Need help with strategy - Posted by POP

Posted by POP on March 31, 1999 at 15:09:20:


I think I may have my terminology a little mixed up. I have access to private funds at a rate of 7 to 7.5% to purchase these properties. I was thinking of “hard money” being non-institutional money. Sorry for the confusion.

Does this change your opinion? As I said, any suggestions on how to bargain down the seller so that I only have to borrow up to 80% LTV or so up front would be most appreciated.

Thank you for your time.


Need help with strategy - Posted by POP

Posted by POP on March 30, 1999 at 20:36:13:

Hi everyone

I want to buy (in preference to controlling) SFH’s so that I can lease/option them out to tenant/buyers. I have found a hard money lender willing to go to 80% (90% at a push) Loan-to-value.

My problem is making sure that the first mortgage does not go above 75% of fair market value so that I get finance at good rates and so that closing expenses can be covered by the hard money. I want to do it with “no money down”.

I thought that I could make an offer on a SFH at around 85-90% FMV, with 70-75% payable now, and the other 15-20% carried by the former owner who would have a second mortgage on the SFH, payable in three years as a balloon with or without interest (depending upon motivation).

Any other ideas on how I can make this attractive for the seller would be greatly appreciated.

Kind regards


Re: Need help with strategy - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on March 31, 1999 at 08:35:46:

Joe is right. The only way to make it work on a cash flow basis is to have the hard money only of up to 50-55% LTV, and have zero interest seller carry second. I have an article in money making ideas “Cash plus cash flow” that describes this technique.

a kink in the strategy . . . - Posted by Joe Kaiser

Posted by Joe Kaiser on March 31, 1999 at 01:53:45:

Whenever I think in terms of hard money, I don’t think long term. Any potential cashflow on your subsequent lease option gets eaten up in the financing.

We use hard money to get in and out, and sometimes when we’re in a hurry or can pull out huge chunks of equity. We don’t use it to finance rentals.