All Forum Posts by: Seth Hayes

I've been approached by a bank with a list of 800 REOs that they are looking to unload. They are spread out across the country. I'm thinking that I should have them send me the list with their rock bottom price on each property and negotiate a non exclusive purchase option with them, so I can then turn around and wholesale them knowing what price point I have to hit instead of having to negotiate with both the buyer and the seller on each item.


Is there a better way to approach this than this strategy? Is there anyone here that has used this strategy and can point me in a direction so I can better prepare for my negotiations with the bank? Any help is greatly appreciated.

If you can season it for one year, you can do a cash out refi based upon the appraised value rather than the purchase price. Prior to that, you may be able to get a loan based upon the appraised value, but it will typically be at a lower LTV which will basically put you in the same position as if it were based upon purchase price.

Be sure your numbers are calculated well, and base the anticipated value off of performance CAP rate, and you should be fine.

A portfolio lender is one that keeps the mortgage in house instead of selling it. They don't have their hands tied with regard to the number of loans you have.

Hard money is typically for flips, but you can get an unlimited number of commercial loans for long term rental properties.

@Melvin List is right. You need to talk to a broker. They can help you navigate through the process and inform you of all your options.

I can't speak for FL law, but when OH tried to say that wholesaling is the same as unlicensed real estate dealing, it got shot down.

If you get a house under contract to purchase, you are not advertising or selling a house you don't own. You are selling the controlling interest in a legal contract. There is nothing wrong with that.

The only reason you need to worry about how long your HELOC money is in your account is if you are only looking for conventional financing. If you go with commercial financing, where you get your down payment money and how long you have it is not the primary concern.

Crossing the 5 unit line and moving into commercial investing is not as scary as it should be. Numbers are numbers when it comes to commercial lending. If the numbers work, the deal works. Don't be afraid to make that move.

One benefit of the many that follow the jump is that it eliminates 90% of your "competition." Most investors are intimidated by commercial investing, so they stay with SFR and 4 and under multi-families. This leaves the field wide open for those that are willing to take that step.

There are a few adjustments to investing in commercial numbers. It becomes more of a team sport, but once you have your team in place, it works great.

You can get as many commercial loans as you like rather than go FHA. The best terms I've seen for a while have been 20 - 25 years amortization. You'll still need the same 20% down, and the rates will likely be in the mid 5% range, but it's doable. Simply factor in the debt service into your offer and you'll do fine.

Outside of owner financing, you will need to go with a commercial loan for anything over 4 units. You'll need to have at least 20% down on the purchase price. Lately we've been able to get 5/1 ARMs on 20 year fully amortizing commercial loans for these types of properties in the mid 5% range. 

As far as determining a reasonable asking price, you will need to see the NOI on the property, and determine the CAP rate that is the going rate for your area, then factor in any capital expenditures that you anticipate encountering such as replacing the roofing, HVAC, etc...

After that, you'll want to determine what the cashflow will be and make sure you'll be able to service the debt, set aside money for vacancy, repair, and property management, and however much you'd like to net in cashflow. Once you've determined that, you should be able to sort out a MAO for the property.

Good luck

Mortgage brokers save banks money by doing the loan processing for them, leaving the banks to only be responsible for underwriting the loan. The banks and brokers typically work something out between them so the closing costs with a broker will look no different than if you went directly to the bank.

Where a mortgage broker will save you money is that they have established relationships with multiple lenders. They've already done all of the footwork of finding banks, hedge funds, private money, and other lending institutions that will work with investors. They've learned all of their unique lending requirements and are able to quickly pair you up with a suitable lender. Whereas, an investor will call several banks and go with the first one that will lend to them because it is difficult to find a good commercial lending institution.

It is not uncommon for brokers to also be lenders. It doesn't sound unreasonable for him to find you a lender if he was unable to provide the funding. What doesn't seem right is you not knowing he was a broker. Was that due to his advertising or a misunderstanding on your part?

The fees don't sound excessive for a brokered deal. I normally tell clients to expect up to 4 pts at closing. 2 pts go to the broker and the other pts vary due to what the lender charges.

Aside from the confusion about the actual occupation of your broker/lender, it seems to be on the up and up.