Posted by Mark Graham on February 23, 2001 at 11:43:17:
The size of the deal is irrelevant except to your comfort level. When looking at ANY property, the profit is what counts. If it needs LOTS of money up front, then the profits are unlikely to be as high and it is less likely you will choose to do the deal in the first place. If you decide to act on this opportunity but you don’t have the neccessary cash, then it’s time to get more creative with the financing. Keep working on the financing until the property is sold, either yourself or someone else. You would be surprised at some of the financing offers that creep out of the woodwork when you start looking at longshot possibilities.
Also, this work might prove beneficial even if the deal falls through. Let’s pretend that the appraised value of the props is $4million, 20% down would be $800,000 to go the conventional financing route. You manage to find $400,000 in private investment money, but the props are sold to another investor at this point and you’re out of the game. Advantage: you know where to get $400,000 worth of high-risk loans. That’s not something to sneeze at.
In your particular case you mentioned “24 repos”. “Repo” usually means the bank owns the property, but you said the real estate agent “had them”, rather than “listed them”. In any case, if the bank owns them, you might be on a gold mine … the bank usually hates being landlord, and might be desparate to unload them. At the same time, they don’t want to repo them again in two years. More to the point in the analysis is WHY were they repod in the first place? Too much maint? bad neighborhood? overpriced? Do the numbers, factor yourself a nice fat profit margin, and make an offer, even if it seems absurdly low to you. (Don’t forget the escape clauses, in case you can’t swing the financing or you change your mind later.) In the above example, you might offer $2.9 million and allow yourself to be negotiated to $3.1 million. If this is accepted, you’re buying $4mil worth of property for $3.1mil, and this suddenly looks attractive to REIs. Chances are it will be rejected, but who knows, the owner might be sick to death of it and ready to bail.
able but cant seem to get the ball rolling - Posted by cherry
Posted by cherry on February 21, 2001 at 22:49:52:
i have been looking at houses for while now i have found some great deals but they have gotten away. i live in a smaller town and and cant find any willing seller to do any of the deals discribed. my credit rating isnt bad around 650. but my dept to income is kinda high i cant find more then 80% i have 6 boys so my money to invest is zero to none. iam getting really frustrated. because i know i can do this if i could get it going but how if i cant get the 20% plus i need to start? i know nobody who has the money to back me believe me i have tried! i wanted to start out small i found a house for 15000 i could put 2000 in it and sell it for 25000 to 30000 i do home improvements but i couldnt get more then 12000 to start so where do i go sorry this is so long. i really need help!
Re: able but cant seem to get the ball rolling - Posted by Ed Garcia
Posted by Ed Garcia on February 22, 2001 at 09:15:55:
Cherry,
With your credit score, you can do deals. I think what you have to do is STOP being paranoid about not have a down payment. By being paranoid about it, you are mentally defeating yourself before you get started. Another thing you have to do is to look for MOTIVATED sellers. You mention that you feel you could have done some deals but the sellers would not carry paper. The seller is just as important as the property when being creative.
Cherry, when you have no money for down, it’s imperative that you have the seller carry-back a second in order for you to have established LTV for your lender. My next suggestion is for you to go to a mortgage broker and have them pre-qualify you for a loan. That will now help you know what it’s going to take depending on how you structure your deal, to do it.
Deal structuring is the KEY. When you know how to structure curtain deals that make them financially achievable for you, you’ll have more confidence when you make your offers.
Now I can make suggestions of other ways to do deals, such as lease/option etc. but with your frame of mind, you will just say that you can’t find anybody that wants to do a lease/option with you. You have to change your attitude about yourself.
Cherry, one more thing, if you talk to 10 people, or you talk to a 100 people, which one will give you the most results. Of course talking to a 100 people. So my point is that sometimes you have to work numbers to get results. If you talked to a 100 people, you have 10 times more chances to do a deal then if you only talk to 10.
Cherry, if there ever was a business where you can make a dream a reality, this is it.
Now go fulfill your dream.
Re: able but cant seem to get the ball rolling - Posted by cherry
Posted by cherry on February 22, 2001 at 21:48:56:
I was so thrilled when you answered my question you can not imagine. it has really got me motivated i called a mortgage broker today to get pre aproved and i will take it from there i talked to her about 20% down and she said she could get up to 95% if she could only get 80% she said she would help me get the seller to carry a 2nd but wouldnt know till she pulled my credit but she said she could get me preapproved and is calling me tomorrow so now i can hardly sit still thank you so much for your time!! I can do this!!! And your encouragement was what got me off the computer and on the phone to get the ball rolling. And get this to boot i have a friend who is a real estate agent and she has 24 repos from a bad divorce apartments and houses!! iam going to go look at them tomorrow i have one question the broker wanted to know how much i wanted to try for i told her i wanted to start out small around 30k but then i found out about these small appartments should i stay small or go for it? your help has been priceless to me a big THANK YOU to you
Cherry