What Am I Missing? Newcomer's Questions
I live in San DIego and I'm excited about investing to make extra money. I dutifully read Peter Conti's How To Create Multiple Streams of Income: Buying Homes in Nice Areas with Nothing Down! by Peter Conti & David Finkel.
On Sunday, I made my first written offer on an investment property for sale by owner. The home was a single-family house. He was asking $699,000 and I offered a lease option to purchase at the full asking price. The Seller said no, he wanted cash and that was ok with me. What surprised me was that the very next day, the Seller decided to list his property with a realtor. My wife laughed and said, I should be a great boon for local brokers!
Here's my question--should I take what this broker later told me at face value or not? And if not, why not?
"Rob,
I don't think there would be any real profit at all in the Malvern to flip. You can't get 100% financing for nonowner occupied property-you would probably need to put down 10%-20% to get the loan-so there would not be really any profit there. To flip properties, you really need an undervalued property. I don't work in foreclosures. The people who do purchase foreclosures usually are full time investors, primarily in foreclosures. I would not suggest you start with a foreclosure. It is a very difficult process. If you are primarily interested in turning a property now, you would want to find a undervalued single family residence-as undervalued as possible, make an offer, and just begin the process. You may make only a small amount the first time, but that would enable you to learn some of the ropes, get your crew together for the rehab, inspections, termite, escrow company, particularly your loan guy, etc. etc.-all of this takes time. I would talk to the loan guy now. i would recommend DC, Mortgage. He is a very good, experienced and very available. I would do this before you make any offers. Tell him I sent you-and once you have your loan parameters this will give you real clarity before you look and are ready to make an offer. I will send you anything that looks undervalued that I see. You have to be ready to jump on the undervalued properties. They go in a day--so again I would get all ducks in order, a loan prequal letter, etc. before you are ready to write the offer.
Talk to you soon.
X"
Do Peter Conti and Robert Allen have it all wrong? Is it impossible for me to do this myself without a broker and/or conventional financing? I'm willing to work hard in my free time (lawyer is my day job) but I lack experience to know whether X can be taken at face value or not. Thanks.
:-?
Roballen,
Yes my friend you are missing a great deal in making your offer.
You forgot the key is seller motivation.
Seller motivation first starts with details like courthouse research, market research and so on.
Next the most important detail is was the homeowner occupied, if so the key is how are they going to find another home and cover relocation cost?
No money down deals can be one of the most difficult forms of real estate investing!
Considering the volume of business I do let me share with you some percentages:
Trust purchases 69%
Lease purchases 8%
No Money down purchases 2%
Mortgage/lender related purchases 19%
Other types of purchases 2%
Yes all the creative investment strategies can and do work but the key is MOTIVATION.
Try asking questions of your sell like:
Such a lovely home why do you want to sell your home?
How did you come up with the asking price?
If you sell your home what do you plan to do?
If you don't sell your home what do you plan to do?
Learn all that you can and continue to push forward as real estate investing is a numbers game, the more no's you encounter the closer you get to YES!
:-D
Seller motivation, seller motivation, seller motivation!!!
Because I found the classified ad listed in a 3 months old newspaper, I assumed that the ad had aged and that thus the seller would be dying to sell. I get it. Note that the house was vacant and the Seller had been trying to sell by owner since at least April1. Apparently, the Seller wanted to sell the house to pay for his mom's nursing home expenses. The house is his mother's home and the father passed away last year. The seller lives about 10-15 miles away. That was his motivation.
Q: Is the courthouse research for foreclosures and pre-foreclosures per se? Or would courthouse research help identify lease option to purchase opportunities as well?
Thanks for your reply. So, I'm not crazy to think I can make it happen without aid of a broker. It'll just take alot of work and I recognize that 10 nos might stand between me and a YES.
To make a lease option work yes the courthouse is a big key in making a deal.
Your customer did not have the motivation to give you no money down deal.
You could have built your deal around their need>
Example:
Express the tax hit they would have taken both state and county.
Possible offer a payment that would cover the cost of care.
On and on we could go with this, I would suggest learning all you can on lease options and true no money down real estate investing.
I am sorry as I can not recommend, but I would be happy to provide an opine on their teachings when you find them.
It's just a conflict as I am one of those real estate gurus who teach real estate investing on the creative side.
First of all, this realtor you ran into that listed the property is intentionally painting the picture black. Do you really think he wants to compete with investors for his/her listings?
Secondly, creative financing does and will work but the previous posters are correct in that you MUST find the motivated sellers.
The principals and scenarios that Conti/Finkel teach have proven to make me deals but you must read between the lines and be creative. Good Luck.
Dave
_________________
"Opportunity is missed by most people because it is dressed in overalls and looks like work." (Thomas A. Edison)[ Edited by dealfinder on Date 07/22/2004 ]
To Dealfinder and Everyone Else:
1. In trolling through aged classified ads, I found myself bumping into hungry brokers and realtors like the one I quoted. Should I simply view brokers as competition and an obstacle?Conti teaches us that brokers can be valuable contacts.
2. Have you been able to do lease option to purchase deals in the San Diego market this year?
3. I'm going to spend time tomorrow doing research at the local courthouse and perhaps place a classified ad for highly motivated sellers behind in their payments. I'm thinking I would rather have highly motivated sellers self-select than spend time with less than motivated sellers.
Thanks again for everyone's thoughts and insights.
Most sellers that I know may be motivated to sell, however few of them want to have to come up with cash when they sell a house. Most Brokers I have met with like to get paid. Take those two factors, and your No-money down proposal, I see a difficult time trying to get the other two people involved in your transaction excited about your proposed deal.
It is difficult to negotiate no money down deals through a Broker unless you can show them that it will be worth their while. Obstacle #1.
Possible Solution - No listed properties.
When presenting your offers to the seller/s, it is critical that you know and address their needs or you will be walking away empty handed every time.
Lease/options are a legitimate technique used to acquire property. It is however critical that they make sense for both the seller, and the buyer for them to become a reality.
With regards to realtors being assets. A good realtor can be a tremendous asset to you. You will need to figgure out how they are to get paid though, or they will quickly lose interest in helping you.
Jeff
Roballen,
These responses are probably correct. It looks like a guy not desperate to sell.
The Realtor's advice, however, was very good. He wasn't trying to find a way to get you into the deal at any cost. He stated that he thought it wasn't really a money maker.
He told you that you should get with a lender and see what's available for you and once he finds out your parameters, he will look out for deals for you. I think he's a keeper. A lot of Realtors could not have been so clear on what you need to do to compete in the listed properties market. Btw, a good Realtor will know the market better than a new or part-time investor.
You need to find a seller under the radar (no competition) to do what you want, I believe. I live in L.A and I know the San Diego mkt is as hot or even hotter than here. I don't even chase pre-foreclosures here because I just bump into pissed off owners that had a dozen recent 'graduates' try to black mail them out of their home.
Try and find your own angle to buy at a discount. Good luck! Di
Roballen,
I have not done any lease options in San Diego this year but do know investors in my local association that have.
I am presently investing in the High Desert area of California because I feel you get more bang for your investment buck and the appreciation rates are very good.
I am also working in the Phoenix and Bullhead areas of Arizona as these are also good appreciating areas and home prices are very reasonable.
I didn't mean to infer that a relationship with a Broker or good real estate agent was a bad thing. They can be very helpful. I also agree with a previous poster that stated the Broker or agent needs to understand how they will get their commission and be motivated to do the deal. Good Luck.
Dave
[addsig]
Hi
What is a trust purchase?
Steve
A trust purchase is basically acquiring real estate by way of using a land trust - I suggest searching TCI, as there are several articles on this subject