Expert opinion?-Starr/JohnBoy/Trandle/Jim - - Posted by Green

Posted by Green on March 03, 2002 at 21:03:53:

Hi Joe,
Excellent idea. Thanks. I have been reading your other post too. They have been very helpful. I want you to know that We all newbies do appreciate it.

Couple of Qs
1)According to you I should be looking for partnership investors with who do fix upper-rehab. right?

2)The above case that I wrote…Is that feasible?

3)what city are u in :slight_smile:

I will keep you posted as how I am doing with your ideas.

Expert opinion?-Starr/JohnBoy/Trandle/Jim - - Posted by Green

Posted by Green on March 03, 2002 at 18:27:41:

Newbie still reading case studies.

Here is the case- Say I am not a very ppl person(shy kind). I am not good at marketing, negotiating. Say adding to that I a have a great job which keeps me busy not just the weekdays, weekends too. So pretty much I cannot do any of the brilliant ideas the experts suggests for being successful in RE investing.

Here is my problem, I am very interested in RE Investing, and am working my way up for financial freedom. I find myself reading creonline every few minutes I get during my job.
I have good credit.

So here is what I do based on a case study I read from some of the Rich dad books and some RE investing books and some posts on this site.

Appraised value of home: $135000
I buy at same price. ( No 25% less than the appraised value)
Cash Down $10000

Mortgage amount $125000
Closing cost $2500(approx)(Dont know how I came up with this)

Finance(30 yrs) $791.25 per month( based on interest rates these days)

Put an advertisment for Owner financing with no cash down(must have good credit). With “No cash down move in” I assume I hope I would get atleast one buyer.

So Sell it at same price I bought. $135000 @ 11%
Their monthly mortgage- $1286.55
How much i make- 1286.55-791.25= $495.30

Total investment from me 10000+2500(closing)…12500

ROI= (495.3 X 12)/12500= 47%

Well If I get that kind of return, I don’t mind being busy with my job and also do RE . BUT ALL THIS SOUNDS TO BE TOO GOOD TO BE TRUE.

I am sure so many things would be wrong here…like
1)Closing cost??
2) Would I get loan financing for same interest rate that I would get owner ocuppied home loans. I heard loans for investing and non owner occupied property are higher??
3)If I sell the home with owner financing…you guys think 11% in common.
4)taxes. This 495 per month is 5943.6$ a yr. How is this taxed. Same as my income?
5) I am doing aginst the REI priniple preached by experts-“U make profit when u buy”.

Some Questions
a) With no time to invest- How can I get deals 25%(approx) below apprasied price???
b)When people say “we buy houses” and “will pay cash”. Do they actually write a cheque for the seller and later finance it?? or they line up the finance and then pay just some amount from their pocket and rest the chequ from bank???

Any input…?? pardon my ignorance if i am grossly wrong on my theories as I never talked to any experts. All this is based on the reading I have been doing so far.


Re: Expert opinion?-Starr/JohnBoy/Trandle/Jim - - Posted by JoeS

Posted by JoeS on March 03, 2002 at 19:56:11:

Green…if you lived in my town you would be an excellent candidate for being a hard money private lender. You have some cash, excellent credit, and the availability of more cash! An investors dream contact! Here is what you can do. In your little spare time, maybe during the day for a few minutes, call some Title companies and attorneys. Tell them that you have some cash to invest and was wondering if they knew of any local investors who need a silent partner.
Have your attorney work closely with you and you could make an excellent return without leaving your desk! This is the way I structure the deals with my silent partners. They put up the funds to close, say 30K. They also pay for the minor rehab, another 2K. My part of the transaction is to locate the properties, handle the workers for the rehab, and sell the finished property. My silent partner then deduct ALL expenses out of the proceeds, and split the balance with a 50-50 split. We each make anywhere between 10 and 15K on each deal, in about a 4 month timeframe. That my friend is an excellent return on investment.

Become a lender - Posted by Mitchell

Posted by Mitchell on March 04, 2002 at 09:23:43:


Greens’ advice is very good, with a few caviats.

First, your original deal is doable, any deal is doable. The question is, is it advisable. No! There are too many ways that you can get hurt and not enough ways to protect yourself.

To be a newbie lender is also fraught with danger. Your attorney had better protect you well. Engage a realtor who is very knowledgable about the area of investment and who will give you very good comps. Engage a retired contractor to be your “Clerk of the Works”. He can look at the proposed property for you, making sure that it is a situation where the “right things are wrong”, and he can also oversee the fixup being done by your rehab partner. Make sure that a schedule for each part of the project is created and written into the contract. There must be penalties if your partner does not live up to his end. The reason that most partnerships fail is that one partner tries to get something over on the other. Remember, you have the “gold” so you make the “rules”.

Good luck,