All Forum Posts by: Randy Thomason

Jon and Stephanie Iannotti from Tampa, Florida will be teaching for the first time in Arkansas their REACT/CATS program.  First time guest are free and we have great networking and our free food is unbelievable. Come network with other investors and meet possible private lenders in the room too.

Hi Shay,

Notes are a great way to get return and I do buy them but I look for slightly flawed notes to get bigger returns. Not flawed from the standpoint of late or missing payments. Flawed in that they were not underwritten well by the seller. (no appraisal, no credit check, no dow payment,etc) But i look for some payment history and current LTV ratios. I often buy at big discounts from motivated sellers and get a 20 to 40% ROI. Then if you wanted you could sell some front end payments and keep the back side. This way you could get your cash back and have a free back side investment coming in in 5 to 10 years with good payments.( I recently did this and got my full investment back by selling 5 years of the payments of $808/mth and kept the last 16 years. It had a 9 year pay history also. I have nothing invested at all and if the loan goes to term I will collect $155,136.) I have zero risk and everything to gain.

But my favorite strategy is buying houses Subject to the existing mortgage from motivated sellers. I average 1 per month easily without much marketing for them.  States differ but in my state I can usually buy houses in the 80 to 125,000 range like this.  Closing cost me around 1k and they will cash flow 200 to 400 per month.  Some need a little work. 2-6k. 

Combine this with some notes, a duplex here and there, some short term private loans to landlords maybe (factoring for their monthly rent)  and then you can hit your magic number and be diversified to a degree.

Just some different ideas to throw at you for thoughts!

Yes Phillip, That is the thought of most newer people, me included back in the day many many years ago.  Don't let your brain go there though.  You aren't borrowing from hard money lenders. you borrow from Private lenders.  Big difference.  When I borrow I offer a rate but guarantee them minimum of 90 days interest. I often sell and close in 30 to 60 days but still pay for 90. That makes them feel good and usually they are begging me for another deal instead of giving the money back.  Always give it back and then reborrow though.  Keep the paperwork clean, legally and also for taxes.

Hi Patrick, You ask some interesting questions.

Yes, your mortgage company is going to hire their appraisal company to value the house so they make sure it is not being over appraised.  Yes you will have to pay for that.  So I would not do it unless you are very sure of the current value.

Your local bank is going to require their appraisal company to do their valuation for the same reason. Two appraisals and tow fees. I would do the PMI one first if you are going to do both. That way you are lowering your payments which helps your debt to income ration with your bank when they are looking at your stats to make you a loan. Also, if it doesn't appraise for what you think it would maybe you wait on getting the Heloc.

I would also caution you on looking to leverage up right now.  Markets are trending down on prices and days on market.  Many believe we are headed down for a while and gettng fully leveraged could create cash flow hardships.  I don't know your financial situation but being fully leveraged in a down market can spell disaster for many people.   

You are on the right track Phillip.  If you put them on title they own part of the deal and will get their prorated portion back at closing.

They are the bank. Do a loan and have the title company file all the doc's just like they would a bank loan.  The lender is secured and will be paid at sale closing by the title company from your sale funds. Make sure you list the lender as such on the insurance policy so in the event of a fire or other disaster they get their money first.  

Keep you lenders secured and tell them that their security comes before everything else.  If they sleep well and you pay as agreed they will keep lending and maybe give you more money in the future.

Why pay 12% ?

If they put their money in the bank they get .5 to 1% interest.  Ask them what they think is a good return since the bank is offering them 1%.  They might say 5% or 8%. I probably would not go higher than 10 unless you don't have any other options at the moment.  If you start high then you will never get them to go lower.  If you start low you can always go higher, if need be.

Money is everywhere, you just have to ask and find it.  It is hidden from plain view to keep people from begging everyday.

Happy hunting!

Hi Krista,

As you can see we are in the time of max investors, only they are not really investors.  Every gurus has taught all these people that they need to be wholesalers.  What you need to do is find their buyers they sell to.

Usually every state/county has a website where you can go and find the buyers who actually close on deals. The county tax assessor is usually a good site. Look up your street without the street number. It will usually bring up all the owners on that street. Look at the ones who own more that one property or have a name that says LLC or investments or properties in the name. Do that for the streets on either side of your street. Then you have a potential buyers list for your property. Take it to a bigger scale and look at the city level. Don't put a street name in the search. Just put a wildcard in the name and "contains investments or properties". The search results will bring you all the owners with those words in their name. Now you have a large buyers list for your city. Who are the real players who close on deals and what areas of the city they buy in. And you can see how much they paid for the property too.

There are several other ways to find cash buyers but this is one way that is easy and you learn a lot from doing this exercise.

Banks won't write you a residential mortgage when it is held in LLC. They will write you a commercial loan though in one. Commercial loans are usually 1- 5 years. They will write it with maybe a 20 year amortization but it will balloon in 3 to 5 years usually and are CALLABLE at he banks request. Be careful on these loans as the market is slowing and if the economy slos enough banks have a history of not renewing these type of loans and even sometimes calling them in early if they think you are a high risk borrower. And remember that you will be signing a personal guarantee with any commercial loan. That guarantee means you are promising everything you own as collateral if the loan goes bad. You could lose everything.

If you can find one, and you can if you ask enough people, find a private lender to make a loan to you. They are everywhere but don't advertise they have money.

Your other option is to deed it back to yourself and get the loan and then move it back to the LLC in a few months. Banks don't like that but they usually don't say anything about it, but it could trigger the Due on Sale clause in the mortgage.

The biggest thing I DIDN"T see in the replies here ( or the ones I read anyway) was it doesn't seem like you know how to negotiate.  Use your best bid and then go to the next two or three lowest one and tell them you would prefer to do business with them but they need them to improve their their price.  Do the same thing you do when negotiating with homeowners.  Ask, is that your best price?  Keep asking.  Write your scope of work with what you require and get it all in writing.  Contractors are very flexible when they want work.  When they have full schedules they will still bid but the bids are high.  They figure they don't need your business but if you are willing to pay THIS price they will do it.

You have the gold so you have the control of the situation.  If you are more motivated than them then YOU LOSE!

On the other subject of racism, choose who you want to do business with.  If you support people like that then they get confirmation that their attitude is acceptable.  If enough people don't do business with them they will change their ways over time or go out of business. 

As the saying goes, Leopards can't change their spots.  People are set in their ways and personalities are developed over the decades.  With a few exceptions, people are who they are.  Choose your business partners and sleep soundly.    

If what you're doing isn't working then you need to change what you are doing!  There are deals out there.  Don't follow the crowd though as they are all doing the same thing.

Tips for finding deals:

1-Mail probates BUT don't do what I see everybody else doing.  They mail the "Family or the Estate of ."  Dig a little and find the Personal rep or executor and mail them directly.  If you go to the probate docs they are usually listed there and their mailing address (in many states.) Throw out the ones where a spouse is living in the house unless they are older, like above 75.  More chance they will sell especially if the survivor is the wife.  If an adult child was living with them then consider not mailing them either as they have a free house unless there is a mortgage.  This cuts down on cost and time.

2- Divorces- in the bread and butter priced houses you usually have two people working to afford the house. When a divorce happens neither usually wants the house because by themselves neither can afford the payments. Perfect opportunity for a Sub2. They don't have enough equity for a realtor to sell it and it may needs some minor repairs but the divorce lawyers have eaten both of their savings accounts, so Presto! You come to the rescue.

3- Eldercare- Baby boomers are headed to nursing care in droves.  Build relationships with the financial departments of nursing homes and they will refer families to you. I buy many houses a year from this group. 

4- Near a military base? Sub2's are a big problem solver for transfers who don't want to be an absentee landlord. I buy several a year from this source. They usual get orders to transfer and have only 90 days to sell and move.

Deals are still there but they are not going to fall into your lap like the have in the past.  Only the diligent are going to survive the next few years and you have to think differently!

I only buy deals at discounts I know I can move fast, or I buy cash flow.  

If you get caught with several houses in rehab as the market turns, WHICH IT IS DOING RIGHT NOW, it isn't going to be pretty for you.  

One thing you didn't discuss was the balance and term left on your mortgage.  are you on the downside of the amortization or close to flipping to more principal pay down?  If so then another option you might consider is selling the negative cash flow to an investor for part of the equity.  Calculate the 800 per month compared to equity pay down and how long to pay off the property.  If may be more beneficial to you to keep it and find that person that will give you the 800 per month in exchange for a good return.  Or maybe some return and all the depreciation if you don't need the depreciation.  

Just another way to view the analysis.