I am going to buy a house this month, here's how

[furnishedowner]

hassansr,

I, for one, am enjoying your thread and I always look for it. When I first started explaining what I do in real estate (fix and furnish rental homes and make a good profit doing it) I had people critical because they said it wasn't possible, so it must be BS. Nobody else here seems to have found my niche.

What is not possible in one market may be possible in another.

OK, so it's taking longer than you thought. It is still very interesting to see the level of analysis and your line of thinking. I believe you will get there and with investor money too.

Please carry on with your thread for the rest of us, and thanks.

Furnishedowner

[brockovich]

Using private lenders is certainly possible. If you get a bite, you can't be as picky on the terms. I will explain some deals I have done later.

Here are the issues I have with this thread. Hassansr is critical of using a realtor but is willing to spend $500/month on advertising??? In my situation on flips, I always target houses at 100K or less ARV. If If you figure on 3% being eaten up if another realtor brings a deal, then the most you will be out is another $3000 by using representation from a licensed realtor. Find a GOOD realtor and they are worth it. They will work hard for someone buying and selling with them consistently. Mine advertises consistently beyond the MLS, they do open houses, they do cross marketing with other listings. They show houses at all times. They handle the paperwork. They work with the lender, the appraiser, the inspector, the other realtor(which is the worst part of a real estate transaction) during the closing process. All while I am looking for other deals. A GOOD realtor is worth the expense. I didn't say you always have to use them but I do when I am selling... ALWAYS. I want to do deals, that is why I use my own money. I do not have to depend on others when I stumble on a good deal. Hassansr has a good deal and he is jeopardizing it by analyzing numbers from a private lender instead of just stepping up and using his own money. You talk about the risk of using your own money. If you beleive in what you are doing it is not risk. Yet you ask a private lender to put up cash on your terms??? I'd tell you to go take a hike. I'm sorry but my private lenders want some guarantees... and monthy payments, and income & P & L statements. And you know what, I have a half a dozen or more investors that I can go to, if necessary, and ask them for money. Do you know how they respond? They ask me how much I need and that's it. Even in this market. I have a proven track record with them, I provide guarantees and I can get their leverage when I need it. I usually only engage them on properties I plan on keeping as long term holds. I setup new LLC's for every new property I buy with the help of private money. I provide an 8% monthly return. Where else can anyone get that kind of return with their investments? I set a buy out option based on projections and I always beat it. The best thing about doing this is I can get into a 700K property with no money down and own 90% of the property in some cases. This si the deal I am working on now. I already have my private lenders lined up. I sometimes spend a year getting the property management in order and then buy their interest out in 18-24 months, sometimes longer, sometimes shorter, depending on the projections. A lot of times they are ready to roll that money into something else so I'm rarely chasing money at this point. I diversify. I buy and hold multi unti properties. Must be 3 or more units per building. I only flip single family homes. You cannot make money with SFH homs as rentals, Lease options, or Land contract unless the financing is on the horizon, which it rarely is, That is why very few LO convert into purchases and Land contracts run their term. I have the same kind of relationship with the bank. I can usually ask them for money and they too ask how much? I usually finance my long term holds into financed bank deals after I get the rent rolls and property value up after taking ownership. I have bought on land contract. Ended up with (2) 4 unit buildings for 321K and brought no cash to the closing table. Not the greatest return on the front end but hell I have no money in the deal either. They provide decent return and will provide even better returns after I will buy the investor out within the next 12-18 months. Mike (Property Manager) would question this deal because it doesn't fit into the 50% rule but I wasn't as picky since the financing terms were exactly as I wanted them. I bought a six unit building last year that I converted into a 5 unit for $22,000. Bought it directly from the bank. I have bought SF homes sight unseen, except for a driveby of the outside. Sounds crazy doesn't it? I always know worst case scenario for rehab. If they are in a decent neighborhood, I know how much ARV is just by experience. I don't need a realtor or appraiser to tell me. I know how much each job costs from experience also. Hassansr overanalyzes. He will rarely do any deals with this kind of analysis. And he has no money, which means even if he finds a deal, he may not be able to close it. I've typed enough for this evening but I wish him well. Even if I have been critical of his approach.

[hassansr]

i guess i struck a nerve...

[nwsold]

hassan,
i'm really enjoying this thread .... keep it going!

[jbhollis1180]

Brockovich,
Thank you for all the information you provided regarding your investments.  As I've stated before I use this site as a learning tool and very much enjoy the information that's been provided.  If you haven't already posted it somewhere, I'd love to know more about how you perform your long term deals that you mentioned.

Hassan, good luck and keep it up!

[JAREDfromPA]

Brockovich,
Thank you for all the information you provided regarding your investments.  As I've stated before I use this site as a learning tool and very much enjoy the information that's been provided.  If you haven't already posted it somewhere, I'd love to know more about how you perform your long term deals that you mentioned.

Hassan, good luck and keep it up!

For what it's worth I second that

[wallacehobbs]

hassan,
i'm really enjoying this thread .... keep it going!

I can't belive I read the whole thread 

[hassansr]

Looks like I am going to be wholesaling this property on Cherie. The appraisal came in quite a bit lower than I needed it be ($75k vs my initial est of $90k) and the trend doesn't look promising., something I'm not willing to live with in today's market. The big issue is that there are far more pre-foreclosures and foreclosed properties on the market than I thought there were for this area. The other issue I have is that last week Bank of America decided that it would be a great idea to slash my personal credit lines from $75k down to $25k (when do I get my bailout?) and I still have been unsuccessful in securing a private lender with terms that will work for me. The thing that really bugs me is the credit line being slashed as it will affect my credit scores for quite awhile as my debt usage to availability ratio is now significantly higher than it was before just cause the bank wanted to reduce their risks. I should have taken the step of cashing out the credit lines and depositing the funds into a bank account, but now I am where I am.

I will continue seeking private funds as that is now the best way for me to go for future purchases and I don't believe in quitting.

All is not lost, however as I can still wholesale it to make some cash. The good thing I learned from the appraisal is the fact that rents have not dropped in the area that the house is in and are stable This trend supports my wholesale buyer's cash flow based strategy.

Wholesaling  a bank owned property is a pretty straight forward process. The trick to doing this type of deal is that I can't assign the contract or do an option on it, nor do I want to tie up my money on a deal that I wont be holding. That said, I'll have to do a double closing which will cost a little money, but not so much that it kills my deal.

A double close is done when you have a house under contract between you and the seller for one low price, that you will resale to a third party buyer at a higher price on the same day. In this situation you are going to take title to the property just for a few minutes and then sell it and transfer that same title to the third party for a higher price. Normally it's done when you are forced to take title because of the nature of the deal or when you don't want either the buyer or seller to know what your profit is going to be.

Double closing in GA requires the person doing the deal to bring what's called "wet funds" to the table. This means that you have to have the cash needed to buy the house to get title before you can transfer it to your end buyer who will also bring cash to the table to buy it from you. If you have the cash on hand you can use your own to fund it or you can borrow it from another person (some attorneys will do this) just for the day.

You have to have wet funds because some states have made it illegal to use the end buyers funds to cover both the cost of your initial transaction as well as theirs, which is how many of the 'gurus' out there claim that you can easily do; trust me it isn't.



Now my buyer wants to pick up the property at a cost, purchase, rehab, closing expenses and my fees are no more than 50K. He also wants the deal to be one where the net annual income (total rents less expenses like taxes and insurance) bring in at least a 20% return on his investment each year.

Based on his due diligence the estimated rents for the area are in the $850-$875 range and the repairs are a little higher than I estimated ($13,500 vs $11,280). He agreed to the tax rate, though it will most likely be a bit lower due to his purchase price, and is able to get the hazard insurance for a couple bucks less each month. Thankfully he won't factor in a vacancy factor nor will he be using a management company to deal with tenants. That said I have to make some adjustments to my figures to get him where he needs to be.

His Est Rent $850 x 12 months = $10,200 (year)
 Tax    $92 x 12 months= $1,108 (year)
 Insurance $45  x 12 months =  $540 (year)   
 Total  Net Income $713  x 12 months = $8,556 (year)

To determine what his bottom line on income will be, all I need to do is take the net annual income and divide it by 20% to find out the max the deal can cost him. Then I can work my way backwards to see what I'll make.

The math works like this:

$8,556/ 20%= $42,780 which is the most he can pay in total to get the deal to work for him.
           
To get my fee and his purchase price, I take that 42,780 and deduct the costs:

Buyers max cost $42,780
 Less repairs $13,500
 Less Closing Costs $1,200
Equals Buyers Purchase Price $28,080

From this number I have to back out the costs to get my profit. At first glance it looks like I'll be making about $7,080 from the wholesale proceeds as his purchase price of $28,080 less my contract price with the Wells Fargo Bank is $21,000; unfortunately it will be a little less as I'll be doing a double closing on the deal.

The cost of doing a double close for consists of two components, the admin fee and the use of funds fee. The admin fee is just $500; it is what the lender charges me just for setting up the deal and wiring the funds into the closing attorney's account on the day of closing. The interest charge is a  percentage or flat fee on the amount borrowed. In this case I'll be borrowing $22k just for a day and the lender will charge me $1,500 for the use of his funds. Normally he charges the greater of 10% of the amount borrowed or a minimum of $2,500, but since I have worked several deals with him in the past he will give me a break. My total cost for the double close will be $2,000 ($500 + $1,500), the buyer will pay his own.

After all of that is factored in my profit on this wholesale should be $5,080 which is as follows:

Buyers purchase price $28,080
Less my Purchase price $21,000
Less my double closing costs $2,000
Equals my net profit $5,080

The buyer has agreed to buy this house from me in it's as is condition for $28,080 and has signed the contract, which is  written up on a standard purchase and sale agreement with the buyer paying $1,000 in earnest money to me with a closing date on or before March 26, 2009. The only stips are that I must be able to get clear title on or before the date of closing. The buyer will also pay all closing costs on the 2nd closing.

He has agreed to use my closing attorney which I have instructed to check title. Hopefully the bank was able to clean up any issues when they foreclosed on it. If not the closing attorney will have to clean up the mess or the deal won't close. we'll see.

As for the remaining properties here are the statuses:

2. Exeter: asking $54,900, my MAO 37,350, my orig bid 31,748, bank countered at 48k, I up my offer to 33k. Bank countered at 47k, not very motivated and slow to get back with me.  Update2: bank countered at 45k and I raise my offer to 34k. Update: this house is in the same area as the house on cherie so I am very concerned about the value. The bank is still sitting at $45k and I am sitting on my offer of 34k.  I've resubmitted at that price and will check in with them in 2 weeks.

3. New Castle: asking $55k, my MAO 21,415, my orig bid 18,203, bank countered at 45k, I up my offer to 19k (might not get this one). Bank countered at 40k, still too high; I'll let the bank eat silence on tis one as well. Still waiting for bank to get real, I'm upping my offer to 20k. I noticed that they lowered asking price on MLS to $49k from $55k and that it was originally priced at 70k; meaning that the bank really is interested in moving this one.  Update: someone beat me to the punch and now has it under contract.

4. Burnt Leaf: asking $60k, my MAO 35,299 my orig bid 30,004, bank countered at 48k, I up my offer to 32k. I'll stand at $32k and have re-faxed the offer and left the realtor another message as the property is still actively listed at 60k. Update: Bank finally responded and countered at 45k. I stand at 32k and will followup in two weeks as well.

6. 3867 Trenton Dr, Snellville, GA (FMLS # 3788896): asking $59,900k, my MAO 29,330 my orig bid 24,931, bank countered at 31k, I up my offer to 26k. Update: bank is standing firm at 31k, I'll stand firm at my offer of 26k and see who blinks first (won't be me).    b]Update: reo realtor called and said that its under contract as of March 2. Pending close date is March 25. I liked this one too, sad I couldn't get it. I'll monitor to see if it actually closes later in the month.[/b] Update: still waiting to see if this one closes.


Well, this has been an interesting experience. As you have seen it is not as easy as it looks to get a deal that makes sense for you. Yes it is very easy to today's market to buy a house, but to get it at a price where you can make the profit you want isn't. Market values are dropping and the things that we usually  take for granted (like our usual lenders or credit lines being there) aren't as we expect them to be. That being the case however you still have to go forward.

At the moment I am stuck by my reliance on using private lenders to fund my deals. I don't want to risk or use my cash or credit to fund my deals, as they can be tied up for a long time. I can still wholesale, but retailing will be an issue til I resolve the funding issue. The places that I normally would seek private lenders (real estate investor associations and meetings) are not of much use as the experienced investors want too much in return and the inexperienced ones aren't as anxious to get into a deal. So I'll have to expand the circle; it's not a problem, but a challenge that I'll have to meet.

To do that I've gone back to the old tried and true method of writing down a list of everyone that I know of and calling them to let them know of the opportunities that I have access to. I've also joined a couple of professional groups that are not related to real estate investing to start building relationships in. It'll take a little more time than I originally anticipated, but it'll work.

In the next post I'll explain the strategy I'm using in more eloquent terms. I'll also give updates on the statuses. I noticed that some of the readers of this post have had  their doubts about it and my ability; but that's ok. Not everyone is going to agree with my methods or goals and that's also ok. What's important is that one sets their goals and does what ever it takes to ethically achieve them. The means by which one gets there will of course change to reflect actual conditions in the market and you learn from it.

 Til next time...

good luck and good hunting.

[hassansr]

title came back clean. proceeding with the wholesale closing. need the reo realtor and the bank to do their parts. It may take a little longer to close the deal out than on the contract due to that fact, but my buyer is patient, and we'll take the hicups as the arise.

 also time for me to address some of the concerns raised by others on this topic.

[hassansr]

Ok, we'll start here.

I have two main facets of my real estate investing business, a wholesale (investor properties) unit and a retail (owner occupied homes) unit. For the wholesale properties I am simply assigning contracts or buying and selling on options. These are properties that I never or rarely own, that don't fit the bill for what I am seeking as it relates to retail properties. Normally wholesaling is about 25% of the business, however over the past year it has been about 80% as I had been wary of risking my private lenders money in a market where property values have been sliding backwards.

For the retail biz, I predominantly use private lenders to fund the purchases of the properties that I repair and resale to owner occupant buyers. It's not because I don't have money or credit. It's because of the fact that my money and credit are limited resources. Once I commit them they are locked up in the properties until I have them resold, an open ended process that can take just a few days, or 6 to 12 months or more. The effect of this is that there is a financial limit to the amount of deals that I can do, not a risk that anyone should take while you have other things going on in your life that consume cash and credit.

That said, I have to spend a large portion of my time creating relationships with potential private lenders; regular folks like you and me that aren't millionaires, just thousand-aires (if thats a word) with 10k-100k+ in investable capital. These private lenders are folks with under performing cash sitting around in IRA's, 401k's, checking and savings accounts. Working with them gives you the flexibility to target deals at prices that make sense for you, not the seller. Finding private lenders is a bit harder than it used to be, but still worth doing. I use several methods to find them, including:

1. Reaching out to family and friends about upcoming opportunties that I have
2. Networking at professional, business, real estate investing and investing clubs.
3. Holding meetings with small groups to explain how the process works

As part of the process of finding private lenders you have to have some opportunities for them to consider already in the bag. This means that you have already viewed the inventory on the market and have some potential deals in the works, which only comes as the result of your making offers.

There is a saying in this business, that 'if you are not making offers, you aren't making money'. I agree.

If you don't make offers, you'll never have an opportunity to present potential investments to private lenders when they have their money available. You also won't be engaged in the game, resulting in months or years going by without you ever earning a dime in real estate. So it's a delicate balancing act that you have to perform as you have to keep your head in the game while you match up real estate investment opportunities with the people that have the money to lend, when they are able to lend it to you.

Contrary to Justin's statement, I don't put out 10 low ball offers hoping that one will get accepted; that would be dumb on my part. I put out 10 lowball offers with the knowledge that the seller I am targeting, banks, can afford to and in the right situation are willing to sell at the prices that I need to buy the houses to at. Most private sellers can't do this as they have high debt loads and low equity.

I am not concerned with the fact that I may or may not have the funds already lined up when I make offers, as I know that if I do everything that I need to do in securing the right deal and packaging and consistently communicating the private lending opportunity to the private lenders in my market, the funds will come. If the funds don't come I still have the opportunity to wholesale the deal out to other investors that can close in their names fast.

By starting my offers at 85% of the maximum that I am willing to pay and working upwards during negotiations, I am making sure that I don't overpay, and making sure that I have enough time to line up potential private lenders.  This process works well for me and many other investors.  If I wait til everything is perfect, I'll never try, won't be engaged in the market, nor will I make money.

For those of you that invest by using your own cash or credit, that is ok as well. Just try to be careful and minimize your personal exposure.

Good luck, Justin


Hassan

I think there was a lot of shotgunning involved here.  You don't have to put out 10 lowball offers at the same time and hope that one gets accepted.  Hassan seemed to be going about things backwards from the way I do it.  I don't go around trying to put things under contract unless I've already got financial backing in place.  Seems like he was way too strung out trying to throw out so many lowball offers hoping something would stick and also trying to meet with so many private investors. 
On the property we have under contract now, we went from looking at it for the first time, to submitting the offer, to under contract all in 5 days. 

[hassansr]

I am a fan of Robert Kiyosaki, who believes that you should be earning at least a 200% to 1000% (or more) return on your money. It took me a while to get thru the noise of the promotional stuff he pitches, but if you listen well, you'll see that he does make sense.

For some a 10%, 20% or even a 50% return on your money may be a great deal, but to me it's not worth the risk, especially when property values are in free fall in many areas of the country. There are too many things that can go wrong if one expects that level of return, which to me is just like the exposure that you get in investing in stocks or mutual funds.

Returns of 200% to 1,000% are very much possible in real estate investing if you do it right. Those levels of returns give you the ability to take your time and invest thoughtfully, not emotionally or speculatively. To get such a return, you should never use your own cash or credit, nor should you accept a deal where you are hoping for capital appreciation (values to rise). You have to use other people's money (not banks) with you in complete control of the deal.

By taking the time to re-engage the market, I have been able to see the real effects of the mortgage meltdown and will adjust my efforts accordingly.

Contrary to Brockvich's claim, the pool of private lenders has not dried out completely. There are  many potential lenders out there, you just have to spend a little more time working to find them and be consistent at it. My issue is the fact that I had not taken the time over the past year to broaden my base of lenders and have not communicated with them consistently enough to stay on their minds, especially when you see that so many of them don't trust the stock market. This happened because I got more focused on wholesaling and avoided retailing.

I have to do a better job of identifying private opportunities by finding better deals and communicating the benefits to my market. That for me is the number 1 task I have this year.

Remember there are many ways to get a deal done and anybody with cash or credit can buy a house now (getting rid of it at a profit, that's another issue). Use the method that makes the most sense for you.


Best of luck

Hassan

20% return in 3 months on my money. I will take that anyday. Carrying costs were $500 per month and covered my interest only payment on my money into it, insurance, and utilities. So even at 6 additional months I would still clear 10K. This doesn't mean I don't make mistakes. I have lost money on a flip. But I don't have to rely on other money to do deals which is imporant as hassansr has found out, the well has run dry on those private sources.

[hassansr]

Please see my earlier post today. If all one knows about buying properties is to use a bank loan or their own cash, they shouldn't be surprised when they fail. Been there, done that. Not going down that path again.

Jared,

IChristopher W
Investment Mortgage Planner
Supreme Lending
Cell:     214-923-5781. 

[hassansr]

thanks

hassansr,

I, for one, am enjoying your thread and I always look for it. When I first started explaining what I do in real estate (fix and furnish rental homes and make a good profit doing it) I had people critical because they said it wasn't possible, so it must be BS. Nobody else here seems to have found my niche.

What is not possible in one market may be possible in another.

OK, so it's taking longer than you thought. It is still very interesting to see the level of analysis and your line of thinking. I believe you will get there and with investor money too.

Please carry on with your thread for the rest of us, and thanks.

Furnishedowner

[hassansr]

Let's address this one as well.

1. I have no issue with spending $500 a month on advertising as it accomplishes several things that working thru a realtor makes impossible.

a. It allows me to build a timely list of the potential buyers in my market. If I use a realtor, I never know who these people are except for those that are represented by another realtor. This is extremely important as I need to know who the lease to own buyers, cash buyers, credit buyers and renter are at any given time to be successful.

b. I typically will buy 2 or 3 houses in the same area, which enables me to combine my marketing efforts and lower my unit marketing expenses. I never place an ad or send a direct mail piece with  the addresses of the properties that i have for sale; I direct all potential buyers to my retailing website or voicemail system so that I can have them prescreen the buyers and record their information. This also enables me to build up my home buyers list.

c. Using a realtor that is not a flat fee listing agent locks me into a 3% to 6% commission that I have to account for in a market with receding home values. I have to honor that commission agreement if if I don't make money; not acceptable. I use a flat fee listing agent as it costs only about $300 to get each house listed on line and about the same once the deal closes on resale. It also provides max exposure online and on the MLS.

I have no issue with realtors, they just don't fit into my model for either buying or selling. As for their marketing efforts, paperwork and showing houses, for most realtors I have not been impressed. Open houses for the most part don't work, especially in a flooded buyers market. It does not take a realtor to write up a contract; in fact in most cases I normally handle my own. As for showing houses I have for the past 4 years used an autopilot system where the buyers see the houses on their own after getting a lock box code over the phone from either me or one of my associates. If they like the house, we take their application direct and process them on our own. It's not a big deal and not very complicated at all. Working with lender is not a big deal at all. All that's required is for the buyer to qualify for a loan credit wise and for me to ensure that they provide the lender with the 5 - 7 documents required to close the deal, like checkstubs, bank statements, appraisals, applications, credit reports, verification of rents and insurance. I never allow the realtor to manage the process because i want to ensure that I get the deal closed.
The trick is to get a large number of potential buyers to see  the houses, which is done thru our marketing. Why should I pay 3-6% of the sales price as a realtor commission when it isn't necessary?

As for me jeapardizing good deals while I wait for private money, I disagree. Even though my market (Atlanta) is flooded with potential deals, the risk to me, my family and my business is too great for me take a chance on doing this the wrong way. I know how to find deals, how to structure them, how to repair and market them and how to get them sold. I have to make sure that i have deals when the private funds are there and avoid the temptation to use my funds. Yes I will lose some, but because I by the houses correctly, I'll make much more than I would if I rushed into the deal the wrong way, using my funds.

As for private lenders, I provide them with much of the same info as Brockovich does, securing their money with a 1st position loan, at a fixed interest rate over a defined period of time, usually for about 60 months. They also get title insurance and hazard insurance as well. I do not make monthly interest payments unless I really need to (which is never). My interest rates start at 8% and go upwards, with equity splits if needed. I also guarantee at least 6 months of interest in case the house is sold quickly.  I don't provide profit and loss statements because most private lenders don't want or expect them (of course if needed I can show my lenders exactly where we are in the process and how their funds are performing). I train my private lenders to invest on my terms. If they are unwilling, then I respectfully decline their support.

 My business revolves around me securing private funds, not using my own. I have been down the path of using my money and credit and got burned badly early in my investing path. I believe that my model does work, if I didn't I wouldn't be were I am today. For all investors out there I truly believe that you have to believe in what you do and work it til you succeed. Along the way you will have many nay-sayers and distractors, however if you stay on track and engaged with your goals you will get what you focus on.

Brockovich does know what he is doing and will in the long term be successful, as will I and many of you. We are just taking approaches to the biz that reflect the realities of our separate markets.

Good luck

Using private lenders is certainly possible. If you get a bite, you can't be as picky on the terms. I will explain some deals I have done later.

Here are the issues I have with this thread. Hassansr is critical of using a realtor but is willing to spend $500/month on advertising??? In my situation on flips, I always target houses at 100K or less ARV. If If you figure on 3% being eaten up if another realtor brings a deal, then the most you will be out is another $3000 by using representation from a licensed realtor. Find a GOOD realtor and they are worth it.

 They will work hard for someone buying and selling with them consistently. Mine advertises consistently beyond the MLS, they do open houses, they do cross marketing with other listings. They show houses at all times. They handle the paperwork. They work with the lender, the appraiser, the inspector, the other realtor(which is the worst part of a real estate transaction) during the closing process. All while I am looking for other deals. A GOOD realtor is worth the expense. I didn't say you always have to use them but I do when I am selling... ALWAYS. I want to do deals, that is why I use my own money. I do not have to depend on others when I stumble on a good deal.

Hassansr has a good deal and he is jeopardizing it by analyzing numbers from a private lender instead of just stepping up and using his own money. You talk about the risk of using your own money. If you beleive in what you are doing it is not risk. Yet you ask a private lender to put up cash on your terms??? I'd tell you to go take a hike.

I'm sorry but my private lenders want some guarantees... and monthy payments, and income & P & L statements. And you know what, I have a half a dozen or more investors that I can go to, if necessary, and ask them for money. Do you know how they respond? They ask me how much I need and that's it. Even in this market. I have a proven track record with them, I provide guarantees and I can get their leverage when I need it.

I usually only engage them on properties I plan on keeping as long term holds. I setup new LLC's for every new property I buy with the help of private money. I provide an 8% monthly return. Where else can anyone get that kind of return with their investments? I set a buy out option based on projections and I always beat it.

The best thing about doing this is I can get into a 700K property with no money down and own 90% of the property in some cases. This si the deal I am working on now. I already have my private lenders lined up. I sometimes spend a year getting the property management in order and then buy their interest out in 18-24 months, sometimes longer, sometimes shorter, depending on the projections. A lot of times they are ready to roll that money into something else so I'm rarely chasing money at this point. I diversify. I buy and hold multi unti properties. Must be 3 or more units per building. I only flip single family homes.

You cannot make money with SFH homs as rentals, Lease options, or Land contract unless the financing is on the horizon, which it rarely is, That is why very few LO convert into purchases and Land contracts run their term. I have the same kind of relationship with the bank. I can usually ask them for money and they too ask how much? I usually finance my long term holds into financed bank deals after I get the rent rolls and property value up after taking ownership. I have bought on land contract. Ended up with (2) 4 unit buildings for 321K and brought no cash to the closing table. Not the greatest return on the front end but hell I have no money in the deal either. They provide decent return and will provide even better returns after I will buy the investor out within the next 12-18 months.

Mike (Property Manager) would question this deal because it doesn't fit into the 50% rule but I wasn't as picky since the financing terms were exactly as I wanted them. I bought a six unit building last year that I converted into a 5 unit for $22,000. Bought it directly from the bank. I have bought SF homes sight unseen, except for a driveby of the outside. Sounds crazy doesn't it? I always know worst case scenario for rehab. If they are in a decent neighborhood, I know how much ARV is just by experience. I don't need a realtor or appraiser to tell me. I know how much each job costs from experience also. Hassansr overanalyzes. He will rarely do any deals with this kind of analysis. And he has no money, which means even if he finds a deal, he may not be able to close it. I've typed enough for this evening but I wish him well. Even if I have been critical of his approach.

[moneyyoda]

Here are some tips I'd like to share -- three ways to buy foreclosures. There are pro's and con's in each of these methods...

1. You can buy the foreclosure BEFORE the foreclosure auction. This is the best time to buy the foreclosure because you have NO COMPETITION. During this step, the work you need to do is do a shortsale. The disadvantage of a shortsale is that your profit is in direct proportion to what you can negotiate with the bank and shortsales take a LOT OF TIME AND EFFORT to negotiate. Also, in a shortsale...depending on the homeowner, it's hard to tell them a shortsale is not going to help them keep their home.


2. You can buy the foreclosure DURING the foreclosure auction. This is the worst time to buy foreclosures because there is a LOT OF COMPETITION. You have amateurs who thought there are good deals during foreclosure auctions and you have representatives from the banks who will buy back the properties. The other bad part of buying properties at auctions is that you don't have an inspection contingency. In some cases, you cannot even inspect the property and estimate the repairs. Buying properties during auctions is a terrible idea specially if you're a beginner. DON'T DO IT!


3. You can buy the foreclosure AFTER the foreclosure auction. That is when the property was bought back by the bank foreclosing the property. At this stage, the property becomes an REO - which stands for Real Estate Owned. The advantage is that THERE IS VERY LITTE WORK other than making lots of offers and getting one of them to get accepted by the banks. There is some competition but if you click below, you'll learn how to get around your competition and be the KING of REOs in your area.



dedicated to your financial success,

Trace Trajano