All Forum Posts by: Chris H.

I'm in this situation too...I only owe 30k on my house, at 5.5%. I have a 40k HELOC available (free service from my bank).

I can refinance to FHA, 3.8%, and take 40k cash out, less 3k closing. Lower interest...but paying interest on more money. Trying to decide if I should do this!

I intend to do the same thing- buy houses cash, then refi. It is occurring to me, though, that if I cash-out refinance, I'm paying interest all the time- if I buy houses on the HELOC, I'm only paying interest for the one month I have the money borrowed.

So, I'm trying to get a feel for what purchasing subject to the existing loan really means (reading links from Google). If I understand right, I make a contract with the owner that gives me ownership of the house but obligates me to make payments for the loan outstanding- but the loan stays in their name for the duration, right?

Or is there a way I can just assume the loan and put the property in my name?

No, I'm thinking about what he owes on it, if what his daughter told me is accurate.

If it's not, if he owes a lot more, how would I go about this?

A great price would be what he owes on it (I'm told ~30k). I believe the house- judging from the excellent neighborhood (antique, beautiful homes in a quiet neighborhood surrounding a park), and current comparable listings- is worth quite a lot (comparables are ~200k). However, it needs work as it is right now. If I remember right, there were some foundation issues. I'd definitely get an inspector and a contractor to give me an estimate before buying anything.

I have 40k available to me through a HELOC.

So, if I'm understanding this right, the options available to me are:

* Take over his loan (purchase it subject-to), fix it up, then refi the whole thing cash out with a portfolio lender. Can I do this? If so, how do I go about it? I google'd purchasing it subject to an existing loan, and read up a bit, and it sounds interesting, but there's not so much of the "how" aspect. I really want to make sure I understand what I'm doing before I get in to this.

* Take out a hard money loan, buy it outright from him for the remaining value of his mortgage, then fix it up, then refi

Am I right?

Alright, I'm the guy from this thread. I'm looking to get an investment snowball going- I've got a decent amount of cash but I'd like to get in to even more houses than I could buy with 20% down + fix up costs.

A younger friend of mine who recently moved when her parents did has told me that her dad is letting the old house go in to foreclosure and has started making payments. She also thinks he owes around what is a fairly small number, considering that this is a large house in a nice neighborhood, though it was a bit scuffed up last time I was over.

Might it be possible to work out some kind of financing deal for me to buy this at a great price while keeping him from getting a foreclosure on his record? I know he has terrible credit so it's likely I could refinance to a lower rate and then rent it out for a profit. How would it work? Please let me know any ideas I might use; I bow to your experience.

Thanks!

Great responses so far, thanks! Bryan, I'll have to check out that book.

So I had looked at a property and put an offer in last week at $38k- it occurred to me that I can put the whole thing on my 40k HELOC on my primary home, fix it up, and then take it to a portfolio lender. That sound reasonable?

My big question is this: How do I go about finding a good portfolio lender? Googling "spokane portfolio lender" didn't turn up much, mostly junk (job postings). http://www.sfgfunds.com/ was the only one on the first page of results I found, and their office is in another city five hour drive away.

Also, are Portfolio lenders going to have similar interest rates to the conventionals (~5% range)?

Hi Monica, Ann, thanks for your thoughts!

So, let me make sure I'm understanding this correctly.

You're first going to a hard money lender and financing the house + estimated cost of work to be done with that route, and paying a down payment, but a smaller one than you would've with a conventional mortgage (but crazy high interest).

Then you fix up the house, go to your portfolio bank, and refinance cash out up to 75% (paying closing costs again), and if you increased the value of the house by enough you'll have the entire original cost of the house inside the refinanced mortgage, making you essentially in for zero down.

Interesting! A few questions:

* Why are you using a portfolio lender? Will any do or will I have to do some work to find one?

* Doesn't the doubled up closing costs end up being a pretty sizable percentage of the cost of the house? Seems like it could add up to a two digit percentage pretty quick.

* How does the hard money lender deal work? Do they just give you cash and you make a cash offer on the house? Or do you make a financing offer?

* What about the changes on Freddie Mac and Fannie Mae to require 120 days before refinancing? See: http://www.biggerpockets.com/renewsblog/2011/04/13/understanding-the-benefits-and-risks-of-hard-money/
Will this effect the strategy?

50% of income? How could it be profitable? My PITI comes out to just below 50%. That'd essentially put me at break-even, without the property manager's 10% cut and ignoring any vacancies unless you're including that. Is this a generally accepted rule?

I guess I forgot to write about my region. It's another potential roadblock, I suppose. My region didn't really have that much inflation through the housing bubble. When the California houses my parents bought rapidly rose in value, they started buying houses up here. When the housing bubble popped, the houses up here didn't drop as drastically, and as a result there wasn't the crazy flood of foreclosures.

There's still a ton of them, but it's not Phoenix, Vegas, or Florida.

As I noted, I was able to grab a 55k foreclosure, fix it up for 5k and throw it on the market for 850 a month. However, it's worth wondering if I should be grabbing even cheaper properties from regions that are more distressed than mine, or stick to what I know here...

Hello all.

So, I'm young (early twenties). I work a professional job and have a very respectable income. I live in a low-cost-of-living region in Washington state. My parents were active real estate investors (my mother a former realtor, my father going over to full time land lording after retirement).

Over the past year, studying investing in my spare time has become a very active hobby; I day trade forex in small amounts, buy and hold stocks (dividends + selling occasional covered calls), and have been trying to in general be very frugal and conservative (no cable TV, negotiated down all my living costs, got a roommate in to cover the mortgage) and put away a very large percentage of my income. Before I started really crunching numbers and embracing the concept of investing, I thought the best thing I could do would be to pay off my mortgage, so a lot of money got funneled that way. I bought a foreclosure two years ago (conventional, 5.25% interest), fixed it up, and now have well over 50% equity.

I'm rather enamored with the idea of living on as little as possible, taking my sizable professional income, and creating a snowball of investments (re-investmenting all proceeds year after year in more investments), until I can eventually retire and take on projects that interest me in my free time, or study, or travel.

I just discovered BiggerPockets and watched some video interviews. I was hoping I could bounce my ideas off of some of you more experienced professionals. I don't know how some of this will be perceived, and I imagine there are lots of young eager investors who come in here excited with silly expectations only to get shot down. So, have at me!

I will first outline my situation:

My biggest issue is this; I have the money, but not so much free time. I do value preserving time above all else at the moment, as a result. And maybe that's fundamentally incompatible with land lording, and maybe you'll tell me that. I'm currently intending to use property managers, realizing that'll cut in to my margins, but at least might enable me to maintain my 8-5 career while adding properties to my collection. If I ever leave my day job to do this full time, a property manager would obviously go.

As to the money; I have a decent amount in savings, an even more decent amount in my stock account, and a HELOC with 40k available. I was thinking of (since I've fixed up my house) refinancing my home FHA to cash out ~40k less ~3k in closing costs, and get my interest rate to the 3.8% range. Altogether I could probably raise ~$55-60k.

I have good credit. As of yesterday it was at 705; however, I just bought my second house and signed up for a half dozen credit cards (I churn; get them on promotions all on the same day, put my spending on it to get rewards, pay them off every month, call and downgrade the card to a no-fee one before the annual fee comes around. Collected about $3k in rewards this time around) in the last 90 days, so my report is full of recent inquiries that'll drop off and I'm sure it'll go back up to the previous value of 740 soon enough.

So as I mentioned, I just bought my first investment property (second property). I got it for $55,000 conventional, 20% down, $3k closing costs, fixed it up for $5k and am interviewing tenants for $850 a month. I've run the math and am expecting an annual return of over 20% of what I paid in cash after property management costs and principal/interest/insurance/taxes (counting principal as losses). I imagine my real return (with potential vacancies, repairs, bad tenants) won't be near that over the long term, however.

So, I like this idea. Buy foreclosures with a conventional loan, only take the deal if I feel I can get a ~20% annual ROI (with repairs and 20% down payment figured in), and I can buy maybe two more right now while maintaining an emergency fund and 1-2 a year.

This was what I was going to do.

Maybe I can do more?

I'm looking for ideas and options to explore. I feel like there is a huge opportunity for borrowed money at the moment because of the historic and artificially low interest rates. Leverage. Can I do better than 1-2 houses a year?

I don't know the slightest thing about owner financing. One of the interviews I watched talked about finding people who can't meet their monthly payments and taking the mortgage from them. Can anyone point me towards resources about this? Can I do this, fix the house up, and then refinance to get a lower interest rate?

What about hard money? The interest rates look too high, but are there perhaps any tricks to it? (Borrow hard money, buy a house, fix it up, go to a bank and get a conventional mortgage on it to pay back the borrowed hard money?)

What other ways are there to get in to a house with little down so that I could pick up multiple? Or am I off my rocker?

Finally; if anyone here has read Malcolm Gladwell's book, The Tipping Point, I am a stereotypical Maven. In other words, I tend to obsessively collect information about topics, almost to a fault, and love numbers. (Totally new to real estate, of course)

A friend of mine is a true Connector. He's the type of person who "collects" people, and has friends and contacts in almost every field. We've had discussions about the idea of starting a business of some sort for a while, but without a clear direction. Would there be a use I could have for someone with this particular talent, that would be worth some sort of commission or cut? Perhaps if I'm going to be contacting people for owner financing deals or working with lenders to try to find these types of people? Or would it not be worth any additional cost to my margin (keeping in mind that time constraints will be my biggest limitation)?

Thank you all so much for reading through my little novel and offering me any wisdom.