Tired Landlord Free and Clear - Posted by Bill

import · March 13, 2001, 3:41pm

Posted by Bill on March 14, 2001 at 15:49:28:

Ken, sounds like a good strategy for you. Here’s my problem, though. If I would try to refi two months after being on title, lenders would tell me to come back in 10 months (seasoning). So, I’d lose the use of my cash for a year! If that was $85,000…OUCH!

Then again, I haven’t done an extensive search for a mortgage broker that can refi at a decent rate with no seasoning. The brokers I work with now can’t do it.

Those illegal flippers that started all this 1-year seasoning BS should all go to Heck!

import · March 13, 2001, 3:41pm

Tired Landlord Free and Clear - Posted by Bill

Posted by Bill on March 13, 2001 at 16:41:33:

A landlord from out-of-state called from a postcard I sent. (I sent it over a year ago, if you can believe it!) Anyway, he and his wife are retired, and are not wanting to deal with rentals anymore. This is the last rental house he owns in my city. He has a local management company handle everything.

Tenants have been in the house for a few years, and are good tenants, and he doesn’t want them to know he’s interested in selling (OK, Mr. seller, how am I supposed to see the inside?) He’d prefer it if they could stay-on as tenants as long as they want, which would be alright with me if I get a good enough deal.

He’s interested in being cashed-out. I asked about the possibility of financing me, but he’s not interested in that. He owns it free and clear, or, there’s a small remaining loan.

I’m OK with holding this as a rental, but I’m not sure about what to offer him. I could get a loan, but I don’t want to put much downpayment money into it. I’d like NOT to get a large loan, just so I can say I own this rental… it’s got to cash flow well, or no deal.

What do you do with owners like this? Do you just try to low-ball, and if they don’t take it, you move on? Or, do you pretty much IGNORE their desire for all cash, and present a few offers including things like 1/2 cash now, 1/2 later, etc? And creative deals aside, what if you can get it at a price that allows a decent cash-flow, but you’d have to get a new loan? Are you absolutely opposed to getting loans in your name? My question is a general one, not just about this property.

Sometimes I wonder if a myopic focus of trying to get into EVERY property with little or nothing down makes us miss the occasional “keeper”.

import · March 14, 2001, 6:46am

Re: Tired Landlord Free and Clear - Posted by ken in sc

Posted by ken in sc on March 14, 2001 at 07:46:23:

Here is another way. Buy using hardmoney or credit line, then refi. What I do is buy with a commercial bank loan of 80% of price, paying the downpayment from a credit line. Then, in a couple months I have it appraised for full retail value and refi out as much as possible.

Lets look at numbers. If the retail value is $100,000. Offer him $85,000. Show him that if he sold with a Realtor what his net would be after commissions, etc.
Also he would have to make the tenant move out to sell it. If he sells to you he can collect rent right up to closing. If he agrees on the $85,000 price, and you refi 2 months later (an $80,000 loan based on a $100,000 appraisal) you might wind up with $6,000 or $7,000 in the house. If it breaks even cash flow,goes up $3,000 (3%) per year, and pays off $1,500 per year, them you are making about a 70% return on your investment. Not bad - might even beat tech stocks!

Good luck - Ken

import · March 14, 2001, 5:31am

Re: Tired Landlord Free and Clear - Posted by Tom

Posted by Tom on March 14, 2001 at 06:31:26:

Hi Bill, I’m not going to make any suggestions, seems like you already got some pretty good advice. However, I would be very interested in knowing what you stated on your postcard that was so impelling that they kept this for a year. Do you do your cards in your own handwriting that make it more personable, or what? Thanks for your input, Tom

import · March 13, 2001, 11:24pm

Don’t Miss The Forest For The Trees! - Posted by Vic

Posted by Vic on March 14, 2001 at 24:24:24:

Bill,

If you find a good enough property you’d be foolish not to get a bank loan, just for the sake of being able to say you did a creative or no money down deal.

Creative & no money down deals are always great to get, but don’t pass up a “good deal” just because you have to get a bank loan. As time goes on you can still do creative things with a bank loan. Just make sure that you KNOW it’s a good deal. In other words, don’t miss the forest for the trees.

There’s a couple of ways you can proceed on a deal like this:

Create a note & sell it at the close.
Ask the seller if he’d be willing to take back a small second mtg., which could be sold at the close, then find a private investor for the first or maybe your private investor will fund the whole thing for you.
Partner with someone.

That’s just 3 quick ways that come to mind.

Good Luck,
Vic

import · March 13, 2001, 5:51pm

Re: Tired Landlord Free and Clear - Posted by Surfdog

Posted by Surfdog on March 13, 2001 at 18:51:06:

Ken-I try to be creative; to me creative is using other folk’s money-even if it’s a bank’s. Here’s an example: I bought a prop that needs fix-up but is in relatively decent shape. Purchase price (from bank via sherrif sale):$15000. I have a banking relationship with a bank I’ve given several dozen mortgages to, so, I was able to get a loan for $35000 that includes paying me back my out of pocket acquisition cost, $14000 in rehab expenses, and the rest is in my pocket as tax-free cash. It’s a duplex, and even with the cash crank, I’ll end up with $150.00 positive cash flow. Can you see how if you rinse and repeat this once a month, you could be on to somethin? Oh-I forgot to mention-once I end up renovating, the prop is worth $45-$50000!!

import · March 13, 2001, 5:08pm

Re: Tired Landlord Free and Clear - Posted by Ken (ILL)

Posted by Ken (ILL) on March 13, 2001 at 18:08:29:

Try a “land contract” or Contract for deed, or whatever your state calls it. He will remain the owner of record, and get all the tax right-offs until you’ve paid it off. Remember to try to get the contract on zero percent interest. (Don’t bring up interest unless he does.) Spread it over 30 years with a 5 to 15 year balloon, and he might like that. This will give you time to create something later to help your finances.

good luck… Ken