Two best indicators of a good tenant - Posted by Nancy in NC
Posted by Nancy in NC on April 03, 1999 at 19:57:30:
I do an application etc and a selection criteria check list. However the best two indicators are a good credit report and steady employment with a supervisor who states the prospective tenant is a good, dependable worker.
If the boss says good things about the employee and they pay their bills on time, it works well for me.
Re: Landlording headaches Vs. Retailing Headaches - Posted by Nancy in NC
Posted by Nancy in NC on April 03, 1999 at 20:00:38:
Laure,
Do you buy on lease w/ option, or do you close the deal, then sell on lease w/ option?
Also if you don’t mind, what price range houses are you working with? House style? Neighborhood?
Re: Another “cog” for the system? - Posted by Rob FL
Posted by Rob FL on April 05, 1999 at 17:32:25:
Just one small point. If you have an RE agent on your “payroll” you would almost definitely need to be a licensed broker. Otherwise no agent would choose to be employeed with you.
If you have a legal, equitable, or some contractual right in the property you MIGHT be able to get away with it. Just be careful not to cross the fine line towards brokering.
Re: Last minute loan changes - Posted by Jackie in Dallas
Posted by Jackie in Dallas on April 04, 1999 at 16:10:05:
Here’s my take on it:
You take a buyer’s 1003 (loan application), supporting documents and a copy of the contract to a mortgage broker. They see that the buyer has 10% to put down and they are wanting to finance the other 90%.
The mortgage broker pulls their credit report within 24 - 48 hours and tells you and the buyer that they can do a 90% loan at such and such interest rate. They say it will take 2 - 3 weeks. NO PROBLEM! (how many times have I heard that)
The end of the 3rd week they tell you it will be another week - the underwriter hasn’t finished.
The end of the 4th week the mortgage broker calls you (the seller) and says “they have a problem” they can only finance the buyer at 80% and if you want the deal to go through you (the seller) will have to carry back a 10% second.
That leaves you with 3 choices. (1) Kill the deal with your buyer and start looking for a new buyer (2) go ahead and reluctantly do the 10% second (3) take the whole loan package to another broker and start all over again.
What I’m thinking is that the mortgage broker knew darn well that they could only do a 80% loan from the get-go but didn’t want me to pull the loan from them and take it elsewhere.
They know that if they just hold out long enough - and keep stretching out the closing date - that most investors will just go ahead and do a second just to get the darn thing closed.
Kinda puts you between a rock and a hard place! Not a pleasant feeling!
Re: That’s why I love L/O’s - Posted by Carol
Posted by Carol on April 04, 1999 at 08:05:33:
Nancy, at least you have
(1) current cash flow on the property and
(2) plenty of time to deal with contingencies .
It matters less if it takes 30 or 70 days to close whne the t/b is there and paying the rent!
At any rate, I know I’m happier that way. And if it drags on too long, one can always refi and pull out equity for cash, if that is the objective.
There is, obviously, no one best solution!
Carol
Re: Two best indicators of a good tenant - Posted by Rob FL
Posted by Rob FL on April 04, 1999 at 17:56:03:
I guess they do things different in NC. Around here, if you start asking a boss to give opinions on an employees performance they will tell you to drop dead. I guess the reasoning is, what is your definition of “good” or “bad”. With such a litigious society, the most you can get out of an employer around here is how long the person has worked there and how much is their income. (And of course they want faxed signatures before they give that info out)
Just my experiences over the past several years.
Re: Last minute loan changes - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on April 06, 1999 at 09:44:30:
Jackie,
It sounds, oh, so familiar. The closing date is pushing the 3rd month, the LTV dropping from 90% to 75%. The size of the 2nd is increasing, the payments and the interest on the 2nd are decreasing, because the 1st is a B-C with 12% adjustable, and the buyer wants out of the deal with high payments. And this is all while you are making payments on an empty house. In the end you end up with barely any cash and a large poorely secured 2nd with low payments behind high interest escalating 1st, which you don’t ever care to take over if your buyer defaults on it.
A while back I made a decision not to sell on straight conventionals, FHAs, VAs, etc., unless it’s a below market rental to a pre-approved for a loan investor. Today it’s either a lease/option or a contract for deed only, eventually to be refinanced. And my preference is rather later than sooner. An investor-friend just sold a house where he had $34K equity based on his sales price. By the time the smoke cleared he ended up with about $8K in cash and $14K 2nd at $200/mo. I feel really sorry for him. Just to get that cash he traded his potential 26K 1st position subject to a 27 yrs underlying 8% loan into measly $14K 2nd behind a bad B-paper loan.
I’ll refinance that buyer, but only and only after he is in my house making payments and has a lot to lose if he decides to walk away when that refinance does not go through.
Re: Last minute loan changes - Posted by Reif
Posted by Reif on April 04, 1999 at 18:56:55:
Seems like one needs to find a good broker and stick with them. I can’t believe with the volume that Jackie and Steve Cook do that the mortgage broker wouldn’t be more square with them.
Is it possible to start the process with two different mortgage brokers and get the loan from whomever performs fastest?
Reif
The Absolute #1 Indicator for me is… - Posted by BRnBA
Posted by BRnBA on April 04, 1999 at 18:58:38:
a steady job that they want to keep! That basicly equates to a job that I can successfully garnish wages
should the need arrive. I won’t rent to plumbers, carpenters etc., they are too transient and if you try to garnish wages they will quit the current job and find another. I have found that in the 20 years I’ve been a landlord that if they meet the steady job they want to keep criteria, they usually work out fine.
Re: I agree! - Posted by Jackie in Dallas
Posted by Jackie in Dallas on April 06, 1999 at 22:23:53:
Starting in 1999 I have also decided to ONLY sell with owner financing or lease options. In the past I’ve gone through the traditional holding times and costs and all the hassles associated with getting my buyer a mortgage – but NO MORE!
Here’s an example of a recent deal I did the non-traditional way. It sure was easier and less stressful.
The day after the CREOL convention I closed on a 3/1/1 house for $28,000 with a hard money loan (no points, 18% simple interest). I put another $2500 into it for central air, carpet, tile floors and new faucets ans shutters. Ran the “No Bank Qualifying - Owner Will Finance” ad to sell for $59,500 and my phone rang off the hook!!
I just got their name, phone number and how much they had for a down payment and told them to drive by the house and call back if interested.
Almost all of them wanted the house were interested but I picked the one with the most down payment - $10,000.
At the suggestion of a few investor friends, I talked to a few note brokers(big mistake) who suggested I create a 75% first and carry a second for the rest. They said they would be glad to buy my first with ONLY a 10% discount AFTER I seasoned the note for 6 months. Or if I wanted to do a $49,500 first they would need a 15% discount AFTER the seasoning — ya right!
Now why in the world would I want to take a discount?
Heck, I got $10,000 up front and I’ll make $250 a month on the cashflow and the whole thing from my closing date to buy to the closing date to sell took less than 30 days. Now that’s progress!
The hard money loan must be paid off within 2 years - meanwhile my buyer’s payment is covering the cost of the loan and giving me a nice little cashflow.
I’ll eventually refi the hard money loan myself but with my good credit and a 50% LTV loan it should be easier than trying to get my buyer a loan at 85% LTV.
Re: Where? - Posted by Jackie in Dallas
Posted by Jackie in Dallas on April 04, 1999 at 20:25:27:
I’ve switched brokers many, many times. Each time I get a high recommendation from another investor. Each time I start the relationship with high hopes that FINALLY this will be the one. Each time I do the the things that Jim Piper recommends, I’m personally involved from the very first day; I make sure ALL the docs necessary are turned in to the mortgage company along with the 1003, I call to see if they got the credit report, follow-up to make sure the survey was ordered, the appraisal ordered, ask if it has come in yet, etc., etc…
I don’t run into the last minute changing of the LTV everytime - it just happens so frequently and with so many different brokers that I really think it’s something they teach in broker school - it’s just the way they do business - a way to make sure the loan (thus the commission for it) stays in their office.
A new problem I’ve run into is that some lenders will NOT make loans on properties that have been owned by investors for less than 1 year - specifically LongBeach, they say it’s their new company policy. Unfortunately, I found out about it half way through the mortgage process on 2 loans and had to start all over again with a different lender. The broker says he was not made aware of it until that time too!
The BOTTOM LINE is that dealing with mortgage companies,and the games they play, and their rules and regulations, make me determined to find a way to get them out of my life completely!
I’m not sure how yet - but I am going to find a way to streamline the entire process. No doubt, with the brain power of this newsgroup I bet we could come up with a way!
Re: The Absolute #1 Indicator for me is… - Posted by Rob FL
Posted by Rob FL on April 04, 1999 at 20:03:37:
I tend to agree. I would rather look and see their length of employment as opposed to what some “boss” (who could be there best buddy for all I know) says about them.
Re: I agree! - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on April 07, 1999 at 08:48:41:
Jackie,
That’s a great deal. I wonder how you manage to go that far with your $$ on repairs. Around here the A/C alone would cost the entire $2,800 !
One way you could increase the profit on your deals even more is by obtaining cheaper hard money. Advertise for a few weeks in your metro paper in the financial section. Over the years by advertising periodically I’ve been able to find 3-4 private lenders which I constantly work with. I pay in the range of 12-15%, with longer term balloons, 5+ years (let’s me sleep better at night).
NO, WHY ? - Posted by Alex Gurevich, TX
Posted by Alex Gurevich, TX on April 06, 1999 at 10:38:32:
Jackie,
Solution is simple - cash flow. Once you get about $10K/mo in cash flow from your owner financed deals set up for several years, you don’t need that cash out deal anymore. It’s not bad to get a chunk of change once in a while but the key is you don’t depend on it.
Just ask Dan Luibell who has about 160 L/O homes. His biggest problem is that a local mortgage company is chasing his L/O buyers and refinancing them too quickly. That creates all kinds of extra work for him in placing the money again into some other house.
And last, if you get something really cheap, there are hard money lenders to get you some cash upfront. For example, bought a light fixer house for 37.5K, borrowed 45K (pocketed about $6.5K at closing) at 12% with $600 PITI; will sell on L/O for $85K with 900/mo payment. If I refi at 9% the cash flow with jump by another $100/mo.
I see one other serious drawback with selling on FHA, etc. loans to buyers. In most cases we, investors, while sitting on empty houses and making payments find ourselves under pressure of losing the buyer, or losing the loan, etc., ready and willing to “sweeten the deal” for a buyer, i.e., to pay closing costs, points, do extra repairs, cut the price, etc. All of that eats into the bottom line dollars, and a LOT of them. I found with L/Os or OFin. when I let people in the houses with little downpayment and some dings on their credit, I get away with hardly doing anything to the house, and not paying for anything I don’t have legally to pay (per purchase contract accompanying my L/O). Not even a title policy which sorta goes without saying in Texas.
I personally believe that you only need to deal with banks when you are playing in the commercial field with high dollar properties. With an abandance of “subject to” low interest FHA, VA, conventional loans, hard money and seller financing to buy homes with, why would we need to liquidate them for all cash with us depending on buyers having to qualify, mortgage companies to stick to their quotes, underwriters not coming up with last minute requests, appraisers to know what they are doing, surveyors, etc.
So why do we have to compromise with all of these dependancies when in a matter of 2-4 weeks we can have a tenant/buyer in a house making high monthly payments to us for many years to come ? I found, the less people, conditions, and circumstances there are between me and a buyer, the SOONER and MORE money ends up in my pocket.
Happy hunting.
Re: I agree! - Posted by Jackie in Dallas
Posted by Jackie in Dallas on April 08, 1999 at 09:30:03:
I put in a used system for $1200 total - it includes a 6 month warranty.