All Forum Posts by: Derek Dombeck

Ryan,

The terms with your friend can be whatever you both are comfortable with. But, to protect your friends money, make sure you give him a note, mortgage, lenders title insurance, and list him as the lender on the property insurance policy.

Most likely, you won't be able to get bank financing to purchase, but refinancing a few years later could be fairly likely. It's easier to get a refi loan vs a purchase money loan. Of coarse this all depends on income and credit.

Happy Investing

Derek Dombeck

If you use an option, typically you would fill out a purchase contract upon exercising your option. The purchase contract will have more information in the document than the option would. For instance, the closing date, inspection clause, financing contingency, transfer of clear title language, pro-rations, etc.......

It will be cleaner to start with the purchase contract.

BTW..... a purchase contract that has contingencies, by definition, is an option. This is because the seller must sell to you, but you have the option to back out based on the contingency you used.

Happy Investing

Derek Dombeck

@Beth Teutschmann

Keep in mind there are many other ways to buy or control real estate. If you are just getting started with limited cash, I would concentrate on learning these alternative methods. Buying Subject to the sellers financing staying in place ( very little competition with this in our area ) Master Leasing, Options, Lease Options, Highest Bidder Sales, Wrap Loans, and How to structure Seller Financing terms that benefit sellers. I live near Wausau and utilize all of these and then some. Almost nobody is doing any of this around here. I know this because I run the Central WI REIA and most of the real players in the area are only making low all cash offers or using conventional financing. They are not closing to many deals lately. Also, be aware, you will most likely NOT be able to structure deals with most of the above mentioned methods unless you get face to face with the property owner. Listed MLS sellers put the real estate agent in the middle of the transaction and that prevents you from being able to discover the sellers true motivation, which is KEY.

Happy Investing

Derek Dombeck

@Luke Spooner

One major problem you will likely have is both your hard money lender and your bank are going to want to be in a first mortgage position. Also, most hard money lenders don't want you, the borrower, to live in the property because the loan will then fall under consumer protection laws. If they needed to foreclose on the loan, it can take much longer to get the property back. When I lend, there are clauses in the mortgage forbidding my borrower from living there and we will call the loan due immediately if they do.

Happy Investing

Derek Dombeck

Try to keep in mind the people you are helping by sending out letters. Today I received a call from a Father and Mother of a diseased Daughter who were so happy that I sent them a letter. They are currently trying to deal with the sudden loss (which involved fowl play) and can't even go into their daughters house because of the memories. Her son, their grandson, is now in their care and the house needs to be sold asap to get the money which will be placed into a trust for the boy. During the fowl play, the house got trashed and they want to sell it as is. I'm not taking advantage of the situation. I'm solving the problem......

Those calls make the negative calls worth it......

Happy Investing

Derek Dombeck

@Eric Tan

He would still have ownership which makes him responsible to maintain R E Taxes and insurance unless you structured a Triple Net Lease. Either way is doable. 

Here's another scenario.... If the property is owned by an entity, like an LLC, you could buy the controlling interest of the entity. By doing this, there was never a sale of the real estate. An entity stake is considered personal property and is sold at whatever value you all consider fair and reasonable.

In regards to the 80k, If that loan has good terms, I would try to keep it in play rather than pay it off.

Happy Investing

Derek Dombeck

I have Mentored quite a few people over the years and currently run a REIA in Wisconsin. The absolute worst thing that people do to me is ask for lunch or a meeting or a phone call and then be late or never show up. If you are genuine and can provide value to your mentor, that's all you need to do. Don't waste their time......

Happy Investing

Derek Dombeck

I love buying and selling with private seller financing. The main questions I ask sellers is what are they going to do with the money from the sale of their property and then I build my offer from there. 

A deal I recently did went like this.

This seller was diagnosed with cancer and didn't want his wife to get stuck with the stress of landlording. He did however, like the idea of still bringing in monthly cashflow for his wife.

I bought his duplex that was in great shape but the seller was well below market rents. My purchase was based on the income that was coming in. I offered $5,000 down on a $132,000 purchase with interest only payments at 3% for 8 years at which time a balloon payment is due. ( He chose the interest rate ) 

I sold the duplex 30 days later for $155,000 with $10,000 down at 6% P and I payments with a 5 year balloon due. This loan is Wrapped around the loan I structured when I bought it. These numbers were based on the proper market rents.

My spread on this deal is $519 per month. We structured the balloons to coincide with each other since the underlying loan is interest only and the wrap loan is amortizing.  

Plus, after 30 days we have zero cash out of pocket.

The key to getting seller financing is finding the true needs of them and solving their problem.

Happy Investing

Derek Dombeck

@Eric Tan

Just based on the limited info, I would structure a Lease with an Option. This way there is not a sale until a future date when it makes more sense for your inlaws tax wise. Perhaps you don't exercise the option until after they pass away, at which time there may be a step up in basis. They can get income in the form of rent from you as their Master Tenant while you sub lease to the other tenants. Your option fee actually is not claimed as income until the option is exercised ( not giving you tax advise ) which may not be for years. You have control over the asset and they still have income and tax advantages.

Happy Investing

Derek Dombeck

@Nick Hundertmark

I can't tell if this is will work for you due to lack of information, but here's an option. Ask the sellers if they would pull a loan as a refinance for 80% of the value of the property. This loan should be easy to get unless they have bad credit. Buy the property subject to the note/mortgage they just got and have them carry back a 2nd mortgage for the balance owed. All of this of course takes negotiating. Why would they accept this you ask? Perhaps you offer them above retail price if they give you favorable terms. I make these types of offers all the time. The key is to focus on solving the sellers problems. I can elaborate more, but I would need more details.

Happy Investing

Derek Dombeck