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[RKMoney]

Argh!

Alright. Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo, now I talk to my agent who says he'll be receiving 5% commision. Already time to move on ehh? Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake. (BS) He thinks they aren't including the sales commision in the offer. Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it.

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more.

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

 

[Superdbs]

Hey gurus,

Very impressed at the depth of real estate acumen in this thread after skimming some of the pages and topics. I'm going slightly off-topic as far as the investment theme here in hopes of picking up a little wisdom from all the sensai out there:  I'm probably going to be selling my house soon to move in with my girlfriend and am debating whether to sell it on my own to save the commission (it should go for around 208K). I have heard a lot of pros and cons both ways and don't know who/what to believe. I live in Colorado and the market is ok, not booming, but not bottoming out either. So what's the straight scoop? All things considered, would you advise doing it on my own, or is it not worth the hassle for an inexperienced rookie like moi to attempt it? 

Any thoughts appreciated. This was a terrific idea for a thread, very helpful stuff--

The straight scoop is that approximately 90% of FSBOs don't sell. Why...1. The biggest reason is price. People get attached to their home and think it's worth more than it is.

2. An unwillingness to work with buyer's agents. Most people are going to want representation.

3. They don't answer their phone or return calls. Customers aren't going to wait for you to get home from work.

4. Lack of exposure via internet.

5. Unqualified buyers give them the run around.

Solve those problems and get into the 10% that do sell and FSBO is no problem. Of course don't be the portion of that 10% that actually undervalues their property and leaves money on the table.

I'll give you an example of a FSBO I picked up last year. A CONTRACTOR "Heard" that there was a lot of money to be made in old Historic Homes. You buy them cheap, fix them up, and sell them for a ton of money.So my Wife and I walk around the area about 3 nights a week looking at the rentals. We walk past a place on OUR OWN street, and the lump sum of this guys FSBO advertising is a Small (Smaller than a sheet of paper) sign with a phone number. We call him for 3 solid weeks, HE WON'T ANSWER THE PHONE, and he finally calls back. He wanted $80K. I let him stew. End result, I bought that house for about $36K with massive seller concessions, and it rents without issue for $675 a month plus tenant pays all Utilities. I have a waiting list, I best I could raise it to $750 plus utilities and still move it every single time without fail, and the extent of the work I did was run a 220 volt Stove plug, have the carpets cleaned, and reconnect some heating ducts.

The guy could have gotten $90K plus, but he knew better than any Realtor could have known. He actually had to write a check at the closing table, as he lost money at the end of the day. I really appreciate all his hard work.

Could I run a FSBO? Sure, I'm in the business. Should the average person? Most likely not, as they will lose every bit they think they are saving. ANY and EVERY buyer looking at a FSBO drops their price by 7% just as a given because they know the seller is already saving that. From there, you have tons of pitfalls you can fall into.

The worst is when it sits on the market, and an Agent approaches you because they have a Buyer and they want you to pay them a 3.5-4% commission to bring their buyer. You end up paying them as you just want to sell it, the buyer has serious professional help, and you have nothing.

There is a place for FSBO, and it is in a Hot market. Anything short of a Hot market, and you are best to just raise your asking $10K and hirer a Realtor.

You can easily pull it off in a hot market.

Thanks Mike, Homer and BnB, appreciate your helpful advice. I'm not too proud to admit when I think I'm getting into something that's over my head (which is why you won't find me repeating past mistakes involving electrical re-wiring ) I hadn't even considered the scenario of buyers dropping their price right from the get-go because of the commission money I'd be saving. This is all that #### you definitely don't want to learn the hard way. You've gotta love FBGs and the FFA.....is there ANYTHING you can't get an answer to around here?!

 

[Battles]

Argh!

Alright. Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo, now I talk to my agent who says he'll be receiving 5% commision. Already time to move on ehh? Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake. (BS) He thinks they aren't including the sales commision in the offer. Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it.

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more.

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

Well, I'm dumping this agent and trying to get an agent I know to sign up to be able to bid through HUD. The 5% was ridiculous, which i discussed with him in less blatant language. I ran the idea by him that if he'd cut his rate now, I'd make up for it plus some when I sold it through him. No dice, so I'm moving on.Does anyone know how hard it is for an agent to get qualified with HUD?

 

[Random]

Argh!

Alright. Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo, now I talk to my agent who says he'll be receiving 5% commision. Already time to move on ehh? Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake. (BS) He thinks they aren't including the sales commision in the offer. Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it.

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more.

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

Well, I'm dumping this agent and trying to get an agent I know to sign up to be able to bid through HUD. The 5% was ridiculous, which i discussed with him in less blatant language. I ran the idea by him that if he'd cut his rate now, I'd make up for it plus some when I sold it through him. No dice, so I'm moving on.Does anyone know how hard it is for an agent to get qualified with HUD?

I'm pretty sure any agent can place bids.

 

[Homer J Simpson]

Here's a thought that might solve my entry money issues...let me bounce this around.

Let's say I buy the brick double we were looking at last week ( MLS #2554391) and borrow 20% down from my sister. I can get a great rate as a first-time buyer and live in half of it.

Then I find a good rehab/flip project...would I be able to get a HELOC on the first place (since I have 20% down) to finance the upgrades on the second place?

First, of the people on tonight, Bass would be able to answer the HELOC better than I would. He has better knowledge than I on the Money side from dealing with tons of people who all do the Money side differently. I have one experience to draw from.That said, what would the Sister charge you in interest?

I believe 15% down (Bass would know) is the cut off for the PMI #&%$@ you monthly penalty. If I am right (I haven't paid PMI in years) would taking the 20$% from the sister, and just using 15% of it, claiming to keep 5% back for repairs, but really using it to move forward be an option?

One good Flip and you will be on your way. I don't flip because I couldn't stand putting in that much work and handing it over to another. If I was going to flip, I would ONLY flip a SFH.

We need to have a private talk about Seller Concessions.

20% is the PMI hurdle. Buy the first property with zero down using an 80% first and 20% HELOC out of the gate. You can then use the cash from your sister as the down payment on the flip.

This could work. The mental wheels are turning...What's the policy on getting rid of a renter if I buy an occupied duplex? Because a first-time buyer has to have that as his primary residence, IIRC.

 

[Homer J Simpson]

Mike, have you ever used a 203k loan on a rehab project?

ETA: The one where they'll loan you the estimated value after the rehab work. My instructor today said those have gotten much simpler than they used to be.

 

[RKMoney]

Argh!

Alright. Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo, now I talk to my agent who says he'll be receiving 5% commision. Already time to move on ehh? Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake. (BS) He thinks they aren't including the sales commision in the offer. Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it.

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more.

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

Well, I'm dumping this agent and trying to get an agent I know to sign up to be able to bid through HUD. The 5% was ridiculous, which i discussed with him in less blatant language. I ran the idea by him that if he'd cut his rate now, I'd make up for it plus some when I sold it through him. No dice, so I'm moving on.Does anyone know how hard it is for an agent to get qualified with HUD?

Wow, he is a moron! So, he wants 0% of nothing instead of x% of something?

 

[JerseyToughGuys]

A crappy block in the midst of a spectacular neighborhood and one street over from High.

For the record, OSU was one of my stomping grounds when I was a student at IU. I should have been arrested on High street so many times in my life it seriously isn't funny. I can't tell you how many weekends I "lived" at the Outer-In, and then hit the 4 in 1, or got a Burrito as big as my head on the way home.

If I were to list the markets I could operate in with some knowledge, it's Fort Wayne, Indy, and Columbus.

LA BAMBA!!!!### #### I miss those.

 

[Random]

I've got another two weeks or so until closing on the HUD house and the anticipation is killing me. I've already found another property I want to buy, rehab, and keep as a rental (ala Anderson), but being new into this, I'm going to pass until I get the one I just bought flipped.

Anyway, my question is what can I do (legally) between now and closing? We're planning on going over tomorrow to go through each room thoroughlly (sp?) take notes and then make the punch list.

I suppose we can start purchasing materials and supplies after that (assuming my 0% credit card is here soon). You guys have any tips on where to make the purchases? I was just planning on using home depot / lowes. Any and all other tips are appreciated.

 

[Homer J Simpson]

I've got another two weeks or so until closing on the HUD house and the anticipation is killing me. I've already found another property I want to buy, rehab, and keep as a rental (ala Anderson), but being new into this, I'm going to pass until I get the one I just bought flipped.

Anyway, my question is what can I do (legally) between now and closing? We're planning on going over tomorrow to go through each room thoroughlly (sp?) take notes and then make the punch list.

I suppose we can start purchasing materials and supplies after that (assuming my 0% credit card is here soon). You guys have any tips on where to make the purchases? I was just planning on using home depot / lowes. Any and all other tips are appreciated.

Mike mentioned a place in post #1188.

 

[Random]

Homer,

I am still working down the thread.

It's 1:37 am your time, and I see you and I are the only ones in the thread right now. Go and get some sleep, be fresh for the RE classes. I'll be here on Wednesday (Putting up Hardy Plank for the first time in my life on Wednesday, exciting! The local Restore has it for $2 a plank when it normally costs $5-6 a plank.) *side note, shop at the local Restore if you are in the RE game. It's the Good Will/Salvation Army for Building material. Seriously, shop there.

Anyway, get some sleep, and think about some questions, or leave me a parting Zip to look up at the end of the thread. I'll hit it yet tonight, I'm going to be here for awhile.

Also, if you need anything RE Exam Wise spelled out, feel free to post here as we go forward. I aced my test, and can spell things out it needed. I was a Teacher before I was a F&B guy before I was RE professional.

Anyway, go to sleep. Bass will keep me busy tonight.

I have never heard of this place. Searching now for one around here. I think its the habitat restore?found this Restore Directory

 

[Homer J Simpson]

Homer,

I am still working down the thread.

It's 1:37 am your time, and I see you and I are the only ones in the thread right now. Go and get some sleep, be fresh for the RE classes. I'll be here on Wednesday (Putting up Hardy Plank for the first time in my life on Wednesday, exciting! The local Restore has it for $2 a plank when it normally costs $5-6 a plank.) *side note, shop at the local Restore if you are in the RE game. It's the Good Will/Salvation Army for Building material. Seriously, shop there.

Anyway, get some sleep, and think about some questions, or leave me a parting Zip to look up at the end of the thread. I'll hit it yet tonight, I'm going to be here for awhile.

Also, if you need anything RE Exam Wise spelled out, feel free to post here as we go forward. I aced my test, and can spell things out it needed. I was a Teacher before I was a F&B guy before I was RE professional.

Anyway, go to sleep. Bass will keep me busy tonight.

I have never heard of this place. Searching now for one around here. I think its the habitat restore?found this Restore Directory

Good find. Thanks.

 

[BassNBrew]

Here's a thought that might solve my entry money issues...let me bounce this around.

Let's say I buy the brick double we were looking at last week ( MLS #2554391) and borrow 20% down from my sister.  I can get a great rate as a first-time buyer and live in half of it. 

Then I find a good rehab/flip project...would I be able to get a HELOC on the first place (since I have 20% down) to finance the upgrades on the second place?

First, of the people on tonight, Bass would be able to answer the HELOC better than I would. He has better knowledge than I on the Money side from dealing with tons of people who all do the Money side differently. I have one experience to draw from.That said, what would the Sister charge you in interest?

I believe 15% down (Bass would know) is the cut off for the PMI #&%$@ you monthly penalty. If I am right (I haven't paid PMI in years) would taking the 20$% from the sister, and just using 15% of it, claiming to keep 5% back for repairs, but really using it to move forward be an option?

One good Flip and you will be on your way. I don't flip because I couldn't stand putting in that much work and handing it over to another. If I was going to flip, I would ONLY flip a SFH.

We need to have a private talk about Seller Concessions.

20% is the PMI hurdle. Buy the first property with zero down using an 80% first and 20% HELOC out of the gate. You can then use the cash from your sister as the down payment on the flip.

This could work. The mental wheels are turning...What's the policy on getting rid of a renter if I buy an occupied duplex? Because a first-time buyer has to have that as his primary residence, IIRC.

Have to honor the lease or buy them out.

 

[Random]

Homer,

I am still working down the thread.

It's 1:37 am your time, and I see you and I are the only ones in the thread right now. Go and get some sleep, be fresh for the RE classes. I'll be here on Wednesday (Putting up Hardy Plank for the first time in my life on Wednesday, exciting! The local Restore has it for $2 a plank when it normally costs $5-6 a plank.) *side note, shop at the local Restore if you are in the RE game. It's the Good Will/Salvation Army for Building material. Seriously, shop there.

Anyway, get some sleep, and think about some questions, or leave me a parting Zip to look up at the end of the thread. I'll hit it yet tonight, I'm going to be here for awhile.

Also, if you need anything RE Exam Wise spelled out, feel free to post here as we go forward. I aced my test, and can spell things out it needed. I was a Teacher before I was a F&B guy before I was RE professional.

Anyway, go to sleep. Bass will keep me busy tonight.

I have never heard of this place. Searching now for one around here. I think its the habitat restore?found this Restore Directory

Good find. Thanks.

Awesome. Ceramic tile $0.25-$0.40 sqft.

 

[Jeff Pasquino]

I still have a property I need to unload and would sell at cost in Hagerstown, Maryland. It looked like a winner - 9 unit property, needed light rehab, yada yada yada.....

After owning this pig for over a year I've had issues with the crew, the (ex) partner, and the city. I'd be happy to walk with what I sunk in it, maybe less.

I am re-reading this thread from the beginning trying to find something.WOW, what a MONSTER thread this is, there is so much jam packed in this thread, it is mind boggling!

I wish I had this thread when I was starting out. For the last few years, when a nuts and bolts RE thread in the FFA came along, Bass would post for sure (He Always does, he's passionate about RE), flyingv would post (That guy has game, but doesn't seem to get in here much, anyway, he knows his stuff), Maybe I would post, and then a whole bunch of posters that NEVER owned more then their own home would post with some story about what their Uncle or Cousin did. That's about it.

I didn't follow the Finance threads at all, as that is not my area, but maybe ProNinja would post in those (And most likely Bass, remember, Passionate)

Then Jeff built this monster, and a MONSTER it is! Really, I am Energized like you wouldn't believe re-reading this thread. Outstanding.

I am spending all day tomorrow taking away a HUGE tree I had cut down for $200.00 to the city Yard waste dump for maybe $10.00, and then getting an 8x4x3 trailer loaded with the Mulch the Parks department uses for $5.00 to put out at rentals. It will be a killer hard day.

That said, I want to go and buy another home. This is an energizing thread.

Excellent work Jeff_eaglz!

OK, that said, it's my nature, and I would have to research it, but if I lived in the area, and could be there on a regular basis, I might very well take on this Hagerstown property. It's my Nature, and my radar is absolutely up.

Just got back from taking pictures of Giant Rats in Orlando. I still have that property. Contemplating going with office space or something else commercial.

A 7-11 would do really well there if I razed it.

 

[Jeff Pasquino]

I've got a little time to kill, someone throw up a link to an investment property for me to analyze. I actually get a great enjoyment from dissecting deals, it's fun for me. I'm here for a little bit, would love to dig into a deal or maybe two.

Throw up a link to a property you have been thinking about.

Actually, even when I am not here, I like doing it, and would be happy to not be OVERWHELMED with a ton of them left in the thread, but happy to look at some if you are getting serious.

I am MUCH better at Multi-Families (2-4).

I'm always game for that as well.

 

[Jeff Pasquino]

Explain to me the timing aspect of flipping a house. You find a house, get it under contract and then look for a gc to handle the fixups? How do you guys work it so that you minimize the time it takes to fix the place up and resell it?

Wow, that's not a small question. You will need to get more specific with what you are asking.On your time line:

If you don't have the skills to handle things yourself, I would get a GC involved well before I got it under "contract" (Not exactly sure what you mean by under "contract", I can imagine a number of definitions)

Number 1 tool anyone in the Real Estate business can have is a PUNCH LIST. Make one, and stick at it. First thing I ever do in a property is walk the place, make a punch list, and staple it to the wall. First thing I do.

Actually, I make a limited punch list before I buy the place as I first walk through it. Later, when you are at home with your thoughts, I want to go over the list, and see what I can handle, and what I can't. Also, it helps you get things in logical order. You certainly want to replace the Houses Main water cutoff before you ever have the water turned on just as a matter of precaution (I've been burned on that too many times). Knowing that, you know to put anything that needs water off for a few days.

What is this? A budget?

A PUNCH LIST is a final list of everything that needs to be finished by a contractor to have a property owner say "Yeah, you're done. Here's your last payment."Think of it as a final walk-thru and eyeballing stuff that isn't done right (or at all).

List those things and give it to him. Finish it and he gets paid.

This is closely associated with a "Holdback". Often a contractor will have 10% of each draw / payment held back by the owner as leverage for final payment.

Example:

$100,000 rehab, work broken down (by a Statement of Work, or SOW) to five draws:

1. $20K - Demo, framing

2. $20K - Brickwork, HVAC, plumbing, electrical

3. $20K - Wallboard, insulation, tile, windows

4. $20K - Kitchen and baths

5. $20K - Flooring, paint, trim

Each draw the financing bank would inspect and cut a check for $20K to the owner (me) and then I'd pay the contractor. If we were doing the standard 10% holdback, I'd give him $18K five times and he'd only get his final $10K if everything was perfect according to me.

This isn't always how it is done, but it is a good idea. Basically - never overpay a contractor, and always have enough $$ left to finish a property if he ups and walks at any moment.

 

[Jeff Pasquino]

But the thing is, I don't have a lot of cash on hand and I think I'll need some help in that area. I'm not sure how far credit will carry a guy in this business. Mike, you've been in it a while but think back to when you were starting out...how did you finance everything? Where did the capital come from?

Credit will carry you a looong way, but not on its own.

And another one...let's say my first property is a big rehab where after purchasing the property I'll have to sink another 15k into the place. Where does the rehab money come from? Is it a dual loan at closing? Is it something I'll have to get after that? If so, can I get a guarantee on that loan before closing? That may be an idiotic question, but I haven't even started yet...bear with me.

You've got a couple different options. A Rehab or construction loan can be the ticket. Here's the short version. You find the right property, and you get bids from contractors and find out how much it's going to cost to fix the property, and with your application, you submit the purchase and sale, the cost of the work, and an appraisal that shows the value of what the property will be worth when you're done, as well as a schedule. The lender inspects the property when work is complete, and pays the contractor as they go. Interest accrues on the draws (payments to the contractor) and gets added to the total loan amount when the work is done. All of the money borrowed gets added up and turns into one loan upon completion of the work.

Here's the thing. If you're a new agent, there's no way on earth you'll get a loan for this without any money down. You can do it with limited funds right now, and hopefully use some profits to work on the next property.

I now know a lot more than I did this morning. Thanks, brutha.As a lender's rep, does buying a rental with a couple hundy a month in profit help or hurt my situation?

Also, have you ever done financing for a group to buy homes?

Homer, it really sounds like you need one partner with some cash. Most lenders are going to want 10% down. While I'd be all over the property with tenants already making the payments, you should probably look at for the first property as something you can flip to create capital for future purchases. Not that I mentioned a partner, I'd be wary about going that route. Definately don't go with more than one partner. It's a pain getting numerous people on the same page to make a decision. Worse yet, if one of the kicks the bucket, you may suddenly have another half a dozen partners in the form of aires that have totally different goals than you. Personally I wouldn't worry about an LLC until you personally have substanial assets to protect. The money is better spent on liability insurance. The costs of an LLC (forming, yearly filings) can easily eat away the profits of one income producing rental. Down the road remember that for an LLC to work, you'll need to keep the number of properties in each to a minimum.Lastly, let me say that banks and their rules suck. Debt to income ratio will kill you at every turn. Let's say you own a property that rents for $700 a month and your payments are $400 a month. That's a whale of a deal right (definately is in my market)? Well the ratio is 57% and most lenders I talk to don't want your ratio to exceed 50%. In other words, by adding a property that will be generating cash flow, you be dinging your ability to borrow in the future. Eventually you need to move into a commercial scenario rather than a personal scenario unless you can up your personal income in your day job. Probably your best route to get started is owner occupied properties. It's like the rules disappear and the lenders will throw money at unqualified people and finance to 100%. If you can move from property to property, you can definately use this to your advantage to access cheaper and easier to obtain financing.

Yes I'm still catching up - but I have a big "hold on" here.Local banks that are portfolio lenders shouldn't care about this if you are buying this in a corporate structure. If the property has the right cash flow and one key financial is in line with their lending guidelines, it is a slam dunk.

This is a Debt Service Coverage Ratio, or DSCR.

In "explain to me like I was 10" terms, it is the ability for you to pay the mortgage plus some extra per month.

DSCR = Money in / Money out per month. It had better be >1. Lenders I know want about 1.20. I've heard of lower and higher, but 1.20 - 1.25 is about right.

Example from above is $700/$400 = 1.75 right? Not quite. Add in other expenses and vacancy factors, taxes, insurance, utilities, etc. etc. and you could get to $550 a month easy.

$700/$550 = 1 + 150/550 = 1 +3/11 = 1.27, so you're still good.

VERY IMPORTANT - THIS IS A CORPORATE / LLC / Partnership loan - NOT a personal loan. Proninja is dead on in that if you own multiple properties in your own name your credit will suffer / suck soon. There is even a federal limit (10) of properties you can personally own.

From a legal standpoint - you need to own them in an alternate entity.

As for partnerships - ugh. Better have a lawyer draw up good documents and "in case of death" or "in case of whatever" docs. Absolutely do NOT go into a partnership without a contract. It is far easier to write this when everyone is happy at the start. After a year when everyone hates the house / arrangement and one partner is moving 2,000 miles away, all hell breaks loose.

 

[Jeff Pasquino]

Mike, I just want to say that if you ever need a kidney or something, you got it.

I have a few questions as well. I posted a listing last week that I'm going to call the agent tomorrow about. It's listed at 120k with both sides rented for $575 each. As there are already tenants, there shouldn't be any immediate rehab costs. Anyway, without a lot to put as a down payment, how hard would it be to buy another place if I buy this one? I want this to be the beginning of something, but as far as financing goes I'm still pretty clueless in that regard.

There are ways to get money for the down, Jeff and ProNinja will be stronger at that for you. There are a NUMBER of creative ways to do things, but at the end of the day, ANYTHING short of full disclosure to your lender is Fraud. A number of things that the average gun shy person in the industry would call Fraud are not, As long as your lender has complete and entire disclosure. Seller can carry a forgivable second, or even provide the down payment. Some lenders won't be close to interested. The ones that sell on the secondary market will shun you like an Amishman, as the fear is that there is creative financing up front, it gets sold onto the secondary market, you fail, and the entity that bought the paper sues everyone in the chain for fraudulent practices. The longer you have been around, the easier it is, AND THE LESS YOU NEED IT. It's a double edged sword. Anyway, Jeff can get real creative here.

Yep, done both. The key (don't want to say "trick", but it is appropriate) is to find a good lender and a good title company. Everything is above board and there's no hidden secrecy about it. Seriously. In fact, the last property I bought I purchased for $301,000 for a first mortgage and a second for $31,000 that was sold at the table back to me for $1 and the closing agent was right there to take that and record it as well. The property was worth $360,000 and the seller paid 6% towards closing and I netted $9,000 at the table (no money down). In actuality, this is a property that is even a bit thin for my criteria ($301K for $360K exceeds my 70% rule), but I see upside that many don't (6 bedrooms with three baths on 1/2 acre and about 1200 sq. ft. of open floor office space above a 2-car garage). That should be worth over $400K where it is located, so that's more in line for what I like.

So - yes - it is all possible. I don't do anything shady, and I teach creative financing to other local investors. I'm also starting to dabble in to buying and selling mortgages (aka "paper).

I'm going to be putting together a business plan this week and next...not sure if that will make a difference to a lender or not. I'm doing it more for my own benefit, actually.

I have NEVER had a lender ask for a Business plan in writing. I have often met face to face, and spelled out the long term plan.



I've written a biz plan and a short presentation for bankers. They love that stuff. About 20 pages for the plan, and about 10 for the presentation (short bullet points).

The real value in the biz plan is getting your own head straight as to how you are going to make $$ (and stay afloat and pay the bank back). They really don't care about the details usually, just that you have thought it all out. Plus few actually do it.

Gives you a lot of credibility.

 

[Jeff Pasquino]

I've read 80% of this thread and the other real estate threads on the board, but I'm not completely clear on this question:

If I drive by a property a want to inquire about buying, should I ask a buyer's agent to represent me?

For an investment? You probably get more out of talking with the listing agent. If you let him/her know you're unrepresented and don't care if THEY GET THE WHOLE COMMISSION, do you think you might get a better deal?I've had many agents tell me more than they should in pursuit for the full commission.

(RE Agents get 6-7%, but split it with buyer / seller agents. They also have to split it with their brokerages. So agents often get under 2% on each transaction).

 

[Jeff Pasquino]

This one seems too good to be true.

Out here, if I am going to jump in, I will have to jump in big (prices are crazy).

Bayonne is here

underdeveloped considering the proximity to NYC, but its time is coming.

Thoughts?

With 3 units this seems like it has huge potential. Trying to get more info.

First, ignore my last post if you are already a LL in NJ, you know the score.Second, what can you rent this for?

some comparable rentals are herewithout seeing the units, I would guess gross around $3K. The two bigger units for $1100 and the smaller for $800 (which probably is too low).

You know, not knowing Taxes in NJ, and a Litany of other things like your market, I would pass this off to ProNinja who understands the money side, and is in a bigger hot market. I wouldn't touch it here, but this is Northern Indiana.I would think it's ability to make money would depend entirely on your Interest rate, term, and Property Taxes. But you might be buying it based on future appreciation?

NJ Taxes and Insurance are terrible - that's why I'm in Maryland, among other reasons.

 

[Jeff Pasquino]

Amazing the help you get around here. I hope to be able to contribute one day.

For the record, you HAVE BEEN contributing every day. This thread has been moving forward faster than it ever did since you, battles, and Homer started posting questions. Those questions allow for answers, and without them, this would be a dead thread.You ARE one of the biggest contributors here.

 

[Jeff Pasquino]

Wasn't someone around here from Austin?

I somehow got signed up on some list, and get about 8 of these emails a day. No way I am into this, but if someone in Austin wanted to at least tell me what this looks like, I would like to understand the condition of the properties that come in the emails every day:

Beauty Bar

617 East 7th Street

Austin, TX 78701

Property Type: Retail

Price: $622,000

Cap Rate: 6.75%

2006 NOI: $42,000

Total SF: +/- 2,338

Lot Size: 0.131 Acres

Occupancy: 100%

Year Constructed/Renovated: 1965/2000

Lease Commencement: October 2005

Lease Type: Absolute NNN

PLEASE CLICK HERE TO DOWNLOAD & VIEW

OFFERING MEMORANDUM:

Asset Investment Highlights:

- Great location near 6th Street entertainment district

- Anticipated delivery of 13,000 condo units in Austin's CBD will increase traffic to existing retail locations

- Newly renovated project with parking spaces onsite

- Beauty Bar has 5 national locations including LA and NY City

- Ideal for smaller 1031 exchange property

I get about 8 Emails a day for Commercial property all over the country.

Let me know what service this is Mike.I'm big into commercial. That's where I'm heading.

 

[Jeff Pasquino]

I may have had some good fortunate drop into my lap. Bought a lot (FSBO undervalued) a little while ago. Didn't think I could divide it as I thought the requirement was .5 acre min and the lot was only .94 acre. Opps...it's actually 20,000 sf minimum, which means multiplied by 2x I would only need .92 acres. The shoreline frontage is enough to pull it off and be approved for a dock. To early for a , but I'm making a drive to the planning commission real soon.

GB zoning laws and reading them.

 

[BassNBrew]

I may have had some good fortunate drop into my lap.  Bought a lot (FSBO undervalued) a little while ago.  Didn't think I could divide it as I thought the requirement was .5 acre min and the lot was only .94 acre.  Opps...it's actually 20,000 sf minimum, which means multiplied by 2x I would only need .92 acres.  The shoreline frontage is enough to pull it off and be approved for a dock.  To early for a , but I'm making a drive to the planning commission real soon.

GB zoning laws and reading them.

Sort of like FF rules, not that the staff has any positive experience there.

 

[cosjobs]

Lots of incredible stuff in this thread. I've been reading it a couple days ago and I am only on page eight. I can't wait to finish catching up and start participating.

I am a certified appraiser and absolutely sick of it. But I have virtually no debt and could pull 100K out of my home that I own outright. SO I am preparing to start playing the RE game. I know my market intimately and have successully GC'ed a couple of major remodels, so I feel well-prepared.

One question for now, tho. I have a broker friend who has offered to give half of his commission toward DP on any deals I use him for- that would bring an extra 1.5% cash to the closing. I could also get a RE agent license in about six weeks for $800. I am wondering if I should get that license now or just advantage of my friends offer (or both).

 

[Flying V]

Lots of incredible stuff in this thread. I've been reading it a couple days ago and I am only on page eight. I can't wait to finish catching up and start participating.

I am a certified appraiser and absolutely sick of it. But I have virtually no debt and could pull 100K out of my home that I own outright. SO I am preparing to start playing the RE game. I know my market intimately and have successully GC'ed a couple of major remodels, so I feel well-prepared.

One question for now, tho. I have a broker friend who has offered to give half of his commission toward DP on any deals I use him for- that would bring an extra 1.5% cash to the closing. I could also get a RE agent license in about six weeks for $800. I am wondering if I should get that license now or just advantage of my friends offer (or both).

In what part of the country are you living, cosjobs?Around here, you have to be a licensed RE agent before you can be an appraiser, and even then the competition to get the job is very fierce. I always thought it would be a great job to have. Why are you sick of it?

Sorry, I don't have any advice to give on your question.

 

[BassNBrew]

Lots of incredible stuff in this thread. I've been reading it a couple days ago and I am only on page eight. I can't wait to finish catching up and start participating.

I am a certified appraiser and absolutely sick of it. But I have virtually no debt and could pull 100K out of my home that I own outright. SO I am preparing to start playing the RE game. I know my market intimately and have successully GC'ed a couple of major remodels, so I feel well-prepared.

One question for now, tho. I have a broker friend who has offered to give half of his commission toward DP on any deals I use him for- that would bring an extra 1.5% cash to the closing. I could also get a RE agent license in about six weeks for $800. I am wondering if I should get that license now or just advantage of my friends offer (or both).

My suggestion is that you go take the class and then make your decision. The problem with having the license is that you're held to a higher standard. For example, if someone offers to sell you their home, you are obilgated to tell them what the market value is. I run into several investors that didn't get their license solely because it would hinder their ability to pursue deals substantially below market value. On the flip side, I know another guy who's a traveling company trainer. He got his license solely to work as a referel agent. He does no real estate work but refers enough people to the broker where he hangs his license to pick up around $15K each year. I'm guessing you have a pretty large network based on your profession.

 

[cosjobs]

Lots of incredible stuff in this thread. I've been reading it a couple days ago and I am only on page eight. I can't wait to finish catching up and start participating.

I am a certified appraiser and absolutely sick of it. But I have virtually no debt and could pull 100K out of my home that I own outright. SO I am preparing to start playing the RE game. I know my market intimately and have successully GC'ed a couple of major remodels, so I feel well-prepared.

One question for now, tho. I have a broker friend who has offered to give half of his commission toward DP on any deals I use him for- that would bring an extra 1.5% cash to the closing. I could also get a RE agent license in about six weeks for $800. I am wondering if I should get that license now or just advantage of my friends offer (or both).

In what part of the country are you living, cosjobs?Around here, you have to be a licensed RE agent before you can be an appraiser, and even then the competition to get the job is very fierce. I always thought it would be a great job to have. Why are you sick of it?

Sorry, I don't have any advice to give on your question.

I am in Austin, TX.I was taught to do appraisals properly. But the market does not want to know the true value, they want the number that works for them. I do not do that, so many clients hate me and I lose a fair amount of repeat business because of it. But I am bound by ehics and guidelines to do it the way I do. If I tell you your home is worth 200K when its really 150K, you will initially love me because I allow you to pull all that cash out. But if something goes wrong and you must sell and can only get 150K, when you thought you could get 200K, it could leave to your bankruptcy or other life-changing event. I do true appraisals and the current market is only interested in "number hitters." I quit.

 

[cosjobs]

Lots of incredible stuff in this thread. I've been reading it a couple days ago and I am only on page eight. I can't wait to finish catching up and start participating.

I am a certified appraiser and absolutely sick of it. But I have virtually no debt and could pull 100K out of my home that I own outright. SO I am preparing to start playing the RE game. I know my market intimately and have successully GC'ed a couple of major remodels, so I feel well-prepared.

One question for now, tho. I have a broker friend who has offered to give half of his commission toward DP on any deals I use him for- that would bring an extra 1.5% cash to the closing. I could also get a RE agent license in about six weeks for $800. I am wondering if I should get that license now or just advantage of my friends offer (or both).

My suggestion is that you go take the class and then make your decision. The problem with having the license is that you're held to a higher standard. For example, if someone offers to sell you their home, you are obilgated to tell them what the market value is. I run into several investors that didn't get their license solely because it would hinder their ability to pursue deals substantially below market value. On the flip side, I know another guy who's a traveling company trainer. He got his license solely to work as a referel agent. He does no real estate work but refers enough people to the broker where he hangs his license to pick up around $15K each year. I'm guessing you have a pretty large network based on your profession.

That's what really concerns me. I am also thinking I may need to let my appraisal license lapse or turn it in to the state to prevent any sticky ethical situation pursuing good deals.

 

[BassNBrew]

cosjobs...Also wanted to add that even though I have my license, I still use other people to sell my properties (of course at a nice discount). I believe that a good agent will get me top dollar and essentially cover my commission costs. Worse case it's a push and I avoid the hassle of doing the work to sell it myself. I handle my own transactions on the buying side.

 

[Jeff Pasquino]

cosjobs...Also wanted to add that even though I have my license, I still use other people to sell my properties (of course at a nice discount). I believe that a good agent will get me top dollar and essentially cover my commission costs. Worse case it's a push and I avoid the hassle of doing the work to sell it myself. I handle my own transactions on the buying side.

This is my basic theory as well.

I don't have a license but may have the Mrs. get one just to check the listing service and POSSIBLY sell our own houses.

But really, it is a pain to be a realtor IMHO. Hours suck (you have to be available nights and weekends) and you get commissions split often.

I know a realtor who joined Long and Foster when the standard was 6%. He lost 3% to the other agent, then another half (1.5%) to his office, then split the remainder with his partner agent. So he was as 0.75% for most deals.

He works at a different office now doing commercial deals.

Consider a realtor like your waitress - you tip them well for what they provide (and far less percentage-wise).

If a realtor gets me an extra 2-3% on a sales price, they are worth it. I don't have to meet 5-10 potential buyers and do an open house, market the house, take calls, blah blah blah. Here it is, do your thing. Call me with an offer ASAP.

 

[cosjobs]

cosjobs...Also wanted to add that even though I have my license, I still use other people to sell my properties (of course at a nice discount).  I believe that a good agent will get me top dollar and essentially cover my commission costs.  Worse case it's a push and I avoid the hassle of doing the work to sell it myself.  I handle my own transactions on the buying side.

This is my basic theory as well.

I don't have a license but may have the Mrs. get one just to check the listing service and POSSIBLY sell our own houses.

But really, it is a pain to be a realtor IMHO. Hours suck (you have to be available nights and weekends) and you get commissions split often.

I know a realtor who joined Long and Foster when the standard was 6%. He lost 3% to the other agent, then another half (1.5%) to his office, then split the remainder with his partner agent. So he was as 0.75% for most deals.

He works at a different office now doing commercial deals.

Consider a realtor like your waitress - you tip them well for what they provide (and far less percentage-wise).

If a realtor gets me an extra 2-3% on a sales price, they are worth it. I don't have to meet 5-10 potential buyers and do an open house, market the house, take calls, blah blah blah. Here it is, do your thing. Call me with an offer ASAP.

I do not really have any desire to be a realtor, I was just wondering if the offset in commissions on my own deals would be worth more than any additional ethical/legal encumbrances I would have with the license.

 

[RKMoney]

Just wanted to give a shout out and say how great this thread is!

Current situation is that the few pieces of property I mentioned haven't worked out (I wasn't ultimately interested) and currently getting bids on fixing up my garage apartment. Wish me luck and when I see a piece of property I truely like, I'll definitely ask for your guys opinions on stuff related to it.

 

[BassNBrew]

cosjobs...Also wanted to add that even though I have my license, I still use other people to sell my properties (of course at a nice discount).  I believe that a good agent will get me top dollar and essentially cover my commission costs.  Worse case it's a push and I avoid the hassle of doing the work to sell it myself.  I handle my own transactions on the buying side.

This is my basic theory as well.

I don't have a license but may have the Mrs. get one just to check the listing service and POSSIBLY sell our own houses.

But really, it is a pain to be a realtor IMHO. Hours suck (you have to be available nights and weekends) and you get commissions split often.

I know a realtor who joined Long and Foster when the standard was 6%. He lost 3% to the other agent, then another half (1.5%) to his office, then split the remainder with his partner agent. So he was as 0.75% for most deals.

He works at a different office now doing commercial deals.

Consider a realtor like your waitress - you tip them well for what they provide (and far less percentage-wise).

If a realtor gets me an extra 2-3% on a sales price, they are worth it. I don't have to meet 5-10 potential buyers and do an open house, market the house, take calls, blah blah blah. Here it is, do your thing. Call me with an offer ASAP.

I do not really have any desire to be a realtor, I was just wondering if the offset in commissions on my own deals would be worth more than any additional ethical/legal encumbrances I would have with the license.

That's a hard question to answer. Based on what you wrote above, it sounds like you would you keep a pretty tight reign on yourself ethically. Some questions to ask yourself and things to consider...Are you going to be knocking on a lot of doors trying to find deals or searching the MLS for foreclosures?

How valuable is access to the real mls (you may already have this as an appraiser) and it's search functions? What about the lockbox key value where you can just go see a property rather than having someone else show it?

How many properties are you going to flip in a year?

Are the networking aspects important to you or is your network already strong?

What type of misc. income (referrels) could a license generate for you?

As a Realtor, you will get special tax considerations, some favorable, some not so good. More leeway on writeoffs / business expenses and taking paper losses on rental property.

 

[cosjobs]

cosjobs...Also wanted to add that even though I have my license, I still use other people to sell my properties (of course at a nice discount).  I believe that a good agent will get me top dollar and essentially cover my commission costs.  Worse case it's a push and I avoid the hassle of doing the work to sell it myself.  I handle my own transactions on the buying side.

This is my basic theory as well.

I don't have a license but may have the Mrs. get one just to check the listing service and POSSIBLY sell our own houses.

But really, it is a pain to be a realtor IMHO. Hours suck (you have to be available nights and weekends) and you get commissions split often.

I know a realtor who joined Long and Foster when the standard was 6%. He lost 3% to the other agent, then another half (1.5%) to his office, then split the remainder with his partner agent. So he was as 0.75% for most deals.

He works at a different office now doing commercial deals.

Consider a realtor like your waitress - you tip them well for what they provide (and far less percentage-wise).

If a realtor gets me an extra 2-3% on a sales price, they are worth it. I don't have to meet 5-10 potential buyers and do an open house, market the house, take calls, blah blah blah. Here it is, do your thing. Call me with an offer ASAP.

I do not really have any desire to be a realtor, I was just wondering if the offset in commissions on my own deals would be worth more than any additional ethical/legal encumbrances I would have with the license.

That's a hard question to answer. Based on what you wrote above, it sounds like you would you keep a pretty tight reign on yourself ethically. Some questions to ask yourself and things to consider...Are you going to be knocking on a lot of doors trying to find deals or searching the MLS for foreclosures?

I have been using the MLS thus far and have found nothing "priced properly." That is: most of the GRMs I'm seeing on multis listed are 111-150. But that doesn't mean I cannot offer an amount that would make it work. But like you I hate to get a rep among realtors of being Mr Lowball and not taken seriously. (Btw, I have not seen the term GRM used yet here- its really simple and means Gross Rent Multiplier. If a home sells for 100K and rents for $1000, the GRM = 100 - coincidentially the same figure using the 1% rule. if the rent was $500, the GRM would be 200. Rent x GRM = Price.)

I doubt I will knock on many doors, but some targeted mailings seem like a potentially good idea.

Finding the "deals" is what I am most interested in learning about. Tips like Mike's sitting in Code Violation court are golden.

How valuable is access to the real mls (you may already have this as an appraiser) and it's search functions? What about the lockbox key value where you can just go see a property rather than having someone else show it?

I have mls now as an appraiser and in Texas, an appraiser is permitted to enter any for sale property to inspect, without notifying the listing agent! That's a sweet bonus with all the lockboxes now computerized and me having the universal "key." If I were to give up my appraiser licese, I do not know how quickly the mls would know and discontinue my use

How many properties are you going to flip in a year?

I am going to start with 100K and try to get into three properties that I rent and rehab over a year and then sell. On these first three I want to keep as capital gains to minimize the taxes. After these first three I plan to accelerate the process.

Are the networking aspects important to you or is your network already strong?

Not as strong as I would like and they seem to be very important.

What type of misc. income (referrels) could a license generate for you?

Could probaly have some listing fees fall in my lap from properties I bird dog, but do not act upon. Seems to be the BIG advantage here is the 3% of sales price on my side of the table at closing.

As a Realtor, you will get special tax considerations, some favorable, some not so good. More leeway on writeoffs / business expenses and taking paper losses on rental property.

I think I can get most of these as an appraiser.[/color]

 

[BassNBrew]

Based on your replies, I really don't see an advantage, at least in year one. Your talking about $15000 in commission on the table. Your friend has already offered you $7500 of that back. If you hung a license somewhere, you'd likely have to give up some of that $15000 and pay taxes plus SE on the balance. Assuming 28% tax bracket and 15% SE you would be right back at close to the $7500. All the other benefits of the license mean nothing to you as you already have them as an appraiser.

Also, if you are going to rent for a year to avoid the caps gains, the leasing regs are usually much stricter on agents.

 

[cosjobs]

Here's another question.

I have two acres in south Austin that my house is on. I am considering building a rental on it. I could probably build for 80/ft, but might need to run an extra 150 ft of sewage, water, gas and electric.

My questions are:

Should I leave the new construction as part of my property, as a single entity to prevent surveying and subdividing costs?

Or should I concentrate on the general market now and keep this as a pet project for later.

 

[Jeff Pasquino]

Here's another question.

I have two acres in south Austin that my house is on. I am considering building a rental on it. I could probably build for 80/ft, but might need to run an extra 150 ft of sewage, water, gas and electric.

My questions are:

Should I leave the new construction as part of my property, as a single entity to prevent surveying and subdividing costs?

Or should I concentrate on the general market now and keep this as a pet project for later.

Excellent question.I'd subdivide if it were me - here's why:

1. A company can own the 2nd property aside from you. Far easier legally to handle things separately that way.

2. Separation of liability - if there is ever a problem with one property (fire, theft, legal, etc.) you have them separated legally. Read this as - the renter can't sue you directly, they have to sue the owner of the property (the company).

3. Your personal expenses go down - insurance, taxes are dependent on your land. That goes down since you now own less land in your name.

4. The company now has an asset and can finance it separately - again, two separate books - insurance, taxes, expenses all kept separate.

5. Less chance of an audit. You are obviously running a company now since the company owns a property separately from just Mr. cosjobs.

6. Better chance for an increase in property value. The best plan would be for you to create the company today. Here is where it gets creative.

A. Create company Day 1.

B. Sell the property to the company (via an option or a normal contract) on Day 2.

C. Take that to the bank and get the company a construction loan to build the house and pay you when it is done. Now you have a loan in the corporation (not your) name and you have a value that is documented in the contract for the property. You'll likely have to personally guarantee the corporate loan (since it is a day old), but at least the clock starts ticking on the company. Companies get "seniority" after 2 years of existence - meaning that people take you far more seriously if you last that long. That's important for the future (credit, financing, etc.).

Now everything you do - EVERYTHING - to build that house is a business expense. It is clean and you should document (receipts and all) EVERYTHING. Tax time you have big writeoffs. When the property is done you "sell" it to the company and the company pays you for the agreed contract price and you have it in the company name.

You should run all this by an accountant to check tax implications, but it is the basis of a good transaction.

Good luck.

 

[Mike Anderson]

Mike, have you ever used a 203k loan on a rehab project?

ETA: The one where they'll loan you the estimated value after the rehab work. My instructor today said those have gotten much simpler than they used to be.

Homer, I posted somewhere before that I have never used it, but did research it. I was asking if anyone had any working knowledge of it myself. The news from HUD a number of months ago is that they weakened the requirements to use it, and the outside commentary on it was that HUD isn't moving properties as fast as they were since the Interest rates are going up, therefore HUD is starting to give concessions.

 

[Homer J Simpson]

Mike, have you ever used a 203k loan on a rehab project?

ETA: The one where they'll loan you the estimated value after the rehab work. My instructor today said those have gotten much simpler than they used to be.

Homer, I posted somewhere before that I have never used it, but did research it. I was asking if anyone had any working knowledge of it myself. The news from HUD a number of months ago is that they weakened the requirements to use it, and the outside commentary on it was that HUD isn't moving properties as fast as they were since the Interest rates are going up, therefore HUD is starting to give concessions.

Cool. I was just curious.Also, I should have some more info on this as I'm starting my finance class tomorrow. I'll ask about it.

And hey, where the hell have you been?

 

[Mike Anderson]

Wasn't someone around here from Austin?

I somehow got signed up on some list, and get about 8 of these emails a day.  No way I am into this, but if someone in Austin wanted to at least tell me what this looks like, I would like to understand the condition of the properties that come in the emails every day:

Beauty Bar

617 East 7th Street

Austin, TX 78701

Property Type: Retail

Price: $622,000

Cap Rate: 6.75%

2006 NOI: $42,000

Total SF: +/- 2,338

Lot Size: 0.131 Acres

Occupancy: 100%

Year Constructed/Renovated: 1965/2000

Lease Commencement: October 2005

Lease Type: Absolute NNN

PLEASE CLICK HERE TO DOWNLOAD & VIEW

OFFERING MEMORANDUM:

Asset Investment Highlights:

- Great location near 6th Street entertainment district

- Anticipated delivery of 13,000 condo units in Austin's CBD will increase traffic to existing retail locations

- Newly renovated project with parking spaces onsite

- Beauty Bar has 5 national locations including LA and NY City

- Ideal for smaller 1031 exchange property

I get about 8 Emails a day for Commercial property all over the country.

I live in Austin and trying to find a fixer upper in East Austin (so far no such great luck)Edit: I live probably 5 minute drive from this place but never remember seeing Beauty Bar there AND I just moved from NYC and never heard of Beauty Bar either.

I can check it out Mike if you want me to in person.

Post some East Austin Zip Codes for me.

 

[Mike Anderson]

Argh!

Alright.  Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo,  now I talk to my agent who says he'll be receiving 5% commision.  Already time to move on ehh?  Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake.  (BS)  He thinks they aren't including the sales commision in the offer.  Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it. 

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more. 

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

Well, I'm dumping this agent and trying to get an agent I know to sign up to be able to bid through HUD. The 5% was ridiculous, which i discussed with him in less blatant language. I ran the idea by him that if he'd cut his rate now, I'd make up for it plus some when I sold it through him. No dice, so I'm moving on.Does anyone know how hard it is for an agent to get qualified with HUD?

I'm pretty sure any agent can place bids.

This is correct, however Some Agents are HUD Pros, and some Agents have never done one. There is so much paperwork involved in a HUD property, that you need a Pro.Both my wife and I are agents, and I wouldn't even consider either of us putting in a HUD offer. I have an Agent who is well versed in HUD offers, and I would only go to him to make a HUD offer (I don't use him for anything else unless he Brings me a Sweetheart deal that he puts in my lap (And he knows that, the last one he brought me put $19K in my pocket at the closing table, and I still won't use him as my Goto guy, Make Realtors work for their money). I have put in HUD offers with 4 different agents over the years, and he is the ONLY one I would use.

It has NEVER been the case in my markets, but your best hope is finding out that the one Agent in your market that lists every HUD deal is actually competent. Hopefully you are luckier than I, as the HUD agent in the two markets I have worked is a Boob.

 

[Mike Anderson]

Here's a thought that might solve my entry money issues...let me bounce this around.

Let's say I buy the brick double we were looking at last week ( MLS #2554391) and borrow 20% down from my sister.  I can get a great rate as a first-time buyer and live in half of it. 

Then I find a good rehab/flip project...would I be able to get a HELOC on the first place (since I have 20% down) to finance the upgrades on the second place?

First, of the people on tonight, Bass would be able to answer the HELOC better than I would. He has better knowledge than I on the Money side from dealing with tons of people who all do the Money side differently. I have one experience to draw from.That said, what would the Sister charge you in interest?

I believe 15% down (Bass would know) is the cut off for the PMI #&%$@ you monthly penalty. If I am right (I haven't paid PMI in years) would taking the 20$% from the sister, and just using 15% of it, claiming to keep 5% back for repairs, but really using it to move forward be an option?

One good Flip and you will be on your way. I don't flip because I couldn't stand putting in that much work and handing it over to another. If I was going to flip, I would ONLY flip a SFH.

We need to have a private talk about Seller Concessions.

20% is the PMI hurdle. Buy the first property with zero down using an 80% first and 20% HELOC out of the gate. You can then use the cash from your sister as the down payment on the flip.

This could work. The mental wheels are turning...What's the policy on getting rid of a renter if I buy an occupied duplex? Because a first-time buyer has to have that as his primary residence, IIRC.

Homer,I don't know Ohio Law on this. It's too late to call one of my best buddies in My Dynasty League who is a LL operating just south of Dublin. Shoot me a PM reminder, or post when you see me on and it's not too late in Columbus and I will call him. Short of that, if I have some time, I will try and research OH law for you later.

This is a State by state deal. In NJ there are provisions for it if you are moving in. In LA it's a Slam dunk as they operate under Basic French law unlike the rest of the nation working under Common English Law. It's state by State, I'll try and find out.

 

[Mike Anderson]

Here's a thought that might solve my entry money issues...let me bounce this around.

Let's say I buy the brick double we were looking at last week ( MLS #2554391) and borrow 20% down from my sister.  I can get a great rate as a first-time buyer and live in half of it. 

Then I find a good rehab/flip project...would I be able to get a HELOC on the first place (since I have 20% down) to finance the upgrades on the second place?

First, of the people on tonight, Bass would be able to answer the HELOC better than I would. He has better knowledge than I on the Money side from dealing with tons of people who all do the Money side differently. I have one experience to draw from.That said, what would the Sister charge you in interest?

I believe 15% down (Bass would know) is the cut off for the PMI #&%$@ you monthly penalty. If I am right (I haven't paid PMI in years) would taking the 20$% from the sister, and just using 15% of it, claiming to keep 5% back for repairs, but really using it to move forward be an option?

One good Flip and you will be on your way. I don't flip because I couldn't stand putting in that much work and handing it over to another. If I was going to flip, I would ONLY flip a SFH.

We need to have a private talk about Seller Concessions.

20% is the PMI hurdle. Buy the first property with zero down using an 80% first and 20% HELOC out of the gate. You can then use the cash from your sister as the down payment on the flip.

This could work. The mental wheels are turning...What's the policy on getting rid of a renter if I buy an occupied duplex? Because a first-time buyer has to have that as his primary residence, IIRC.

Check this link tomorrow to see what if any results you can use may be?Question posted on MrLandlord.com

 

[Mike Anderson]

Argh!

Alright.  Thanks to Random I found the one offer that's been put on this property.

House

Past Offer Results

Sooooooooo,  now I talk to my agent who says he'll be receiving 5% commision.  Already time to move on ehh?  Then I ask him why the net to offer price listed was so low on the other bid and he says it has to be a mistake.  (BS)  He thinks they aren't including the sales commision in the offer.  Anyways, I told him to go with my offer of 41.8k and that I'd like to see how they post it when they reject it. 

41.8k - 2090 commision - 500 title fee that he says is in the net = 39210

That means I'm offering nearly 3500 more, but netting only about 850 more. 

I guess it's time to get my license.

At a win of only $850, I would be Worried if the other offer is Owner Oc. The other guy is either a Realtor, or his Realtor has slashed their commission.

Couldn't Battles tell his realtor to slash the entire commission and IF he gets the bid will give him the % afterwards?So, add the 2090 back on, make the offer and if you get it, give your realtor $1,000.

Well, I'm dumping this agent and trying to get an agent I know to sign up to be able to bid through HUD. The 5% was ridiculous, which i discussed with him in less blatant language. I ran the idea by him that if he'd cut his rate now, I'd make up for it plus some when I sold it through him. No dice, so I'm moving on.Does anyone know how hard it is for an agent to get qualified with HUD?

Wow, he is a moron! So, he wants 0% of nothing instead of x% of something?

As an Agent, Many agents aren't the brightest bunch of people.

 

[Mike Anderson]

I've got another two weeks or so until closing on the HUD house and the anticipation is killing me. I've already found another property I want to buy, rehab, and keep as a rental (ala Anderson), but being new into this, I'm going to pass until I get the one I just bought flipped.

Anyway, my question is what can I do (legally) between now and closing? We're planning on going over tomorrow to go through each room thoroughlly (sp?) take notes and then make the punch list.

I suppose we can start purchasing materials and supplies after that (assuming my 0% credit card is here soon). You guys have any tips on where to make the purchases? I was just planning on using home depot / lowes. Any and all other tips are appreciated.

To be Blunt here, Don't buy a DAMN thing until it closes.Unless you are buying in cash, where you control the results, it's hard enough to make a normal deal work, much less a HUD deal. The last thing you want is to have bought a bunch of stuff, and then the deal fall apart.

Get your punch lists going so you can hit the ground running, but don't outlay a dime until you own it.

This one time at Band Camp....

I bought an REO with massive seller concessions from a Small bank. My mortgage company wouldn't close the deal until the Duplex was Habitable, which involved rebuilding the water supply that had burst (Froze) the winter before.

Now, I was pulling some $12K after closing costs out of this deal, so I wanted to close.

I got permission to rebuild the Water supply at my own expense to close the deal. I rebuilt it in Copper where I had to, and PVC where I could get away with it. (I even went so far as to camouflage the Termite activity as I was stupid, and quite honestly, I wanted the $12K in my pocket)

End of the day, the Bank flipped out, I sued under "Specific Performance", locked the property up for a year and a half, I walked away even at the end of the day.

But it was interesting that the water supply was completely hacked apart when they went to resell it, and some other "Balancing of the tally sheet" things had happened.

Nothing like somehow picking up 15-20 of the Historic Mortise style Door knobs and assemblies that cost some money from.... Now how did I get those again?

***Disclaimer: The lawsuit concluded with the bank and Myself restricted from actually naming the other party at any time, and anything and everything that happened along the way was forgiven. The last part was from me, as I "received" some building materials that proved useful going forward. I was ready to close the original purchase agreement every day for over a year, it was not me that held up the deal.

Anyway, don't do a ####### thing until it is in your hand. RE transactions have a way of blowing up. Shop your local "Restore". It's the Salvation Army/Good Will of building materials.

 

[Mike Anderson]

I've got another two weeks or so until closing on the HUD house and the anticipation is killing me.

Random, As a side note, change your profile to include your Hometown/Area, I can't ever remember where you are, and that would help me. Take the 30 seconds it would take to add that to your profile for me, Please?

 

[Mike Anderson]

Mike, I just want to say that if you ever need a kidney or something, you got it.

I have a few questions as well.  I posted a listing last week that I'm going to call the agent tomorrow about.  It's listed at 120k with both sides rented for $575 each.  As there are already tenants, there shouldn't be any immediate rehab costs.  Anyway, without a lot to put as a down payment, how hard would it be to buy another place if I buy this one?  I want this to be the beginning of something, but as far as financing goes I'm still pretty clueless in that regard. 

There are ways to get money for the down, Jeff and ProNinja will be stronger at that for you.  There are a NUMBER of creative ways to do things, but at the end of the day, ANYTHING short of full disclosure to your lender is Fraud.  A number of things that the average gun shy person in the industry would call Fraud are not, As long as your lender has complete and entire disclosure.  Seller can carry a forgivable second, or even provide the down payment.  Some lenders won't be close to interested.  The ones that sell on the secondary market will shun you like an Amishman, as the fear is that there is creative financing up front, it gets sold onto the secondary market, you fail, and the entity that bought the paper sues everyone in the chain for fraudulent practices.  The longer you have been around, the easier it is, AND THE LESS YOU NEED IT.  It's a double edged sword.  Anyway, Jeff can get real creative here.

I'm going to be putting together a business plan this week and next...not sure if that will make a difference to a lender or not.  I'm doing it more for my own benefit, actually.

I have NEVER had a lender ask for a Business plan in writing.  I have often met face to face, and spelled out the long term plan.

Also, I was talking to a couple of friends (one of whom is a super-duper handyman type) about investing together in rehabs and rentals.  Do you know anything about forming an investment group or LLC to do these kinds of projects?  I'm assuming you have an LLC simply for liability purposes, but that's just an assumption.  From what you've said, I doubt if there are any other investors with you.

I am not going to get into a Huge post with this one.  I have had Investors and Partners from time to time.  I'm not really against investors where you pay a couple points over going rate to quickly rehab a cash property, put a big mortgage on it, and clear $25K in 4 months (Where most of that time is just waiting on closing/seasoning) after ALL expenses including the investor are paid off.  I took in a total of $5K from two different guys in my Dynasty League last year to buy a SLAM Dunk that I just couldn't easily snag at the time in a Cash offer.  I was a little short, and those guys got a 10% return in 7 months.  Not that I would offer that regularly, but it was guys in my League.  I would take a Cash Investor on a Cash Deal where I am going to get them out of my Pocket in under a Year.  I would not take a cash investor on a Long term hold (Unless MAYBE it was completely spelled out that they were even less than silent partners, I run things my way period, but really, I won't do it).  However, if you are really ready to walk down the Partner road, let me know, so I can post some about it before you agree to anything.  Avoid Partners if possible.  If not, let's talk about it.

I do have an LLC, and I have gone back and forth on this a TON of times.  I set it up because that it what everyone said you should do.  LLC if you want to rent, and a Corp to flip.  In fact, some of the best Flippers I know, set up the property in a Corp, and then when the time comes, actually sell the Corp that holds the property, not the property it's self.  There are alot of advantages in this.  Anyway, I firmly believe that a good level of insurance and a Million dollar umbrella is just as good, if not actually better than an LLC.  There is alot of Maintenance in an LLC, and I leave equity in my Properties for rainy days, so an LLC that protects my personal interest can be protecting the smaller side of my assets at times.  Also, Everything in the LLC is open to attack, so if you have 10 properties in an LLC, they are all open to attack.  10 LLCs would be a nightmare.  It's somewhat hypocritical, as I have an LLC, and truly believe that big insurance can be the better option, I just haven't killed the entity.  An LLC protects you from the things that insurance won't cover without paying too much in Insurance.  Lead, Mold, etc.  However, a huge lead case might suck every property in the LLC down.  Best way to avoid this is the strip EVERY bit of equity in the properties (Borrow against them to the hilt, but I like Monthly Cash flow), so any lawyer will see that there is nothing to get.  Being in the Midwest, the Lead laws are EXTREMELY gentle to us as compared to the Socialist Republic of California, and the East Coast.

But the thing is, I don't have a lot of cash on hand and I think I'll need some help in that area.  I'm not sure how far credit will carry a guy in this business.  Mike, you've been in it a while but think back to when you were starting out...how did you finance everything?  Where did the capital come from?

And another one...let's say my first property is a big rehab where after purchasing the property I'll have to sink another 15k into the place.  Where does the rehab money come from?  Is it a dual loan at closing?  Is it something I'll have to get after that?  If so, can I get a guarantee on that loan before closing?  That may be an idiotic question, but I haven't even started yet...bear with me.

Seller concessions.  I was big on asking the seller to fix whatever I could.  My first deal was pay full price, and have the Seller escrow $10K for repairs with the lender.  It was a PAIN.  I had to get bids so we knew that the amount of $10K would work, then the Contractor does the work, submits the bill to the bank, the bank pays.  At the end, everything left in the escrow account returns to you.  As with anything, there are ways to use the system.  As it becomes more of a buyers market, these types of deals will become more common.  As it has been a Sellers market forever, it wouldn't be easy to get a seller to make huge concessions as they could just sell to someone else.  Remember that I now buy almost exclusively beat up houses, where sellers can't move it, and NEED to move it.  Email me at Anderson1170@msn.com for more on this.

All the Dual Loan closing stuff will need to come from ProNinja and Jeff.  I honestly have never done it.

Homer,I might be blind, but I never saw a response to this post. My posts where in Blue. Anyway, we still need to have a Private conversation on "Seller Concessions".

 

[RKMoney]

Wasn't someone around here from Austin?

I somehow got signed up on some list, and get about 8 of these emails a day. No way I am into this, but if someone in Austin wanted to at least tell me what this looks like, I would like to understand the condition of the properties that come in the emails every day:

Beauty Bar

617 East 7th Street

Austin, TX 78701

Property Type: Retail

Price: $622,000

Cap Rate: 6.75%

2006 NOI: $42,000

Total SF: +/- 2,338

Lot Size: 0.131 Acres

Occupancy: 100%

Year Constructed/Renovated: 1965/2000

Lease Commencement: October 2005

Lease Type: Absolute NNN

PLEASE CLICK HERE TO DOWNLOAD & VIEW

OFFERING MEMORANDUM:

Asset Investment Highlights:

- Great location near 6th Street entertainment district

- Anticipated delivery of 13,000 condo units in Austin's CBD will increase traffic to existing retail locations

- Newly renovated project with parking spaces onsite

- Beauty Bar has 5 national locations including LA and NY City

- Ideal for smaller 1031 exchange property

I get about 8 Emails a day for Commercial property all over the country.

I live in Austin and trying to find a fixer upper in East Austin (so far no such great luck)Edit: I live probably 5 minute drive from this place but never remember seeing Beauty Bar there AND I just moved from NYC and never heard of Beauty Bar either.

I can check it out Mike if you want me to in person.

Post some East Austin Zip Codes for me.

The ONLY current ZC I'm looking at is 78702 and East of Chicon Street.