Landlord Answered My Letter To Sell
I have a "milliionare" partner who is so conservative it drives me nuts. He has a liquid 2 to 3 mill to play with in the foreclosure arena. I want to go on my own and show him that 85 to 90 LTV is o.k. in this hot www.market.Examp. Real life deal. I sent a letter to an out of area landlord, he responds to my letter and willing to negotiate. He has a realtor who he has contact up here with who says he can unload the property at 305k . (Some paint and carpet and it will go) desirable nieghborhood. This seller says "market is to good form me to let go a heavy discount, all it needs is paint and carpet, and my realtor will charge me 4% comm, What can you offer me, I am willing to entertain what you mentioined in the letter of "quick close" and cash in ten days" "No fall throughs". Would anybody seasoned enough offer this guy 90LTV and then what? because there is 30k spread and all it needs is 2k flooring, and 5k paint-in/out. 30K!! spread!! in hot market! What would the pros do here. "Tie it up, then place in newspaper "Seller willing to carry"?
This seller does sound motivated at all. He wants a quick all cash close at full price.
You are getting too emotionally involved, though it is great you got a call back from your marketing.
Why would you tie it up and say seller willing to carry when you are not the seller, and the seller has no interest in carrying financing in such a hot market?
Sounds like one of those huckster tricks that barely work in Indiana, much less California, the hottest market in the country.
Best of luck, Dave
Dave is right, you are too emotionally involved, and worse still, you are working to show someone who has made the kind of money you are looking to make that you know better than he does about how to handle his money. He has that liquidity to play with for a reason. Learn from him instead of trying to teach him.
Thanks for reply guys, I see what you guys are saying, but I dont think you understood the question. Once I tied it up, I would open escrow, place the home for sale as if I were the owner seller of this property advertising some like this " Cute/ Clean home in desirable location , owner willing to carry a second, asking 300k perfect for the first time home buyer" . I am not going to mention any names but there are a few people from this site who have shared with me that they do this all day long and make several flips every month, the note they create on the second they end up selling on the note secondary market to collect the other portion ( I know paper buyers would be buying the note at a discount). I just wanted to get some more of the details and the reassurance to make sure if this is how you do this -"wholeselling", "retailing", wholetailing". Making between 5k to 10k per flip to new buyers just by tying up the property from the seller just enough to lock a buyer from the other end. I am looking for reassurance if anyone other the person I have been in contact with been doing this "aggresive" "adrenaline driven" deals. By the way the millionare partner of mine made his money by partnering up with commercial property buyers in the early seventies and eighties and flipping million dollar apartment bldgs, which I asked if I can get him to redo this again with me ( get him back into that niche) he has his mind set on learning the foreclosure business and passing time making a few deals at a time, very passive. I just wanted to share with him (after talking to some of you guys...having you guys come back with something like....oh yeah do this all time, this is what you do..... and watch out for ...... because if.....) So hopefully you understand my question again this time around and I am not trying sound like I am ticked off...contrare...I was just trying some reiteration on what I think I am trying to do and have some reassurance that this might work or if the person I have been in contact with just happens to be blowing smoke up my way. Thanks guys.
brainstorm,
I apologize if I was a little direct on my last post. While you can wholesale to a retail buyer, it is generally easier to wholesale to another investor. Wholesaling is very simple. You put a contract on a property, and assign the contract to someone else for an assignment fee. Sometimes you need to do a double close, but it is always better to keep it simple. Now, if you try to double close to a retail buyer, you may have trouble, because you were on title a short time. If they are getting a conventional or FHA/VA mortgage, you will probably run into seasoning problems. That means it was not titled in your name or your company's name long enough. It generally is not an issue with another investor but it is with retail buyers. You will run into the same problem with the scenario you posted as well.
There are a lot of people out there with their own twist on things - The secret weapon. The fact is that real estate investing is simple. It is hard work, but it is simple work. If you are trying to do something using some secret formula for success, it will generally fail, could be illegal, etc. I am not saying don't be creative. I am just saying keep it simple and be careful.
I do thank you very much and very well understood. This is more like the reply I was looking for and eases my brain from over haul. I needed to read what you wrote about keeping it simple. I think sometimes we tend to over analize things.
Thanks again
Brainstorm:
If he is willing to carry the paper, then you would be safe to give him 90% minus repairs.. In a hot market, you could then sell it by owner and see a decent payday.....
You should not pay 90% with you obtaining your own financing and paying for repairs..... You need to meet with him and tell him that the realtor is going to tell him what he wants to hear to get the listing, but realistically it will sell for --. You could show him your comps and negotiate from there. One thing that you need to explain to him is that not only will he be paying 4% to an agent, but what about other costs such as:
-FHA Non-Allowables ($1200-$1500)
-Buyer Closing Cost (1% - 3%)
-Home Warranty ($300.00 - $500)
-Termite (varies)
-Home Inspector Repairs! Everyone
sends out their home inspector these
days! (varies)
-Mortgage Payments while he is making
payments on the house while trying to sell the property. $$$$
Show him your comps, times your comp by 90%, deduct 4% plus repairs and the figures I showed you above, and make him two different offers... One with him carrying paper and one with you getting a
new loan.. Tell him you provide a service and if he wants to get paid next week or next season??
Make sure you also run these numbers:
-Purchase Price
-Acquisition Cost
-Rehab Cost
-Carrying Cost
-Selling Cost
Best Regards,
Jeff Adam
_________________
"The only place success comes before work
is in the dictionary."
[ Edited by JeffreyAdam on Date 09/09/2004 ][ Edited by JeffreyAdam on Date 09/09/2004 ]
I think this deal is way to thin. To try to work this on a 10% margin because its supposedly a Hot Market is just not enough room. It doesn't take much cooling in that hot market for you to be sitting there holding a full price deal.
Brainstorm,
I agree with Commercialking here. This also goes back to my comment about why your multi-millionaire is a multi-millionaire. You have an awesome resource there. Learn as much as you can from him.
I am newbie in this, and I am constantly asking myself on a specific deal, "is this deal worth it for this money?" Like I said I'm a newbie, and my response will be different than many of you experienced investors. In this massachusetts market, where it seems like there are millions of investors I am tempted to jump on the $20K deal (rehabing by the way) then sit and wait for the $30-$100K deal. I guess it's all so relative. I appreciate all the advise you guys are giving.
Let me throw this out as well, since I saw it mentioned briefly above.
You said something about holding a 2nd mortgage against the property and then selling that 2nd note to a note buyer. If you're thinking of going this way, know this: 2nd liens are practically worthless on the resale market, especially fully leveraged, no seasoned 2nd notes. If you get offered ten cents on the dollar for a 2nd note of this type, better snatch the cash quickly before they change their minds.
Roger
That makes sense, Roger, and isn't it because in the event of foreclosure, 2nds have virtually no priority, and those note holders have little chance of seeing the debt repaid?
Beth
Thanks for the reply, I thought seconds held water. I guess the only ones are the first note holders in the best position.Hmm..back to the drawing board.
nuther newbie question, if what i seem to see in theses forums is right, then investing in commercial real estate is very different from stick houses, which agian is very different from say mobiles, and so on... therefore in the case of the concervative (old time commercial) investor and fairly new forclosure investor due to the differences is there still not a lack of experience on the old time commercial in the new area, sure he would be an awsome experience asset in the commercial end of the bus, but is there not some serious shortfalls to go to him for advice for the new (to him) area of forclosures... thereby also explaining his reluctance to jump in with both feet into an area of limited knowledge?
[addsig]
Roger is correct about 2nds having little value (read zero value man times).
Think of it this way...
First goes into default. What can the holder of the second do to protect their position? They can bring the first current and then foreclose. That will mean more cash out to bring the first current and keep it that way more or less. Then you have to pay the legal fees to foreclose on the owner. Somewhere in this process the 2nd is likely to realize that there is no equity left so even if they complete the foreclosure they have a loss to show for their efforts. There is many times back taxes or other liens if the buyer is really going down.
Oh, then there is the last minute BK filing that stops foreclosure while the losses mount on the 1st and other liens.
Hence the 2nd holder can be very motivated to get something for their position and get out. Think short sales.
Now, if there was a lot of equity above the 2nd then they are in a strong position. The 2nd holder forecloses and can legally take over the 1st without DOS happening (they are protecting their position so that is not a DOS condition). In that case they resell the property and get cashed out for a profit. A BK filing can still mess up the works.
John
[addsig]
Yes my partner is a little new to the foreclosure biz. I drive every day for four to five hours and get frustrated many times over when these owners in foreclosure say " just refied" "filing BK"
"talking to the bank and getting it worked out". For as much time I am "chasing" "that one deal" I should start to look for lots and land to build at least I know I can have something that can start to materialize rather than chase the "unknown"