenditures @ 5% (not 10% because you stated some of the important stuff is newer like the roof, windows & siding) ($4,551)

So your cashflow of $24,000 is actually $6,000.  That's horrible for a $120K investment (in real estate anyway).

As @Joel Owens says, this is not a deal and looks to be overpriced.  Especially for such low rent units.

@Sam Dal,

From the sounds of it, it looks like the seller, for whatever reason, has decided not to sell you the house.

I don't think there is a point in trying to sue the seller, unless there was some form of earnest money paid, and then only to get the earnest money back due to breach of contract or something along those lines.  Trying to force someone to sell a house is not good business in my opinion.

I'm not a lawyer, and this is not legal advice.  If your attorney does not know of the answers to some of the questions you're asking here, you might want to look at getting a new attorney.  Additionally, any type of litigation is going to be $1,000s if not $10,000s, which is why it does not make sense to pursue (I think you're being optimistic with your 50/50 chances).  The fact that your attorney thinks you should sue is odd.  I would make a few phone calls to some other real estate attorneys, and explain the situation to them and see what they say about your situation.  Maybe they would agree with your attorney, maybe not, but at least you would have professional legal representatives providing advice, rather than strangers on an online forum (no offense BP!).

@Jon Holdman I've seen you mention investing in notes in a couple of your responses to SDIRA questions instead of buy & hold real estate.  Are you recommending non-performing, or performing notes?  If they're non-performing, who is doing the "workout" of the note (is it a conflict or non-allowed activity for the SDIRA owner to workout a note)?

@Kenda Bell Are you talking about purchasing a property at a tax lien sale?  You mention redemption, and that usually means tax lien sales and/or foreclosure in certain states.

If you bought the tax lien rights, then you would have to foreclose on the owner after the correct period of time for the area the property is in.  That involves legals fees and court filing fees. You'll want to speak to an attorney who is familiar with tax foreclosures if that's the case.

What is the property worth?  Have you inspected it?  What were your plans for it when you bid on it?

@Daniel Flesher The 50% rule is not a hard and fast rule, it's just a gentle guideline and depending upon the area you're investing in can vary a lot.  It's good for a quick eyeball of a potential deal, but you're better off trying to get real numbers for your expenses.

As others have mentioned, cap rate does not come into the equation at all from a lender perspective for anything non-commercial (4 units or less).  They will only use comps to determine the value of a property that they consider residential (4 units or less).  You can, however, use cap rate for your own internal calculations on whether a property makes sense or not, but you have to know what the comparable cap rates in the area are for similar properties, and that's going to be mostly guess work.  As you mentioned, using a 10% cap rate makes then numbers look way off base, but you're not looking in a 10% cap rate area, you're looking in a 5% - 6% cap rate area.

A little bit more information regarding the property you're looking at would be helpful in determining if it makes sense or not.  What is the current asking price?

Additionally a more concrete description of your goals would be beneficial as well.  Are you really looking for cash-flow?  Or are you looking to house-hack and live at a reduced rate, and then cash-flow when you move to your next property?  I don't think you'll have cash-flow while you're living in the triplex, but you might pay less in monthly expenses because a lot will be covered by the other $1950 you get from the tenants in your property.

It also seems like the area you're investigating is a B class or better area, where you will end up with lower ROI for the higher desirability and stability of the neighborhood. It also means that the cash-flow will be lower.

If you're really interested in knowing if your calculations are going to be valid, make use of the BiggerPockets analysis tools, or use some of the freely available calculators out there on the web.  If you're not sure what's good, let me know and I can send you some links.

@Erik Williams I think using a HELOC to buy a property is a good idea if you can get a better purchase price because you are now a "cash" buyer. Just be careful with the seasoning period for the cash-out refinance. Most lenders will use the purchase price for the value of the property instead of an appraised price until you have owned the property for one year. If you don't mind your HELOC sitting in a house for a year AND you're getting a better price on the purchase, then it's a great way to go. Otherwise, getting financing at the start might be more attractive. Additionally, lenders will use a lower LTV ratio for cash-out refinance in some cases, which means you'll have to shop for the right lender on a cash-out refinance. Personally I've seen lenders only go up to 70% - 75% LTV for the cash-out refinance. You might find some that do 80% but you'll probably have to search for them. This affects your overall cash-on-cash ROI, so you might want to keep that in mind.

-Josh