All Forum Posts by: Christopher Telles

Given the status of the tax issues revolving around the property it's highly unlikely you can get anyone to lend on the property, including HMLs.

A lender would be exposed to tax issues prior to making a loan, and any redemption issues after making the loan. In addition, it's a given a HML will require a down payment, it may not be 20% if you can prove you have the experience to complete the improvements (not to mention the tax issues which I think make it a non starter for a lender).

Alternatively, your best solution to acquire this property is to find a partner to buy this property with you or a private lender.

 For the foreseeable future your seller has found a solution to their problem, avoiding foreclosure and or a short sale. The next problem with this property now belongs to you. How are you going to get clear title for a property you're paying $75k for but the bank is owed $98k? Will your agreement with the seller stipulate they'll pay the difference when you elect to or negotiate a date of purchase? More importantly, if they agree to pay are they capable of making that large payoff?

Even if you can earn a decent cash flow from the property on a monthly basis when you plug in that cash flow into a DCF analysis I'm pretty certain the short sale negative will deliver a net negative on the property for several years if not several decades.

Sometimes the best investments we make are the ones we don't buy. I'm going to speculate this might be one of them!

It was assumed because of the price that the MF example in question would require a commercial loan. There are many commercial lenders that allow a seller carryback to help qualify the buyers LTV requirement.

I can't speak to residential mortgage products.

I've yet to see a lender allow any perceived equity in a property used as part of a required down payment.

Why? Because it's true value is what someone is willing to pay for it today, and even though it might have more value upon a resale the only value the bank can place on the property is what it is being sold for which is the price you are paying the seller.

HMLs may allow this, but you'll pay for the privaledge. This said, if the deal can cash flow the debt and buying a property using HML is the only way you can acquire it then it may make sense to buy it and then wait the required seasoning time required by your lender of choice and then refi.

Alternatively, if you are short say the additional 10% then you can ask the sellers to careyback 10% if your lender of choice will allow you to use that amount to qualify you at their 80% LTV., and many will allow you to qualify under such circumstances.

Then either structure a holding account to save to pay off the 10% owed to the seller by whatever call date on the loan you've negotiated or simply refi the property again sometime before the call date. Just make sure to include these additional refi costs in your  DCF analysis.

Twelve Steps to Normalcy

1. Watch more TV

2. Listen to family and friends

3. Save your money in a rock solid insured CD

4. Work more hours to earn more money

5. Keep building that 401k

6. Plan extravagant vacations annually, put it on a card

7. Plan ways to spend that annual 1-2% wage raise

8. Seek the advice of people poorer than you

9. Sign up for a get rich quick guru camp

10. Buy the guru's extra deluxe platinum elite package

11. Cont thinking a home is an asset Vs an expense

12. Buy more real estate books to decorate your shelves and appear you know a lot about real estate

Awaken daily upon sunrise and repeat these effervescent principals to impress them into your subconsciousness. In so doing you will proactively reduce your need to communicate with others misaligned towards wanting and working towards rewards in real estate.

I'd offer a chant here but I don't know any!

How in the dickens do you report this blatant advertising stuff @Joshua Dorkin

The LOI is simply an understanding between the parties, it can be structured to have teeth but that beyond the scope of this question.

An option when executed properly invokes an equitable interest in the property and depending on how it's written can force a sale should the seller later have a change of heart, file bankruptcy, or die. 

If you do use an option and you're not familiar with all of its components, and I mean expertly familiar, then I would recommend you get your real estate attorney to draft the option since you'll be assigning it to others: and speaking of assignment, you might also get the attorney to include an assignment agreement that fully releases you from any financial obligations relating to the assignment, but also and potential litigious liability. All three parties should sign off on the assignment.

 Good for you for being persistent. 

As a 25+ year veteran on the CRE side and an entrepreneur of CRE brokerages that have recruited 100's of brokers/agents understand not all, not nearly even many, operate in such flagrant dishonest manner.

There are many many ethical and trustful agents/brokers who care deeply about what they do, and equally or more important how they go about doing it. Find a couple of good reputable agents to work with/

 It would be my recommendation when doing owner financing there is no finance charge. It doesn't matter what banks or other lenders charge for financing fees. One of the reasons we as investors buy properties using owner financing is to avoid qualifying issues, and avid paying fees. 

No fees = Deal. Fees = No Deal. Develop a set of investment standards and then stay disciplined and don't deviate from them. They will make and save you more money when you allow them to work for you. When you operate from an emotion point of view its very easy to allow yourself to become undisciplined and pay more or accept terms that should remain unacceptable.

Always remain disciplined. 

Theres some really good advise here in this thread. @Joe Villeneuveanalogy is succinct with how opportunities and markets work.

What hasn't been said though is that for those investors that are finding success in the Bay Area they're more than likely buying deals that are not priced at retail. They may be buying opportunistic resulting from distressed situations e.g. partnership breakups, divorces, business failures, etc., or using creative financing to make their deals work.

If you're looking through the MLS or having a realtor supply you with product that is on the market then its highly likely you'll find, and it appears you already have, that those deals won't work.

So my suggest to you is that if you want to buy property in the Bay Area, and have it cash flow, and have an opportunity to benefit from any capital gain over time, then you need to research how to find opportunistic and value add real estate deals, and how to buy then using creative financing.

Do those two things and the world will literally be your oyster!