OPM

[Miguel Benites]

What requirements do I need in order to be able to use OPM to buy houses? 

[Erik W.]

Ask yourself this very challenging question: "If someone ask ME for $100,000 to invest, what would I want to feel comfy about this?"

Ideally, you want:

1) ROCK SOLID COLLATERAL. What is that? It means if the borrower screws up and I have to repo the house I can turn around and sell it "as is" and recoup all my money PLUS the profit I hoped to make originally within 30 days. So you're looking at a house with LTV of no greater than 70% and probably more like 60%.

2) "Skin in the game".  Every newbie who listens to a handful of podcasts says, "I'm really motivated, I work hard, I will offer you 12% on your money..." blah blah blah.  Okay, that's all nice, but what's to keep you from running away in terror when your first tenant decides to pour concrete down the toilet or move in her drunk ex-con boyfriend who uses your wall for dart boards and as a catcher's mit when he beats his girlfriend up?  Answer: you have some of your own money in the deal that you will LOSE if you run away.  I'd want to see someone with zero experience put up no less than 10% and preferably 20% of their own money into the deal.  We all saw what happened with folks who had no skin in the game during 2008-2009...the minute the house was underwater, they ran away and stole all the appliances, cabinets and copper pipe.  "Strategic default" they called it.

Once you get a dozen deals under your belt, THEN you can trade on your good name and the reputation you have built to get better terms.  Until then, money talks...and the rest walks.