All Forum Posts by: Vinay H.

Evidence is stacking up that residential real estate has at least hit a soft patch. Last week, the National Association of Realtors reported that seasonally adjusted existing-home sales declined for the fourth consecutive month in July, a drop of 0.7%. The decline was particularly steep in the northeast at 8.3%.

A for-sale sign stands outside a pre-existing home, in Walpole, Mass., in July. While house prices are remaining relatively firm, housing sales, and therefore mortgage volumes, aren’t faring as well. PHOTO: STEVEN SENNE/ASSOCIATED PRESS

This week the S&P CoreLogic Case-Shiller National Home Price Index showed home-price appreciation slowed to 6.2% from a year earlier in June, down from 6.4% in July. Weakness again was concentrated in the northeast. New York was the only one of the 20 major cities tracked to see a fall in prices from a month earlier.

These figures are far from dire. Aaron Terrazas, senior economist at Zillow Group, says the housing market is being supported by a strong national economy, particularly in rural areas and smaller cities. At the same time, stretched affordability after years of price gains, and the reduced deduction for state and local taxes, are weighing on certain markets, especially in high-cost coastal areas

You will not get 90% LTV in a refi or heloc. The only way to get a mortgage for 80% with additional cash out is to use point.com or unison or similar “equity partnerships” loans

Have you asked what is the cap rate for this apartment complex. Generally they should post it. Yes if you buy for 3.1 and assume the remaining debt, you need to pay the balance cash.

Intersresting @Sendhil Krishnan

I was not aware there were other companies doing this. To me, whenever exotic instruments pop up and start to gain steam, it means the end.crash is near. Remember when mortgage CDO started becoming the investment product that Goldman Sachs started selling to investors in 2005 lol?

In any case, my cons are as follows:

a) Unison and I assume others charge an origination fee - currently 4%. So they do make money upfront as well

b) There is some language that you cannot sell earlier than 3 years after unison loan. So it is like a little bit of a lock? What happens if you need to?

c) What if you do renovations to the property - does unison share in the gain due to this?

d) What if you sell for less than what Unison has appraised? Suppose they appraise your house at 500k and you are eager to accept a quick cash offer for 480k? Does unison allow this or they will come after you for the 20k unrealized gain?

e) What kind of lien does Unison take. If you have a first mortgage and home equity, they take 1st and 2nd position? Will unison take 3rd?

If this was 2006, not only would your duplex appraise for 200k but the bank would loan the buyers 105% of LTV.

And we know how that ended :)

Looks and feels like an amazing opportunity!!! Keep us posted.

First question to ask - why is the current owner selling?

Second does the 150-160k includes him working on it? What kind of hours does he currently work? Your current job may be dead end but does it require you to work weekends and not take vacations? This business could - so is this the lifestyle you want.

Third - what are some of the hidden expenses down the road - are there licensing fees, rents, refurbishment, deferred maintenance etc which can take a bite out of future cashflow?

Also what are current assumptions - if this is a business than requires inventory or sales etc, what happens if the cost of good goes up and the sales goes down by 10%-20%? Can the business take this hit?

Do you have any experience in this field or would you be learning? If so, will the current owner work with you for x months transition?

Also 560k seems to be a very high valuation for 150k annual earning. Generally the multiplier should be 2 to 3 times, depending on the industry, so I am thinking 300k to 450k. 560k seems high ...

I think the realtors are so busy that a call/email from Israel might seem like a scam and not worth responding to.

You should probably send a business-like email, introducing yourself, your objectives and state the capital that you have available to start investing in properties. Provide references to your social media/linked in profile so people can verify your identity.

I am sure if you do that, someone will respond. It may take time.

Also investing in a 29k foreclosed property in South Carolina over the web in Israel is probably risky. You are also in competition with people who are probably expert and in the ground in SC. You should consider a local partner or coming in for a visit to discuss with people face to face and see the area for yourself.

CURRENT HOME VALUE	FUTURE SALE PRICE	CHANGE IN VALUE	UNISON SHARE OF CHANGE IN VALUE	PAYMENT TO UNISON
Home has gained value	$500,000	$600,000	+$100,000	+$35,000	$85,000$50,000 invested plus$35,000 profit
Home has lost value	$500,000	$400,000	-$100,000	-$35,000	$15,000$50,000 invested minus$35,000 loss
Home value has stayed the same	$500,000	$500,000	$0	$0	$50,000No

I received a flyer from unison. They claim they will help fund 10% of downpayment. This is not a loan but a co-investment. They charge no interest but they share in 35% of the proceeds of any appreciation for home buying.

Their example - if purchase price is 500k, they provide up to 50k for downpayment. If the sales price is 600k, their proceed is 50k + 35% of the 100k appreciation. If the sales price is 400k, they take a 35% share of the loss.

Any thoughts? Any questions I should ask.

Pros I can see - a) No interest payments - improves cash flow

b) In case of home value loss, they share in loss

c) This does not show up as debt? in my income to debt ratio?

Cons:

a) what is the catch?

b) what if I want to opt out or sell for a price that is lower than what they appraise for ...?

"

We provide down payment funds that you can use for up to 30 years1 with no interest charges or monthly payments. In exchange we share in the change in value of your home – up or down – when you decide to sell2. Our share of the change in value is typically 35%. If your home’s value increases, we both profit as partners. If your home’s value decreases, we also typically take a portion of the loss. It is a true partnership – we win and lose together."