All Forum Posts by: Michael B.

Do you guys have a suggestion for a good loan servicing company that calculates their provision on a percentage rate and not a fixed rate per transaction? I am closing on 6 seller financed properties this month and the servicing company that I usually use charges 20 bucks per transaction. Since this is a package deal with one mortgagee I would prefer not to burn $43k over the life of the mortgage (30 years) just for loan servicing! There has to be a more cost effective solution. Also, on this transaction I can't work without a professional servicing company like I have done before, due to the dangerous wording in her promissory note and mortgage agreement. Especially the age of the mortgagee (76) and the potential loopholes that the wording in her note creates in regards to her heirs, make a it a must for me to have a servicer that facilitates the payment. I'm also sure the old lady won't be able to provide a 1098 lol. 

Do any of you guys know a good vendor for this? Thanks a lot!

I'm trying to connect with investors that are active in the Port St. Lucie, Fort Pierce and West Palm Beach areas. Are you recommending this market for buy and hold or flipping? What kind of return have you been seeing there? Are there any areas you stay away from? What is a good management company out there for buy and hold? Do you have contractors that you could recommend for flipping?

 In the Midwest. 

 Mark, I called SW this morning to confirm the numbers. They in fact charge 1.26 - 1.50 per sqft for installation depending on the product. Solid core vinyl is a little more towards 1.5 because it's harder to cut. 

Thank you so much for your insight everyone! I will give it a shot!

@Dante Feria It looks awesome! Some people reported that there can be gaps that form in between the planks if you don't use the click system. Did you notice anything over the years?

I can't agree with that at all. I personally wouldn't live in any of my rentals and most successful real estate investors that I know in the US and in Germany say the same. @Joe Villeneuve hit the nail on the head as always. It's a numbers game! You guys talked about "intuitive feeling." Intuition has absolutely no place in real estate investing.

Successful real estate investors in Germany that are in the buy and hold business (like Gerald Hörhan) will tell you: "the uglier the property the more money it makes" this applies to the US as well. A great school pushes the prices up exponentially to the point where it can be hard to find a deal that provides good cash flow.

What is your guys' concern about lower class houses? Is it vacancy? I just checked my last years vacancy rate and is was 3.4%. All my properties are C properties one is even in a straight up war zone. Nothing fancy and no good schools. All my properties are professionally managed by a reputable management company. When I pick a property I always ask my PM's opinion on rentability. If my PM tells me he is going to rent it out for X Dollars then I usually believe him after double checking rental comps.

Of course, it all comes down to cash on cash return. And your expectation regarding your desired return. I know a lot of people in this forum listen to the deal analysis videos on BP and hear Brandon say that a deal should have a cocroi of at least 12%. However, 12% return will not get you ahead. It's a good return if you want to secure your wealth - but it will not get you ahead. I personally wouldn't touch 12%. Below is a deal that I did a few months back in April. Since then, I sold off another deal package worth 1.7M with a similar return and I have currently another 5 properties under contract.

Burdick Deal

You guys have to chase returns and not pretty properties.  

I'm just jumping on the vinyl plank bandwagon for my rentals. Up until know I always went the cheap carpet route. A few quick questions for you guys who already use this product in your rentals. 

• What has been your experience with vinyl plank so far? Is it worth it?
• How many turnovers does it usually survive? 
• What brand do you use?
• Would you mind sharing pictures?

Thanks a lot!

It's actually pretty simple don't let the big wording scare you. No 3rd party involved.

You are basically just buying a house on an installment loan (just like when you buy a car with a loan). The seller of the house will become the mortgagee just like a bank and he will be protected by a mortgage agreement, promissory note and (sometimes) an assignment of rents contract. I have been very successful negotiating these kind of deals with older sellers that have portfolios that are under performing and that would like to hold on to the cash flow. These sellers are home runs. You can take over their portfolios on seller financing and often give the seller the same net income that they had when they were still active landlords. Your underwriting ability will go a long way here - use @Ben Leybovich depreciation schedule and explain to the seller why they are not receiving the income they think they do. Alternatively you can also use the Fannie Mae underwriting guidelines to determine the actual net income (75% of gross rents - PITI(M))

The advantage for the seller here is, that he will receive (almost) the same income without any volatility. A true win-win without any stiff arming. 

The things you will want to negotiate are: Down Payment, balloon (no/yes/how long), interest rate, amortization. The beauty of seller financing is that you can make the numbers work for you AND the seller by adjusting these 4 metrics. For example if the cash flow is sufficient but the cash on cash return is not, negotiate a lower down payment. If the seller doesn't want to give you a discount, agree to his price and extend the amortization period and/or the reduce the interest rate to lower the monthly mortgage payments. If you agree to the sellers price, keep your exit strategy in mind especially if you have a balloon coming up - it has to be within reason. Once you reached an agreement with the seller, enter into a regular purchase agreement and lay out the terms in the agreement. 

Knowledge of how to "bend" transactions this way will be one of your most powerful tools in negotiations. You will be able to make pretty much any deal work, even when other investors back out. Furthermore, you can use this kind of deal making with any transaction in your personal life - boats, airplanes, cars. Keep in mind that the asset has to be owned free and clear. 

After you entered into an agreement, connect with an attorney that has done these types of transactions before. The attorney will create the promissory note and the mortgage agreement for you (depending on the state) and look over all the paperwork and the assets that are being purchased. The seller might require a assignment of rents agreement in case you default. I wouldn't mention that proactively. Make sure that there is no personal recourse in the agreement/note and make sure that the issue of due on sale in the promissory note was addressed. If "due on sale" is not mentioned then courts currently rule that a "due on sale clause" was to be assumed - counter that by stating that the loan will not be accelerated if you transfer the property. This will allow you some further financial jiu jitsu like reassigning that seller financed deal at higher rates to another buyer. 

Lastly, a little motivating story for people that think these kinds of transactions are not common. In May of this year I was contacted by the SVP of an invitation only private bank in Beverly Hills, CA. The SVP knew about my business model from a friend of mine who I wholesaled 11 buildings to. He explained to me that he had a client that had 10 days left to complete a 1031 exchange. They needed to leverage at 20% and they needed 1.7M in assets. It took me ONE weekend to put a 16 unit multifamily and 14 single family houses under contract. All on seller financing, 20% down, amortized over 30 years, interest only - 6%, balloons in 3,4 and 5 years. 

Please don't hesitate to reach out if you have any questions.

 What are the terms on this purchase? Did you pay cash or leverage?