All Forum Posts by: Sean Bramble

My understanding is that it shouldn't hurt his DTI since his previous loan will be "serviced" by the buyer. Not sure if there is a time lag between when a new lender would recognize this or not

Call 10 lenders and compare. Probably in the 8s/ 9s

Heard about this on Pace Morby's Youtube channel - it's a zero down creative strategy that works when 1) the seller is open to seller finance, but 2) needs a sizeable DP for various reasons (i.e., pay off their existing loan, closing costs, and/ or put some cash in their pocket, etc)

There are 2 "legs" of the transaction. My understanding is it works like this:

Example: purchase price = $1M, seller still owes $200K, seller also needs addl $150K cash at close for whatever reason. But the buyer wants the property at zero down.

First leg:

-- Buyer secures a loan (1st position) for $350K and sends to title company (this is the amount needed to pay off sellers loan + their required cash at close)

-- Buyer also sends $650K cash to the title company (can put in your own cash, or do a temp loan from a transactional lender)

-- First leg of txn is now complete, and the $1M stays at the title company (this is bc you customized escrow instructions upfront to instruct them how to disperse money before escrow began)

Second leg:

-- Buyer and Seller enter into an agreement through an LLC which allows them both to be on title, and seller agrees to seller finance the buyer $650K of the purchase price (on whatever terms they agreed on). Being on title protects the seller from the buyer defaulting - it seems this is an alternative to "officially" putting them in a 2nd position)

-- Title company sends seller the $350K they require

-- Title company sends buyer back $650K (which they can use to pay off their transactional lender if they used one)

So now the seller is happy bc they got the $350K they needed, the buyer is happy bc they acquired a property for zero dollars out-of-pocket, and from what I understand the 1st position lender is happy bc due the LLC arrangement the seller finance component is not technically considered a second lien on the property. Plus all parties were protected throughout the entire transaction through the title company.

Have any of you completed a deal w/ this method? Am I understanding this right? I would love to hear your thoughts on the pros/ cons/ risks involved

Anyone out there buying off-market STRs in vacation markets? How do you identify leads? Does this differ from how you would approach larger metro markets?

I've only looked on the MLS so far, but am super curious to learn about other ways of doing things

I’m sure there are many ways to get creative here, but it seems like simply doing your taxes will open up a lot of common sense doors for you here. Just bite your tongue and get it over with

anyone coming in on a second position will likely not want to take the final 10% of the deal - super risky for them if they are forced to foreclose on you. Could you instead try to get an unsecured loan for the final 10%? Or perhaps one secured by another asset you have? Could also ask the seller if you could pay them back the DP over some reasonable period of time.

If financing it with debt isn’t possible you may consider bringing in an equity capital partner and giving them a % of the deal, sharing profits, etc. 

I'm by no means an expert, but looked into upstate earlier this year for investment - Catskills area. I know from an agent in the Windham area that people have tried to get permits for tiny homes and have been denied. The way the state is structured into "towns" which have authority over much larger areas than what you or I would consider an actual town makes it complicated. Seems like the areas which haven't crafted legislation yet will eventually do so, so investors are looking at an eventual "getting grandfathered in" reality. This can be problematic if STR permits are linked to people - not properties - and may not be able to be transferred to new owners. Really limits exit options and the premium established STRs can sell for in more pro-biz markets. This + very high property taxes is why I started looking elsewhere out-of-state to invest in residentially zoned STRs. That said - take this all with a grain of salt, there could be pockets of safe areas with great potential. I looked primarily and Hunter/ Windham, Shandaken area, and don't have the best grasp of the western Catskills region (or the rest of the state for that matter). Definitely do your own research. If I were still looking in the Catskills I would focus more on old motel/ hotel conversions with commercial zoning .. potentially with creative/ seller finance possibilities. Once regulations are codified STR supply is essentially capped, and there could be a lot of upside for folks who have bought properties with the right zoning. Best of luck, and I would be super interested if you learn anything that contradicts anything I've said here! I live in Brooklyn, and would in theory love to invest closeby

PS- call the towns directly to ask your questions. They’ll have the most up to date info. Really try to feel them out as to how easy or not what you’d like to do will be. Theyll often describe a process, but you should pry as much as possible to see how feasible your idea actually is vs what they’ve seen in the past 

also- unless anything has changed Hunter and Windham will likely remain STR friendly. Problem is property values are so high it's hard to find anything that will cashflow like you would want it to

 Thanks @Robin Simon! I've heard similar from a few of my lenders. Question though - why no log homes? Any idea what's riskier about them?

Question for DSCR lenders: I'm looking at a potential STR property that has an atypical foundation. Namely that it has exposed rock in the basement. It's a log cabin, so my hunch is it's not your standard slab foundation, but instead supported in some other way. I'm assuming lenders typically won't touch this sort of thing - is that right? Please share your thoughts!

A few ridiculous photos below - I guess the current owners tried to make the most of the space and turned it into a literal "man cave" :)

Hey BP - apologies in advance for the naive question here: how do I know how much is too much to offer for a creative finance deal on an STR in a vacation only market?

Seems like the beauty of creative structures like Subto/ Seller Finance/ hybrids is that you can pay more for a property and still get a better yield if the seller will agree to your terms (usually a low DP)... but offering more than market obviously increases risk if you are forced to exit. In a typical metro market, I've heard many say "buy an STR that still cashflows as a LTR so you have a backup plan" ... but in many vacation-only markets (think Smokies, Destin, etc.) no property will cashflow as a LTR anyway. So ... how do I know how much is too much to offer in these markets? Is it simply a matter of calculating the DSCR of the property and ensuring it meets some reasonable threshold? Is there a specific cap rate you target? Or will you simply not offer an amount above what recent comps indicate is fair? Would love to hear your thoughts