All Forum Posts by: Mike Sedlacek

Have the home owner ask the bank with the HELOC To transfer it to his personal residence. Then He can sell the house and pay off the HELOC.

Zillow has foreclosure listed.

You can get an FHA loan for owner occupied from 1 to 4 family dwelling with 3.5% down. Non owner occupied loans are for investors and you have to go the conventional loan at 20% down from a bank. Also FHA will consider part of the rental income added to your income to qualify for a loan.

Based on this information and making some assumptions as to the interest rate on your mortgage and interest rate on the personal loan here is what I come up with.

Purchase price $142,000. Down $28,400 1st Mortgage $113,600 at 3.5% on 30 years

monthly payment $433.57 yearly $5,203

Annual gross income $16,800

Expenses not including management or CapEx. $5,912 yearly.

Mortgage $5,203 yaerly

Personal loan $20,000 at 5% interest on 10 years = $101.11 monthly,  $1,213.32  yearly.

Gives you a net profit of  $4,471.84

Cap Rate = NOI / Purchase price. $10,888 / $142,000 = 8%

You are putting money in your pocket and paying off the personal loan. Good deal to me and consider the depreciation write off on your income taxes yearly. More money in your pocket.

You have to have a pay structure to show the customer as to how you will get paid as the project progresses. I always start with 50% of the material cost up front and 1/3rd labor costs up front as well. I try never to use my money for materials and get enough labor money up front to pay the carpenters thier first week and enough left over for the second week. If the customer doesn't agree then I walk away. I tell them I can't afford to pay for your project you are hiring my company to do the work and we need funds for that,  period. 

I plan out the time schedule and the step by step process which I show the customer and how the payments fit in. Also I try not to have delays because wasted time will cost in the end. I could be on another project keeping my guys continually working without lost pay. 

You have to keep these things in mind and remember you are a business first not a practice or charity.  Live and learn.

Great strategy. I had a friend that did the same. Bought multi-family dwellings and paid off the mortgages within 7 years and had cash flow like crazy. After about 10 years he had a $100,000 a year income after taxes for as long as he held onto the properties. However, after the 10th year he sold off his first property, owner finance and purchased another property and did that over the next 20 years. A total built in retirement plan.

Have the seller structure a wrap around mortgage.

All I can say is you will need to up your credit to 640 FICO to qualify for a loan. Look into FHA financing in which you will need 3% down of the purchase price. If you are a veteran look into VA financing in which no down payment is required. You can ask the home owner to pay the closing costs to save you some money.

I've been an investor for over 30 years. Most properties I've found worthy of purchasing was from my own hunting. Now that I have moved to a new state and city, I went for my real estate license for two reasons, to make it easier to find properties to purchase, second if the property I found isn't a good fit for investing in then list it and get something for my time invested both hunting down the property and spending time with the home owner. 

I have discovered several reasons a house doesn't sell thru a real estate agent. If it is a newly listed property, never before offered for sale the home owner is usually shocked at the price the agent investigated and offered to list for to get a quick sale. The home owner thinks otherwise and wants more money. After about two weeks on the market with no showings or offers the listing agents tries to get the home owner to reduce the price. But there is a problem. One has to know the market, such as are there more homes for sale at present time then buyers? Or is inventory down and good properties hard to find? And are buyers reluctant to jump into a house as a second choice but would rather wait for the right house to show up on the MLS?

Another problem a home owner faces is where are they moving to and how soon does he need to move. If the mortgage balance on his home is high with little equity then the price will reflect the asking price because the home owner has to add the commission and closing costs and some for negotiation.  The other alternative if the owner is in a time problem is to go for a short sale by reducing the mortgage balance with permission from the bank or face foreclosure to get out from under the property. 

With location into consideration such as not so desirable area or not so good schools causes a home to take longer to sell and this has to be discussed with the owner as to why it will take time to sell. Therefore an agent will ask for a 6 month listing.

Now when a listing expires, in my area there are over 3000 licensed realtors and about 1 % of them call on expired listing to get business. Problem is that house is now shop worn and not so desirable by buyers any longer. They are looking for a substantial reduction on price. But again the home owner may not be able to do so. They go the For Sale By Owner route for awhile before listing again with a realtor. Around and around we go.

My suggestion when you find out about an expired listing go directly to the house, knock on the door, introduce yourself as an investor, that you may be interested in purchasing the house. But you need to be there right after the listing expires. But there is a little trick, if you find a house you are interested in listed with a realtor, go to an open house by the realtor, especially a house that has been on the market for 90 days. Zillow posts open houses. Ask questions. Determine the motivation. Then keep an eye on the property but don't nag the owner. Get ready with all your ducks in a row, with a contract to purchase and a quick close offered. You will get the house for about a 20% reduction if the owner can afford to.

Have you asked the seller for owner financing with 10% down? Or  can you do a subject to existing financing with 10% down of his equity position and have them hold a second for the balance. Have you asked them for a wrap mortgage with 10% down? Have you asked if they would go partners with you for one year in which time you work on qualifying for a new loan and you manage the property as if it were your own. Do you have property with enough equity you can pledge as a 1031 exchange? That may lower thier or postpone thier capital gains tax. Do you have a free and clear property you can give them as the down payment? Is there enough equity in the property in which you can sell a portion to a private money investor or an investor partner to raise the down payment?