All Forum Posts by: Jonathan Towell

When you owner finance, you are selling the house to someone who is borrowing from you to make the purchase rather than a bank.

Here are the basic mechanics, though I advise more research on the details:

1. Create a purchase contract for the house

2. Create a separate note contract. For example, 10% down payment, 15 year amortization, 5 year term, 8% interest.

3. Take the deal to a title company to facilitate the closing

Now you've sold your property, collected a 10% down payment, and are collecting monthly payments on your note. If the homeowner defaults, you go through the foreclosure process to reclaim the property.

I think it depends on your goals. If you sell, what will you do with the proceeds? It seems like it is a good idea to sell if your capital gains can be 1031 exchanged into a bigger property.

Otherwise, the Buffett approach of buying and holding for a long time is most appealing to me, particularly on properties that provide predictable cash flow. I haven't been doing this long, but I'm an owner on 248 doors and have never sold a single property.

It isn't a scam. It is where REO properties from the big banks are listed. I've never heard of any real deals being found there because any real deals would have been auctioned during the foreclosure process. That said I'm no expert and there may be people out there finding real deals on the site.

It isn't very easy to do a partnership like that on a SFH because there usually isn't that much cash flow. If I had 20% to put down on an SFH, I wouldn't partner 50/50 with someone who was going to manage it because I know I could just hire 3rd party management for 10% of gross and keep all the equity for myself.

I'm going to follow this thread to see if anyone else has good ideas. Otherwise, I've only seen 50/50 partnerships on smaller properties go well if both partners contribute 50% of the capital.

I don't think being a "menace" is illegal. I think it is bad business.

I'd just move out when the lease is up and then rate the landlord accordingly on Google, Apartments.com, etc.

In Texas you need a broker license to do 3rd party property management. I assume it is the same throughout the USA.

Personally, I've never thought 3rd party property management was worth the hassle. Yes, you can build a property management business and thus create equity in that business. But, I'd much rather own the underlying assets (the property being managed). That is why the real money in real estate is in buying and holding properties.

I don't mean to completely poo-poo the idea of doing property management. I think it is a good idea if you can make the numbers work. I'd just make sure I used property management as a way to eventually get into ownership of property.

Disclaimer: I've never built and I've never own land.

A nice new house may not be a great fit in a C- area. You might not be able to get strong enough rents to justify the new construction expenses due to the neighborhood.

Shawn's reply is great.

We own 248 doors and don't have a realtor or broker license. But, there have been many times when a license would have been super handy. I still frequently consider getting a license.

@Jeff Kochtanek

We own and manage 248 doors: 213 unit apartment, 14 unit apartment, 12 SFH/Duplexes. Also a 180 unit self-storage facility.

Our property management company is its own unique LLC and has no assets. The property management company collects all the revenue and distributes it to the "owners" which are the following:

For our SFHs and duplexes we use a Series LLC which is kind of like an umbrella LLC that lets us place each individual property inside an LLC without having to file a whole new LLC each time. It is kind of complicated. I believe we learned about it on the BP podcast, though I can't remember which episode.

Our self-storage facility and 14 unit apartment are each in their own LLCs.

The 213 unit apartment is owned by a partnership. My business partner and I own an LLC that is the General Partner for this partnership.

The most complicated thing about this setup is the series LLC. It is a new kind of entity and banks are not excited to deal with it. We've had to pay extra fees to let their attorneys review our documents. There are also some bookkeeping issues with it. Neither of those are insurmountable, but they do present challenges.

If we didn't have the series LLC, we'd probably still do separate LLCs for each property. And yes, it does make bookkeeping, bank accounts, insurance, and everything else more complicated.

It may be that all this layering is completely unnecessary. But, we've heard enough horror stories from the REI veterans that we've decided to layer up.

The advice to consult with the CPA and attorney are good. 

I hope that helps.

Houses values are based on comparables (comps). Comps are averages of sale prices for similar houses in the same neighborhood.

Take a 3b2b house in Tech Terrace. 3b2b houses in Tech Terrace may sell for $90/sq/ft. One block over in the Heart of Lubbock, the same 3b2b house might sell for $60/sq/ft. (I haven't run comps on houses in those neighborhoods recently, so don't quote those prices. I'm just using them to illustrate a point.)t

The only place you can get comps (as far as I know) is via MLS. The only way to access MLS data is to be a realtor. If you are going to invest in single family houses, you've got to have MLS access either via a realtor friend/partner or by coming a realtor yourself.

If you are going to wholesale, that means you're going to be running comps on 10-50 houses each day. If I were your realtor friend, I wouldn't want to sign up for that. So, I'd guess the only way to do wholesaling at scale is to also be a realtor.

All that said, I've never done wholesaling, so keep asking around and maybe you'll get better ideas for how to make it happen without a realtor's license. But, my info on comps is rock solid! :)