All Forum Posts by: Scott R.

What would the interest rates be each of the notes? It sounds like you could end up with a massive monthly payment. And that ten year balloon will be huge. According to my calculator, a loan of $1,000,000 (25% of 4 mil) amortized over 30 years due in 10, would cost you $4,321.44 per month. The balloon would be $760,198.19 if you don't make any extra payments towards the principle. That is just the seller carry, which would be only one of the notes on the property.

You wouldn't be able to find anyone who would put a third mortgage on the property. The carry back counts as lien against the property. If the property goes into default, each loan would get paid off in order. Even if you got the seller to agree to take third place, and both banks were cool with the 3 loan situation, you'd need to rent the other unit out for well over $10k, probably closer to $15k to cash flow.

Moral of the story: lower down payments help your return, not your cash flow. Return is very important, but you can't have make a return on your money if you can't achieve positive cash flow. Unless you don't want to buy and hold.

Honestly, if you are looking in Newport and playing with that kind of cash, a live in flip might be a lot smoother and easier to pull off. Cash flow is tight in high priced parts of California, but turnover and demand are high. There are plenty of old houses near the beach that could become nice little McMansions with the proper care.

Also, no tenants.

You could always start with your primary residence. @Joe Homs was telling me just earlier today that picking up a condo to fix is a good bet for a young investor. Live in it two years to take advantage of the huge deduction. Hell you could try to snag an FHA 203k loan (if the condo complex is approved) and finance the repairs. You could still focus on out of state investments after that, and just flip your residence every two years or so. If you make your purchases well and sell at the right time, you can slowly work your way up the ladder to nicer and nicer homes. If you're already living here, it's better than renting or buying ans holding a one unit to live in.

Only 300-400k? That's a steal for two units if they are nice. Well considering you'd have to pay me to live in many parts of the Inland Empire (particularly the areas I'd imagine you'd find such a deal), I can see how that is still too much to be worth it for a live in situation. Pomona might work, there are few duplexes for sale there on the MLS for less than 300k. It is also closer to LA than Ontario. And why invest in other states when we have all kinds of prices here in California? All you have to do is leave the LA/OC metro and prices bottom out pretty good. Especially if you look in Temecula or the elephant graveyard, er I mean Antelope Valley.

Don't sell it yourself. If it has problems, then you already have an uphill battle. Your dad is correct that 6% is the most commission you will see on a residential deal in most parts of the country. But I was just reading a thread on BP about how it can be higher in extremely low priced areas like yours. Maybe not over 10% like this guy is wanting. But I can see how it would suck to sit at an open house for a problem house, knowing that I'd be only be payed $1800 for my trouble if it sold, but I'm spoiled from working in Cali. My advice is to shop around and see what other realtors are charging in your area. Maybe flat fee commissions on low priced homes is common there. If they aren't, I'd suggest listing with someone else. Don't go to a discount broker though. At that price point they won't save you any serious money. Find a full service agent.

I saw your other post too and noticed that 4.1 is the asking price, not the price you've decided to offer. That makes the situation even better. If it was a cool 4 mil then 200k would be exactly 5%. If you find a lender who will hook you up with a 5% down jumbo, do tell! I work in your area, and I'm always on the lookout for fine financing.

That is a hefty seller carry. Everything is possible in seller financing. As long as you bow before the almighty Dodd-Frank. So theoretically, if you could convince the seller to consider that as the downpayment, it might work out. At least it might not be illegal. I doubt it would make for a compelling offer though.

If you use a lender they would probably want you to put down some form of downpayment. And if I were the seller's agent, I would advise them not to sell it to you on 95% seller financing. Money now is worth more than money in the future. That adage doesn't just apply to us as investors, it applies to the sellers as well. Assuming you want to buy the place for 4.1 mil with a 200k downpayment, you would be paying just under 5% down. Be ecstatic about the 25% seller carry. Don't get too ambitious and scare the deal away. Assuming 4.1 mil is a good price, you'd be killing it with 5% down and a 25% seller carry that baloons in 10 years. I don't know where you would find a lender who would give you a jumbo loan for 5% down, but I have heard legends of such things from my mortgage broker. Not sure what the max loan amount was. You might be able to find some private money on BP. With a seller carry that big I would try to find a lender vs. trying to convince them to finance all 95% of it. If I were the seller I would want more than 200k in my pocket at closing.

I would love to get some coffee @Joe Homs, PM me an we can figure out a time.

Hey BP, I finally decided to become more involved in the community, and I can't thank you all enough for the blog posts. This has been my favorite real estate site since I discovered it a little over a year ago.

I am a Realtor® in Orange County with Evergreen Realty and Associates. I live in Tustin, but I work all over OC and even up into LA. I've been transitioning towards working more with investors than retail buyers and sellers, as I've had an easier time connecting with them. I would like to dive into investing myself but I am not sure where I want to start yet.

One thing that has kept me from getting started is that I really want to focus on methods that don't rely on discounts. I find the idea of a discount a little insulting. I also find it hard to say something to someone that would insult me.

As an agent I feel like it would be unscrupulous of me to encourage a potential client sell their house at a huge discount when the market is so hot. And I try to treat everyone with the same respect I'd give a potential client. Because of this I want to pursue strategies that will allow me to offer market value for a home.

So far I'm looking at lease options for buy and hold, and lease option assignments. A lot of that has to do with my odd luck of stumbling upon people looking for lease options.

Even if there was never a chemical spill, future buyers might be overly concerned about this question themselves. And most people are too lazy to do the research to find out. I know RealtyTrac shows information about nearby cleanups. Anyone have any other suggestions for where to get this info?

The upside is that you could get a better deal on commercial real estate next to a gas station, even if it is clean, just because of the stigma. I wouldn't do it for flipping, because it could take a lot longer to sell. If you wanted to open a fast food franchise however, a clean gas station would make a decent neighbor. Don't bother with residential properties next to gas stations, unless they have been rezoned for commercial. Then a tear down might be feasible.

Hiring an agent to fill out your paperwork is a lot like hiring a lawyer to help you set up an LLC. You are hiring a professional who (hopefully) undergoes continuing education to ensure that they are up to date on current regulations in their industry.

When your agent helps you with the paperwork, their errors and ommissions insurance can protect you (indirectly) from serious legal liabilities if things get litigious. If you fill out the paperwork yourself, and you mess up, you are liable. If your agent helps you and he messes up, both you and the agent are liable and can be sued. But the agent becomes liable to you for messing up as well, and you can go after them for the money you lost from the suit.

Their errors and ommissions insurance will pay out what the agent owes you and the other party, as long as the error is covered. If the agent is covered, they will only have to pay a deductable. If the agent isn't covered you can still sue them too, and probably ruin them! What a wonderful world we live in. So sure, your agent might not be the one who found you the property. But that is no longer the hardest part of the game. 

I understand that sometimes it looks like agents are getting easy money. But it is often just a stroke of good luck following a string of misfortune. For every 20 hour deal, you could be facing countless 50-100 hour flops. Buyer's agents have it the worst. At least listing agents have their client under contract for a time. Buyer's agents rarely convince their clients to sign a buyer broker agreement. And yet it is the buyer's agent who is considered the "selling agent" because they helped draft the offer that brought about the sale.

So I can see how your agent may have been unhappy, if not offended, at the idea of taking away less than 2% when the listing agent gets 3%. Usually the split is 50/50. When it isn't 50/50 it is almost always the buyer's agent who gets more commission. Lot's of savy listing agents will give some of their split to the selling office if the sale happens in the property's first month on the market.

Now sure there are plenty of discount brokers you could go to that would take less than 2%, maybe even less than 1%. But why should you expect your agent to protect your interests and make you money, if you aren't willing to make them money? And if the profitability of the deal hinges on 1.5% of the purchase price, I wouldn't touch it with a ten foot pole.