All Forum Posts by: Marc Rice

I have been living in my current home since 2021, I have thought about potentially buying a second home and rent out my current one where I am living, what's sort of stopping me is the fact that interest rates are really high and there has been a lot of layoffs in my industry, is anyone else in a similar situation as me?

Let's say you have your eye on a 100 acre tract of land you would like to build 5 vacation rentals on. 

The seller is willing to sellers finance up to 2/3 of the land. 

How would you approach creatively structuring this deal to accelerate the builds? 

Ideally, I would like to start 2-3 at once, but I may only qualify for the first one starting out. 

Is there such a thing as a commercial loan for vacation destinations? 

@Marc Rice Sitting through city board meetings? You have to physically be there? 

In your experience are these commonly approved, or mostly denied unless you provide a compelling reason?

when I started my RE sales career all I did was seller finance I had no patience  for dealing with banks and appraisers LOL.  One major push back you get is the down payment.. I sold that by working a deal with my seller..  where by I would give them most if not all the down payment and I would take 80% of the monthy payment until my fee was paid.. I created a very nice income stream for myself over the years doing this.. U know mail box money. The other thing is I became somewhat of an expert at Wrap deals and all inclusive Deeds of trust ( the document used to wrap the mortgages).. And of course did lots of Sub too wraps etc.. These are not very difficult concepts to understand you just have to under stand how escrow and title works.. I know in many markets RE agents have NO CLUE whatsoever about title and escrow its just a big black hole mystery to them.

@Marc Rice  It's certainly a valid point to make, Marc, but you don't suggest why you are making that point.  Are you saying that what was achieved in the deal that is the subject of this thread was good enough because it's better than most commercial debt? It's a valid point but so is offering what might make the deal better/safer if the circumstances allow which was my point.  The core reason to try for seller financing is to achieve one or more loan terms that are better than you can get with an institutional lender - faster closing, lower interest, faster qualifying, lower down payment, longer balloons, longer term, some discount for early payment, less cumbersome qualifying standards - the list goes on.  Each of those is helpful and some are extremely helpful.

@Jimmy Lieu A tip of the hat for a good use of creative financing.  However, with all due respect, a 5-year balloon sounds like a good deal but that 5 years will go by in a flash and there is nothing set in stone that says the interest rates will be lower.  I don't even remotely expect it, but peak Fannie/Freddie interest rates went to 14% in the early 1980's (prime was over 20% for a short while), I think they were 8ish in the early 1990's and, with relatively minor fluctuations, ended up 3ish and even lower in our recent history.  It's easy to find graphs that are more accurate than my memory that give a more comprehensive "look" than my feeble memory can provide.  

I grant you that over the next 5 years Columbus is far more likely to show appreciation than stagnant or lower prices but that is a likelihood, not a certainty. Who predicted Covid in 2015, 5 years before it turned a lot of the economy upside down?  Is that likely to happen again?  I doubt it but if China or Russia or North Korea become more bellicose or some significant blunder happens in another country that has great effect on us - it can hit the wall again.   I told a group of investors - guys like me - on a conference call in 2020 that while (in my belief) it was important to print dollars to keep the country afloat and help people trapped in their homes to have a way to eat, heat their homes, etc., the end result would be inflation.  Was I right?  I don't know, our inflation today may or may not be entirely the result of that needed cash or even related at all. 

The point is, none of this stuff is easy for the Fed to figure out and the average person on BP - especially me - is far less equipped to figure it out. I believe a better circumstance for the buyer would be to have an option to "buy" another 5 or 7 or 10 years of balloon extension for some enticing payment of principal (say, 5% or 10% of the outstanding principal or of the original purchase price) or, and far less ideal but that may prove to save your client's butt, some hopefully lesser amount of a payment that doesn't get applied to principal but that buys a good extension.