Posted by Marcos on July 17, 2002 at 09:54:15:
I’m not actually talking about my investing, I’m talking about your strategy.
Here are the issues as I see them
- $12k down on a $100k house. Honestly, there just aren’t that many buyers that have the $12k down. Here are just a sample of a few of the LIVE ads in my paper today.
4/2 - Owner will finance. $2500 moves you in. Great neighborhood. $700mo. 710-7860.
OWNER FINANCE, NO QUAL! Minimum $4K down. From $759/mo. 24hr 1-866-202-6076 x4
Some of the investors in my area do really stupid things. Owner finance for less than 5% down. Do a Lease/Option with $500 down, etc. I’m in Jacksonville, FL by the way.
You seem to have found a way to get people into your houses that have $12k down. I think that in reality that is VERY difficult to achieve. If you took 100 bad credit individuals, only 1 or 2 could conceivably come up with that much money down. No matter what the terms.
Now if you’re in California or some other high dollar area, and you somehow found a $100k house, then I could see that happening. But not here in Florida. When I sell a home, I have to use down payment assistance programs as noone seems to have cash these days. Either that, or I pay for their closing costs.
- Different scenarios that could go wrong. You talk about preferring properties with no equity.
The problem comes when something bad happens. You sell to a lawyer, and they decide they aren’t going to pay you. Hell, you can’t even report their delinquency to the credit bureaus. Now, you have to get a lawyer, and it might take you 12 months to foreclose. Have you ever had someone fight you in the process. It’s not pretty. How do you explain to the judge that I sold it to this guy, yet I haven’t recorded the deed, and the note is not in my name. I mean there are a lot of pitfalls here. That’s one scenario I see.
Another possible scenario. The note gets called due. And you have no equity in the property. Yet you’ve sold the property to somone else, and they can’t qualify for a new loan yet. How do you counter that?
I mean, I could dream up a thousand nightmare scenarios of what COULD happen. The point is, when there is no equity it’s very hard to have a Plan B. I don’t like the idea of setting up a strategy of getting properties subject 2 that have no equity. Sure, you might have decent cash flow, and small lump sums of cash. But, if/when something goes wrong, it could be disastrous.
But, of course that is just my opinion.