All Forum Posts by: Joshua VanName

Quote from @Collin Hays:

Quote from @V.G Jason:

This need for perpetual growth will cause the crash.

Colin you say the recession is here, it's knocking. It's not here, it's coming if folks keep pushing the envelope. But if you look at other global macro trends you see other things forming quicker and I won't get into that, but that doesn't mean this isn't coming.

I'm very tempted for the first time ever to sit 100% cash and watch, I may do this as we enter first business week of June. Tap out of all short-term plays. I am not a market-timer, and a time in market person so just for folks calling that out that is with this considered. We are month 27 since the rise of rates, and month 11 of the expected peak of rates. I have still of a ton of investments that will ride the course, but that's because I can weather those storms.

 I have thought seriously about investing heavily in long term Airbnb put options.  I believe they’ve crested and will not be able to sustain their revenue growth.  Both them and VRBO have about squeezed the turnip dry.

 I have been investing in options for about 10 years now.  Mostly long term puts against stocks I think are highly overvalued.  I personally feel about 90% of the market is due for a major correction but I agree that these have a great chance of being at the forefront of that correction.

Quote from @Robert Ellis:

Quote from @Josh Urrutia:

Quote from @Robert Ellis:

60 days from Dig date maybe. But I doubt it was 4500 sq ft. From closing on the land to move in day is going to be 6 months minimum based on anything I've seen. 

 we don't close on land till permits are approved it's how we write our contracts. no it was 700 sq ft. who the hell builds 4500 sq ft as an investment 

The op asked about a 4500 sq ft specifically.  Your post implied, whether you meant to or not, that builds don't take more than 60 days.  So, we assumed you meant builds relative to the size that he was asking about.

I should add that if we were to build replicas of the same 4500 sq ft house over and over then I would be willing to say we could shave time off the build.  That however is rarely the case unless you are a tract builder and I rarely see the quality of those homes close to what a custom builder will provide you.  In most cases if you have someone offer to be in and out in 60 days on a 4500 sq ft build "RUN".  60 days is a rush job in my opinion.

Quote from @Josh Urrutia:

Quote from @Robert Ellis:

60 days from Dig date maybe. But I doubt it was 4500 sq ft. From closing on the land to move in day is going to be 6 months minimum based on anything I've seen. 

I have been in residential construction for some time and know very few reputable companies that would guarantee a 60 day build on anything close to 4500 sq ft. If the plans are super detailed or complicated forget about it. Especially post covid with all the supply chain issues that followed.  4-6 months is a much more realistic timeline and if the builder is off any worth you might have to get in line.  4-6 months is assuming you have closed on the property, permits are in place, a contract is signed, and the weather allows me to start today.  

That said I hate remodels and I would avoid them at all costs.  Easier to get burned on remodel.  We are a custom home builder and can price a new home out much easier than a remodel.  Too many unknows and variables involved in remodeling.  Unless maybe the house is gutted and you have had all the inspections done and know all of your unknows.

It is used mostly for land, so more common in rural areas. It is also more common in less expensive areas.   I have purchased land/structures using owner financing on multiple occasions.  In each scenario I could have obtained conventional financing but chose against.  It is common to offer above asking price to sweeten the pot as many owners would simply rather collect the cash upfront.

What makes it a desirable offer structure?

For the Buyer - In most cases the buyer cannot obtain conventional financing. In my case I wanted to keep the properties off the grid to avoid messing with my DTI ratio.

For the Seller - I can only think of a few reasons a seller would prefer this route.  There could be tax benefits in waiting a few years for the bulk of the money. For example if one was close to retirement they may find themselves in a much lower tax bracket. 

Banks may be unwilling to finance.  Maybe the property is priced above actual value or it sits on a toxic waste site.

In most cases there are no inspections done on owner financed properties.  This could be beneficial if the property is distressed or has issues.

Usually the seller can ask for a higher than market interest rate.

And the last reason is it increases your potential market. 

From my experience I would avoid it as a seller unless I was getting a large down payment, a larger purchase price, or a higher than market interest rate.  Or a combination of all three.

Quote from @David Rutledge:

Good evening,

I am wondering if anyone has any suggestions on how to go about finding properties with owner/seller financing?

This would be for an investment property not a lease with an option to buy.

Would it just be through agents, if it is mentioned in the listing etc... or is there another way to find these kinds of properties?

Also, can someone tell me how seller financing usually works. I have very little knowledge on it but the idea intrigues me as a way to obtain more property over the coming years. 

Thanks for your time.

David

I have purchased 3 properties using owner financing (they hold the title).

My offer on all three was the same.  Contract for deed (20% down, slightly higher interest rate, 5 year balloon).  

I found one in the local classifieds.  Land with a small camp that had been owned by same family for 15 years so I knew there would probably be no mortgage.  It had been vacant for awhile from the looks of it.

Another I found on the MLS.  It was 5 acres with a 2 bay garage and small area for an apartment.  The owners had planned to build a house but ended up moving out of state for work.  

The third was from a family member.

My best suggestion is to find properties that have been on the market for awhile and make and offer.  You are going to likely have to offer to pay full market, higher than normal interest rate, and a 5 or 10 year balloon. 

Realtors are required to bring all offers so by all means feel free to make an offer.  The longer the property has been vacant/on the market the better chance you have. 

Some sellers may be willing to hold the paper.  I would prefer to have gone that route myself but have no complaints with a simple contract for deed.

Quote from @Demetrius Potts:

Quote from @Dennis Weber:

@Ray Harrell

Full price

10% down

10% interest rate

10 yr term

 Only an someone not smart would agree to this.

A bank can do 20% down, 6.5%, 30yrs.  I’m seeing a lot of sellers offering 10% interest for financing and I think it’s ridiculous.  The whole reason folks are looking at seller financing is to dodge the already high interest rates. 

I have bought 3 homes using owner financing.  20% down, interest rates slightly higher than market, 5 year balloon.

I consider myself rather smart. Issues with DTI kept me from financing directly through a bank on these properties. Obviously if you can walk into a bank and get a lower rate that is the way to go.

Not sure what you mean by folks look at seller financing to dodge high interest rates. Interest rates are almost always higher with owner financing vs conventional.

Quote from @David M.:

@Joshua VanName

well, sounds like the best use of your time is to work so you can hire people to do these cabins...

If you worked on the cabins yourself, you'd get paid back but much later when you sell.  And, you'd be paying long term capital gains tax.  That's where the lower cost basis comes into play.  But, I am guessing you need something to pay the bills today instead of in 10 years...

simply put, REPS is just the ability to take passive losses incurred that year onto your main 1040 return to offset your usual wages/salary.  Normally (yeah, bunch of income limits), passive losses can't be taken onto your main return, but are carried over year over year until you have net passive income to offset.  

some investors pushing to get more tax deductions try this to decrease their tax liability that year.  In certain circumstances I think that works.  However, in the long term I find it to be tax inefficient.  

Good luck.

Hey I appreciate that explanation on REPS.  I already take a ton of deductions so I can see where it would be tax inefficient.  My salary is nothing crazy so there is only so much to offset.

I think my best bet might be to hire it out.  Or as a previous post suggested hybrid approach where you basically farm out what you don't want to do.  I have access to my employers subs for plumbing, electrical, and we have some finish guys for rock/trim.  

Quote from @Bruce Woodruff:

Quote from @Joshua VanName:

We'll just have to get some old GCs on here to fly back for a week and get 'er done then....

But you couldn't afford the beer charge....... : -)

I would take 5 grey haired carpenters over 10 of the guys we're seeing these days.

Quote from @David M.:

@Joshua VanName

What are you planning on doing with these?

If you sell them, it just means that you cost basis is lower, and you earn more profit (which was the point of doing the labour yourself)...  No point being spiteful to pay somebody else to do the work.

Not seeing how real estate professional status (reps) helps here.  You need to have losses and you don't have much in the way of depreciation just yet, or not much at all.

you need to consult a qualified professional how this development will be taxed.  I am wondering if it will be capital gains at all.  Building/developing like flipping I thought was dealing in inventory.  So, it will be taxed as ordinary income.  if you can declare a business around being a developer, then sure you could probably expense an excavator, truck, etc against your income assuming you sell them.

If you keep an rent them, not sure if you could use an appraised value as a cost basis --- probably not.

Hope this little bit helps.  Good luck.

Thanks for your reply.  My plan is to rent them for the next 5-10 years and then sell them and run as far and as fast away from New York State as possible.  I would not pay someone else to build it out of spite.  For me it is all about opportunity cost and tax ramifications.  Losing out on w2 income and then losing out on the higher cost basis is a double whammy for me. 

I honestly still do not fully understand REPS and need to further research that.  It seems you are correct that it may not be beneficial for me.  Being able to use and appraised value as cost basis would be a dream but you are probably correct that that is unlikely as well.