All Forum Posts by: Jeff V.

@Ronald Harris

VA Loans are probably the safest way to invest with no money down that I can think of.

There are a few caveats that I know of though, nothing major but:

1. You must occupy the property for at least a year after purchase. VA will make you sign stating that you will occupy for a min of a year during the loan process.

2. Once you leave the property and rent it out, those funds are still tied up and go against your VA benefit. Once the benefit is exhausted you'll have to use traditional financing.

3. On the bright side, if you sell traditionally the VA loan will be paid off and you will have those funds available in your VA benefit pool once again.

4. One must first qualify and actually have a VA benefit, it's not really open for everyone. Only military and their dependents I believe.

5. I doubt you will be buying any fixer uppers due to the stringent VA inspectors. This limits your pool to Pretty Houses that are habitable.... IF this is what your going after then great!

6. If you must occupy the home for a year...  that means you can only buy 1 per year.

7. If you buy a new house every year, that means you have you move all of your belongings every year...  If your down with that, then great!

One major PRO is that even though the property is 100% financed, you still will not have to pay for PMI. This is a major win to help the property cashflow better.

Second PRO is I think you are pretty much guaranteed the loan if you have not exhausted your benefit amount.

Third PRO is your only out of pocket would be closing costs...  unless you negotiate for the seller to pay those...  With low out of pocket expenses you can get some really nice cash on cash returns.

Hope this helps...

Jeff

@John Henderson

You said he's a friend, just ask him what he owes on the property.

If you know what the other similar houses in the area are worth then its simple math... FMV - Debt = Equity

Simple, but it should work or at least get in you in the ballpark.

Jeff

@Account Closed

Definitely shop around. We have one from our first rental using the equity after repair. You can add more properties to the HELOC to expand your limit... they evaluate your equity annually and raise/lower your limit accordingly.

Beware... If you have many properties under the same umbrella HELOC, they are all at risk... Also, another caveat... If the equity drops for your annual evaluation and you have a higher balance than your equity allows you could be forced to either pay up the difference or they foreclose on all properties listed as collateral.

FYSA, they are really good to have but I would be cautious on carrying a high balance.  Pay down the balance as quickly as possible.

Cheers.

Jeff

@Account Closed

It may not help with the immediate 15% Down issue, but have you thought about using the 15% down option to purchase the place then put on a HELOC using the equity on that same property and then cut yourself( Or your LLC) a check for the 15% you just had to put down...

Just a different way to skin the same cat...  however it would require the 15% up front even if only for a few days... but would be 100% financed.  

This method could also be used to fund a rehab on that same property...  if so required...

Or you could use HELOC from another property's equity for the 15%... not sure if your in that position...

Just an idea.

@Jack Reed

Sell it to a Retail buyer, but be the Lienholder...

That way the park owner gets an owner occupant, you get a retail price plus interest over say 18 - 24 months and a retail buyer gets financing on a used mobile home which is very hard to find!  If they don't pay their note GREAT take the mobile home back and sell it again with a note.

Ever Read "Deals on Wheels" by Lonnie Scruggs?   That's his niche market!  He would be fighting tooth to toenail to get in just the position that your in!

BTW he finances these small notes at 12% :D

Good Luck

Ben,

First, I'm no expert, but we would need more information to help answer this question.

Some things that I can see that we would need is.

Purchase Price

Non-Refundable Option Consideration - This amount will go towards your down payment/purchase price if you exercise your option.  If this is 3.5% of the purchase price you should be good to my knowledge.

Sounds like you have some sort of rent credit scenario going on if you have $41,000 in principal payments... If that is true then I think that will more than satisfy the 3.5% down payment requirement for FHA.

Like I said...  I'm no expert on Lease Options but with the information provided and assumed it looks like you more than cover the DP requirements.

This all really depends if you do in fact have $41,000 in principal payments and is $41,000 more than 3.5% of the purchase price...  

Hope this helps.

Jeff

Welcome!

Everyone here is really helpful, so if you have questions feel free to ask.

Jeff V

I've seen some good videos on this topic.  They recommended building your net worth to critical mass then rolling your portfolio into Notes that yield the cashflow that you want to live on hassle free.

Example If you had 600k net worth and can find 10% yield notes...  that could provide 60k income annually from interest alone.  Then take the principal portion that you receive and keep that rolling back into new notes.

So then you work backwards...  say you want 100k in passive hassle free cashflow for your retirement.  IF X * .10  = 100k solve for X  = 100k / .1 and X = $1,000,000.   Basically you would want to keep investing until YOUR critical mass is reached of 1,000,000 in net worth.  If you are ready to retire you can then start rolling that 1M net worth into notes that yield at least 10%.

On a side note... NOTES are really good to hold in your self directed IRA/ROTH IRA.

One could build both a rental business while building their note portfolio in their IRA/Roth IRA in preparation for their retirement.

I really like The Bald Guy's 4 pillars of investing videos on this.

Thanks,

Jeff

@Brian Larson

Tried out the spreadsheet it is a nice product.

I would add in more detail for your permanent financing such as a term...  Your spreadsheet assumes one will be financing with 30 yr loans.  Someone may only have available 15 yr loans or want to use a shorter term loan due to some other constraint.  It would be nice to have that capability.

An example would be my 2 lenders here only will do 15 and 20 yr loans being the property will be non owner occupied and is owned by an LLC. They pass the loan off to their commercial division and those are the only packages they offer. On a 20 yr the property has to be less than 5 yrs old. My "Bridge" financing is a LOC which has no term so one can pay interest only during the rehab/hold period.

Just offering constructive criticism.  Hopefully it will help, if not please disregard.  It really is a nice spreadsheet app.

Thanks,

Jeff

Amy,

Your question reminds me of our first deal.

A co-worker of mine found a deal for 20k and purchased it.  He didn't have the money to complete the deal so I matched him with 20k cash for the renovation.  We hit some snags along the way and needed 15k additonal cash which I put in.  Once completed we re-financed 40k back out of the property and it's currently renting out with nice cashflow.

The property is now worth 80k and that added 40k in equity to our net worth.  We used that equity to add to our Line of Credit so that we can use that money immediately to aquire the next deal.

Basically 20k will not be enough to complete a fix/flip or Buy/Renovate/Refinance/Rent deal on it's own most likely.  You will most likely need to find a deal you can tie up with the 20k and then find your money partner to complete the deal and split profits.

I think the key thing here is to find the deal...  If you had a good deal you could theoretically tie it up for $100 earnest money then wholesale it, find a money partner to fix/flip or use the remaining money for downpayment  on a buy and hold.  If you have a deal the money can be found to get it done...  the key is it has to be a good enough deal to be worth splitting with a money partner or giving up some profits to pay the interest on the money borrowed and still end up with some profit for yourself.

Another option is to help out another investor... maybe they found a deal and don't have the funds to complete renovation....  maybe the 20k would grease the wheels to get their deal to work and you would learn from the process and split profits with them.

Maybe you don't have a deal but you have 2 local investors who are also in your shoes with only 20k...  that would give you 60k if you all partner up on a flip...  you or them would just have to find that deal that you can lock up and be all in at lower than 60k and still make a profit.

Good Luck

Jeff