How do I fund a constant flow of deals?

Real Estate Investing Real Estate Financing
1

I have 6 properties under contract to buy. All are short sales I’m currently negotiating with the banks. I am starting to bite my fingernails about how I’m going to close them all.

What strategies are you using in these situations to do multiple deals?

Will (WA)

2

Are you worried about closing costs/holding costs, or something else? Do you have buyers/renters lined up? What is your investment strategy?

3

Good question. I don’t really have a solid exit strategy.

  1. I am exclusively pursuing short sales. A number of them, maybe all?, don’t allow assignments.
  2. I’m using standard MLS Purchase and Sale documents for State of WA that don’t allow assignments. I could use a non-traditional purchase and sale that doesn’t forbid assignments, but I’d be concerned that the lender wouldn’t sign off on the short sale at closing.
  3. I can close and fund a few deals, but I am thinking hard about scaling this business and I don’t feel comfortable about adding many more deals when I’m not sure the best way to hand them off to another investor or end buyer.
  4. The only exit strategy I’m very familiar with is to buy with conventional financing, or all cash, remodel, list and sell to a retail buyer. So, If I have limited finds, I feel that I will run out of money quickly with this strategy.
  5. I can see that my most valuable contribution is to keep securing, closing deals and handing them off to an end buyer or rehabber, but I don’t know the best vehicle to accomplish this with short sale properties.

Thanks for any ideas you can give me.

Will

4

Hey Will,

I have not done this, and I am not sure if it fits with your strategy (or if it can scale), but we know there are a LOT of people out there who have declared BK in the past few years who are looking to find a home. Could you lease option these (list as owner financing)? Get a few thousand down, lease purchase to the buyer for a year or two, then the buyer has to find their own financing. If you want to get the houses off your hands as soon as possible, make the term shorter, if you don’t mind holding for a while, make it a longer term. If they don’t execute on the purchase you can continue renting to them, or try and sell it to someone else in the same way. Doing it this way would be better than renting them out in that the leasee/buyer has an in interest in maintaining the property. There is a bunch of information on this type of deal. I think Bronchick had a book on this (I could be mistaken). Let us know what you do and how it works.
Good Luck,
Bob

5

BK records open to all

Will has an interesting idea here…check your local BK filings and follow-up on those folks right AFTER they get final BK Discharge…then they’re free to contract again. Usually a few weeks following their BK hearing.

Find your local Legal Newspaper which will have all BK filings and Discharge Orders.

In fact you might find it interesting to attend BK court hearings and maybe even take some business cards to hand to BK filers right after they testify to the Trustee and leave the courtroom.

6

How do I fund a constant flow of deals?

Will,
I am sure you can come up with some answers as to how to buy all 6, but let me take another approach. When I make offers on short sales, I am lucky if I get half of them to stick. If I get 6 for 6, I am probably offering way too much. Get more aggressive on your offers/negotiations. With potentially too many on the line, you call the shots. It doesn’t matter if you get any one deal or not, so stick to your guns - fewer better deals means you aren’t as likely to get in trouble.

Also, I find short sales can take anywhere from 1-12 months (and have heard of a few longer than that). Odds are they won’t close all at once, so are you able to buy more, more easily, if they are a bit spread out? I know my positive monthly cash flow allows me to raise a lot of cash fast, plus you may have some time to figure out how to make money on the early deals before getting to the later ones (close it, fix it, sell it; RTO with decent down payments; purchase and resell as is; pay cash, then refinance the money out and use for another purchase - of course, you have to be aware of what you are allowed to do, as some short sales place restrictions on the buyer).

Hope that helps.

Best wishes,
Chris in FL

7

get an equity partner

So if you make the offer, could you not take on a private equity partner on a deal by deal case - check out the local real estate investment group, there might be quite a few that would be your equity partner.

Or maybe lend you the money, plus your assignment fee for you to purchase and then deed the house over to them.

Or check with a transactional funding company that would fund the purchase as long as you have the end buyer lined up who is going to close the next day.

At least if you are buying the short sales that need work, you can partner with other investors, to be your lender, equity partner or your end buyer.

Hope that gives you some ideas.

Kim

8

I do not pretend to be an expert, but I have heard of adding a partner, rather than an assignee. You and a rehabber or cash investor may be able to partner on doing these.