All Forum Posts by: Scott Nipp

Yeah. Keeping this as a rental is definitely NOT my first choice. My first choice would be to have a owner finance buyer in place before closing on the Sub2. If I could get a buyer lined up at a sale price of about $150k with them paying 10% down would give me a net cashflow on the property of about $260/mo on an 8% 30 year am (if I'm running the numbers right). The down should be enough to replace the A/C ($5k), do the make ready for the new owner ($2k), cover the attorney's fees for the docs($1k), and still put maybe a few bills in my pocket.

Welcome from another new Fort Worth investor.  My wife and I are still hunting down our first deal.  We have one that we are trying to figure out if it's a deal or dud right now and another we just found out about yesterday that we are going to begin looking at.  There is definitely a LOT to learn and this is a great place to get started.

I would say once you get thru reading the UBG the first time, start listening to the podcasts.  They are really awesome and very encouraging especially for us beginners.  

Let me know if there is anything I can do to help.

I have been looking at a possible deal in Lake Country (subdivision in Fort Worth, TX 76179) on a SFR. Here are the specs on the house...

• 3/2/2 single story w/ pool
• Needs only minor touch up and major work or new A/C system. So total rehab ~$6k.
• Current balance: $135,489.57
• Mortgage company: Wells Fargo
• Payments w/ escrow: $1388
• Payments w/o escrow: $760
• Interest rate: 4.750%
• Number of payments left: 326

Now for the complications... The owner has begun a loan modification with Wells Fargo. She has made one payment on this loan modification program and has two more to go. Here are the details after the loan modification...

• Payments w/ escrow: $1317
• Interest rate: 4.250%Term: 360mo

Here are the comps for that neighborhood...

• ARV: $145k but likely higher up to $160k
• Rental: $1400-1600/mo

I'm concerned about this mortgage being with Wells Fargo and them actually executing the DOS clause. This would probably be a deal killer as this would add a huge out of pocket for us in the down payment and closing costs to finance this ourselves. Instead of being about $6-7k out of pocket to obtain control of the property this would jump to upwards of $15k - 30k.
Wells Fargo suggested the possibility of a short sale, which might be a good option if we could get them down low enough. They also said that they would sell the property for the owner if necessary with a "deed in lieu", but the owner was in over her head and I don't think she got much in the way of details here.
Obviously we want to maximize our profit on this deal if there is a deal to be made here, but I'm not sure how to do that. Additionally, I would like to recommend the option for the owner that is going to be best for her in terms of preserving her credit. What would you recommend in this situation?

@Joe Villeneuve  I don't believe he was talking about having an investment property cash flowing $1000/month.  He mentioned having bought his personal residence and having about $1000/month left over at the end of the month.  That said, it does not really change your advice one way or the other.

Now, the question really is a matter of your priorities and your tolerance for risk.  A couple of months ago I would have said to pay off the loan, but today I would lean more towards using that to fund some real estate transactions first.  In your specific case, I would be most likely to try and find some wholesale or flip opportunities if this is of interest to you at all.  The reason I suggest this is that it seems you are in more need of seed capital at this point that you are cashflow.  One successful flip can not only pay off that $5k loan, but can also put some money in the bank to start using as seed capital.  Obviously though this has a great deal to do again with your personal preferences, risk tolerance, and skill set.

Good luck with whatever you decide.

I totally understand the idea of wanting to be debt free.  That is a personal choice for you to make along with what your desires are for your investing.  My advice would be to pick up a cop of the Rich Dad/Poor Dad book Retire Young Retire Rich.  Read that over and if you still feel better about purchasing the property with cash, then by all means do so.  However, that book might change the way you think about debt along with valuable insights into investment strategies overall.  Either way, good luck.

Outstanding.  Way to go and thanks for keeping us all posted on the results.  I can't way to have that exciting first deal closing myself.

I would have to stay away from that deal. Unfortunately, I would also have to distance myself from that friendship. One piece of advice I have heard in REI is to surround yourself with like minded individuals. This is a matter of being around people who have the same mindset and goals as you in terms of investing. The general idea is that the people you surround yourself with will to one degree or another "rub off on you", and do you really want that kind of individual "rubbing off" on you?

Personally, I would encourage the guy to seek some counseling or guidance for his marriage.  I hate to see people divorce, but if the marriage is beyond saving then that is a better option than a loveless marriage with that kind of situation going on.  Does this guy really want to raise his child in that kind of environment?  I can't quite understand your statement that he is a "good father" when he is setting that kind of example for his child.

You have a great point about if he cheats on his wife how can you trust he won't cheat on you.  Honestly, you can't trust him.  You can probably trust him so long as the deal is solid and profitable for the both of you, but once there is a problem I'm sure he will be looking for greener pastures.

One strategy that I'm trying to learn as much as I can about is Subject To...  This is an option for those of us without a lot in the way of capital funds but still allows us to be able to work with many distressed buyers.  This is obviously not the perfect solution to every situation, but it is definitely a viable solution to offer a lot of distressed homeowners.

I too would like to have someone else give a better explanation/example of "rehab to perm" as mentioned earlier in the thread.

Personally, I would say to wait on it if they won't take a significantly lower offer.  The reason is that I don't see this property moving at that price period.

Another word of caution...  It sounds like you have fallen in love with the property as opposed to focusing on the deal.  This looks to be a bad deal as it stands and only a significant price reduction is going to change that.  You mentioned numerous times that you like the property and since you plan on living it one of the units you have a lot more emotional involvement in this than you should.

Figure out what kind of offer will make the numbers work for you.  If you really like the property then try to get it up to at least the 1% rule and I would shoot for at least living there for free.  Once you have that number figured out, make them an offer maybe $20k below that to give you some negotiating room.  Worst that could happen is they decline your offer and don't even replay with a counter.  Just my 2 cents.

OK... I'm going to be going to talk to an owner on Monday about possibly doing a Sub2 deal on her property. Is there a Sub2 for Dummies kind of primer that I can use as a guide for talking with her? I'm really in need of some guidance as to how to explain Sub2 and how to structure the deal. Thanks in advance for any advice on this.