All Forum Posts by: Matt C.

Many years ago, I had a real estate mentor drive me around Memorial (upscale Houston neighborhood) and show me all the fault lines in the area.  You could see the dip in the road and how it ran right across the front yard and under the house.  She noted that the houses that straddled the fault lines were always for sale and at a discount compared to others in the area.  It is my understanding that you would have to constantly adjust piers under the house to keep the foundation level.  I am not scared of foundation issues but the deal would have to come with lots of equity before I acquired a never ending foundation issue.  However, if the price it right......

I am always suspect of a lender that advertises a loan with no money down.  Lenders are taking a risk when they loan on your investment.  They will want you to have some "skin in the game".  To quote an old professor "If it is going to hurt me, it had better kill you".  If you have a track record of finishing deals and paying on time, after awhile, they may loan to you with no money down.  Look at their terms, is there a minimum term or prepayment penalty?  These are not common on typical consumer loans but you will sometimes see them on investor financing.  What type of fees do they have?  Reach out to some hard money lenders in your area, they should be willing to give you their terms.  That will help you get a feel for the rates in your area.  Then compare that to what the Craigslist add. is offering.  If they are way below on rates and fees, ask yourself how they are making money.  If you can't figure that out, I would be cautious.  They are going to make a profit even if you don't.

If your father cosigns on a mortgage, he is on the hook until the mortgage company releases him.  He can convey his interest in the property to you through a quitclaim deed but he would still be liable for the mortgage.

My guess is that you would have to refinance at a later date, when your income is more established, to remove your dad from the situation.

Also, yes a Quitclaim has no warranty.  However, I assume that a Warranty Deed would be executed that included both you and your dad as grantees.  That would be the interest that he is Quitclaiming.  The warranty that was conveyed to you in that Warranty Deed would still exist.

@charles reed. It is my understanding that Texas A&M did not have a law school until very recently.  What class are you?

@Troy Stoehr and @Brian Gibbons I will ask about amortizing for 30 years with a balloon at the end but I don't think he will be interested. If it had to be the 10 year amortization, would you do it?

I am looking at a property to buy and hold as a rental. It is a 3 bed, 2, bath, 2 car garage, 1,800 sq. ft. built in 1980. It will need carpet, paint and a few minor repairs. The rental comps are $1100. I will be able to get that for this house, maybe a little more.

The owner wants $80,000, that’s his number; I might do a little better. The comps are around $110,000. I am estimating $12,000 in repairs to get it ready to rent.

The owner said he would consider owner financing but on a max 10 year term. We didn’t talk down payment or rates. I chose 8% interest and 5% and 10% down. I don’t know if he would agree to these terms. I have not bought a property with owner financing, so I might be doing the math wrong. With that said; I came up with this:

1. Owner financed, 10 years, 8% interest, 5% down, payment of $922, PITI $1168, cash down $4000

2.Owner financed, 10 years, 8% interest, 10% down, payment of $874, PITI $1120, cash down $8000

3.Conventional, 15 years, 5% interest, 20%, payment, payment of $506, PITI $752, cash down $16,000

4.Conventional, 30 years, 5% interest, 20%, payment, payment of $344, PITI $590, cash down $16,000

With these numbers, it has a very negative cash flow for the owner financing scenarios. Both of the conventional routes should produce a decent cash flow. All the other variables will be the same, vacancy rate, repairs, etc.

I am in a cash position to absorb the negative cash flow. However, my current investing mind set is cash flow driven. Would you consider the owner financing on the 10 year term? Less cash to get into the deal and year 11 would look pretty good. Or would you put in more cash up front to have cash flow from the beginning?

@Adrian Schlueter Sorry to be long in posting a reply. I actually started a direct marketing campaign. As promised, it took 3-4 months to start getting good leads. I am getting better on the phone also. I probably missed a few deals due to my inexperience. So far, I found a good deal on a rent house. It didn't require any rehab and came with great tenants. I recently had a house under contract with the intent of doing a full rehab. I wrote a long post on how that deal ended. Search for "Just completed my first wholesale deal, against my will". At the moment, I have another property under contract with plans to do an extensive rehab. I found this property through my yellow letter campaign, mailing monthly. The owner called off the 4th letter because he just then decided to sell. Jerry Puckett is running my yellow letter campaign. He is here on Bigger Pockets, even has a podcast. He told me that would start to happen and it did right on time. It is in a rural property with few good comps, so my ARV is a little fuzzy. I have been working off the bottom of the range. My estimate of repairs just keep trending upwards. At the moment, my inexperience is giving me heartburn. My decision now is to go forward myself or wholesale it. I want to do it myself just to get a deal under my belt. However, there is so much uncertainty in the deal, I am tempted to pass it along to someone a little more seasoned. To answer your question: I have not found a good wholesaler, although I haven't really been looking for one either. I decided to do my own marketing campaign. If I did make contact with a busy wholesaler that would give me a look at their deals, I would be excited by the opportunity. But that doesn't seem likely. I am planning on continuing and probably expanding my marketing.

Christina R. I agree this is not a pure wholesale deal. It started off as a purchase for me to flip. I didn't want to wholesale it. But I ended up with a wholesale fee, so I think of it that way. Wendell De Guzman - I feel like 6000 is fair. I could have gone ahead with the closing, repaired the house and sold it for a bigger profit. That would have hurt the seller but not me. However, it would have been a jerk move on my part. I felt like the seller and I had made a deal in good faith, not paying commissions was always a part of the deal. In the future, I won't take the seller's memory as correct. I will insist that they get a copy of there PM agreement and confirm the details.

After 4 months of yellow letters, climbing the learning curve and finally getting serious about finding deals, I made contact with a motivated seller holding a distressed property. He was an accidental landlord for the last 10 years. The house needs foundation repair, probably the expensive variety, and a cosmetic update. The owner had tried to sell it in the past and both deals fell through at inspection because of the foundation. So, he was excited to find someone willing to buy the place “as is”. Of course, I was pricing the foundation repair into my offer. The owner and I signed a contract at $235,000 with my estimate of an ARV at $325,000. I think I could get a higher resell than that, maybe $350,000.

The property is currently rented. The property manager is a local realtor. The owner and I did not include her in the negations, neither of us wanted to pay her a commission. The house wasn’t listed for sale or rent when I contact the owner. The realtor just wasn’t in on the deal. Her property management agreement called for her to get a 5% commission even if she didn’t bring the buyer. The 5% is a sales coordination fee. For the Texas people, it is section 11, H, (3) of the current Texas Association of Realtors: Residential Leasing and Property Management Agreement. The fees are “due at the time such services are rendered and payable upon Owner’s receipt of Broker’s invoice.” As such, I am not sure how she would have charged the 5% when her assistant called the tenants to set up a time for me to do an inspection. That would have been her total involvement in the transaction.

When she found out the owner and I had a contract, she called the owner threating to sue him and said my contract was not valid. Mind you, she had not seen my contract and it was valid. At this point, I already had a title commitment from the title company. She and I never spoke. She did go out and find another buyer, who was offering $265,000. I don’t really see how the $265,000 buyer is going to make it work, as a flip anyway. It might work as a rental. FYI, it is currently rented at $1,850 a month. That is a low but I don’t think you will get $2,650 a month. She told the owner she would do the $265,000 deal for 3%. Her services were worth 3% when found a buyer but when she did nothing she was worth 5%. Clearly, she has the owner’s best interest in mind. To the Realtor’s out there: is soliciting another buyer and directing someone to back out of an existing contract ethical?

The owner came to me and asked if I would cancel my contract for $3,000. He and I had built some rapport. I had always been sincere and honest when dealing with him. The $235,000 price was his price, not mine. I had always presented myself as someone that could help the owner sell his troublesome property. He was glad to have a buyer. We talked openly that I was going to renovated it and sell it for a profit. He was and still is fine with this. I reminded him that I was not the one putting him in a stressful situation. His realtor was the one maneuvering around to make sure she got a commission. It wasn’t enough for her that she had managed his property for 10 years making a 10% fee. She asked him why he was going to offer me anything. It is like she really believed my contract was not valid. After some back and forth, I told the owner I would take $6,000 to cancel my contract. The money has to be paid when I cancelled the contract, not at the other closing. I explained to the owner that this is a respectable “wholesale fee”. I had to explain whole selling to the owner and show him that I was leaving profit from a flip on the table. Unfortunately, he had to come out of his pocket to pay me $6,000, with the promise that another contract at $265,000 was coming soon. I reminded the owner that the realtor and I were using him as a proxy to argue over who would get some profit out of the sale of his house. I apologized and reminded him that I had made a compromise to allow him to get the better deal and not have to pay the egregious 5% commission that was now attached to our deal. The realtor never offered anything in the way of a compromise, at least nothing that would affect her commission.

So, I wholesaled a property against my will, sort of. I would like to know what my fellow bigger pocketeers think about this story. Did I handle it well? Is the realtor out of line?

Thanks to everybody for the great replies. There is a lot to digest. It is interesting to see the different styles.