Posted by AJ on March 06, 2000 at 02:00:09:
The biggest obstacle you have in front of you is spelled “REALTOR”
Move on to another deal
How would I structure a deal using other people’s money??? - Posted by SMB PA
Posted by SMB PA on March 05, 2000 at 20:47:08:
Hello,
I contacted a local investor who specializes in buying foreclosed properties from the bank. I asked him about the status of a property that I might be interested in and he replied, “Sold” and went on to say that the properties go as quickly as he receives them. He usually sells to investors who have 1) cash, 2) Credit line and 3) equity. For our first property, we do not want to use any of our cash savings, we don’t have a credit line with a bank nor want to use our credit cards since we are just beginning and third, we’ve only been in our house for a little under three years and we have no equity built up. We understand that CREonline promotes finding creative ways of financing or buying property using other people’s money. Please give us some ways we might be able to do this for our first deal using “other people’s money”. We would appreciate some guidance or assistance with this important process. I’ve gotten most of what I need to make this happen as far as identifying my contacts, promoting my business, finding a property and a neighborhood and pre-qualifying the seller, however, this is the only process where I am totally stuck. For example, I found a foreclosed property which is now listed with a realtor. The bank or realtor is asking between $16,000 - $18,000 under the retail value for properties in that general area. It needs cosmetic work according to the written profile, however, I only drove by it and viewed the property from the outside front. I really don’t know what it needs or what it would cost to bring it up to value because I haven’t seen the inside of the property. The asking price is $54,900 and the average retail price is $72,000 - $75,000. How would I structure a deal like this one using “other people’s money” and without me having to get financing through a bank or mortgage company or spend any of my own money? Please keep in mind that this is a bank owned property.
Thank you,
SMB PA
Re: How would I structure a deal using other people’s money??? - Posted by Carmen_FL
Posted by Carmen_FL on March 06, 2000 at 08:28:28:
I suggest you build a relationship with a hard-money lender, unless and until you want to go out and find your own private investors.
For properties listed with realtors, they will usually ask for a “prequalification” or “source of funds” letter. My equity lender, whom I’ve purchased a couple of houses through, will write these for me all day long, as long as when we actually get the property, we go through them (plus, we’ve sent quite a few people their way in the past few months). We do all the work - send the address, the comps, etc. - and they send a letter directly to the realtor stating we are approved for $XX on the property. Find a couple of hard-money lenders by going to local REI meetings, and talk to them. Some “wholesalers” in the area will also finance the houses they “flip”.
Be careful, always - do your own comps, and run your own numbers, to make sure you’re not getting peddled junk. For instance, on the house above, say the house is worth $72,000. You could probably borrow no more than $46,800 (65%) from a hard money lender. Consider closing costs (which are high with hard money lenders), fix-up costs and your profit, whether you are going to flip it or rehab it. That’s how you would determine how much to pay (to simplify):
$72,000 FMV
- 3,600 “fluff” / contingency amount (min 5%)
- 2,880 closing costs (assume 4%)
-10,000 rehab costs (assumed) - 4,000 holding costs (5 months + utilities, etc.)
-15,000 your “rehab” profit (or wholesaler’s profit)
36,520 Max price to pay
Hope this helped!
Carmen