20 units in about 19 months, not new member but new intro

[Hector Vazquez]

Hi All,

I have been buying and renting homes for the last two years. I have been a member for about that same period of time, I have always looked at the posts and listings and have responded to several of them have contributed as much as I can. It has been difficult with having my own business and HR consulting outsourcing plus doing the real estate and maintaining a wife and daughter happy. That being said I’m making a conscious decision of being more involved in this group. Here’s my story, I have about 20 units and a couple in process. I buy and hold, and are considering our first flip later this year.  I have purchased these units in about the last 19 months. After my first deal I got hooked.  Both my wife and I are attorneys, and have multiple graduate degrees (MBA, MHA, LLM).  We achieved this at a very early age. As you can imagine we also have hundreds of thousands in student loans, given that my wife and I are both from Puerto Rico and had to pay out-of-state tuition everywhere we went. Of course I would have done this differently if I had read Rich dad poor dad and all the books I read after this, plus other podcasts I have been listening for the last 18 months. Unfortunately hindsight is 20 we achieved this at a very early age. As you can imagine we also have hundreds of thousands in student loans, given that my wife and I are both from Puerto Rico and had to pay out-of-state tuition everywhere we went. Of course I would have done this differently if I had read Rich dad poor dad and all the books I read after this, plus other podcasts I have been listening for the last 18 months. Unfortunately hindsight is 20/20  however I decided to do something about it  my first step was to create my own business about four years ago on HR outsourcing and consulting  which increase my income pretty well, however scaling it up has been a challenge, Specifically after I got hooked on real estate. However I decided to scale up the real estate business. Given all our student loans, the traditional financing options are not available. After reading investing with no money down, I did a lot of research on land contracts.  I knew that this was probably the only viable model for us. Therefore all the single family homes we have purchased, and duplex (soon to be two duplexes) .   Have been  purchased with seller finance. I have created a table where I tier  all the contracts and their  balloon payments.  The model has worked very well, and the first house is scheduled to be paid off in about 18 months. Mos of our deals have a 25% + coc except one, which was a mistake but it breaks even. We are constantly looking for seller finance deals, given that these are the ones we are eligible for. I am hoping that I can scale up sufficiently where a bank or a lender (private or commercial) is willing to look at us for financing and hopefully refinancing the whole portfolio or give us financing where we can start purchasing in with methods so we have more options on the table given that seller finance deals are hard to come by some times.  We currently work and live in indianapolis and all my units are in indianapolis, within 10 mins to 30mins from Me.

Not sure what other info usually new member, or new introductions include but I hope this helps to tell our story. 

Hope you are all well and enjoy the long weekend.

[Hector Vazquez]

@Jay Hinrichs Jay Thank you for the information. Did some reaearch and found the posts here in BiggerPockets and my lightbulb turned on I know what you mean. Thank you very much!

[Royston Lobo]

@Hector Vazquez Welcome to BP. I am a newbie to BP myself and have been listening to podcasts and reading the forums. 20 houses in 19 months sounds awesome! I am working towards getting my first turnkey property.

Good luck on your flip, please let us know how it goes. Enjoy the weekend.

Regards,

Royston

[Jay Hinrichs]

well since U want owner contracts I would be following the public records of anything MOrris Ocean point in INdy there are going to be 400 plus properties that I am sure the owners would like to maximize their return on and one way to do that is to sell on contract.. I know when I want max return on a home I sell on contract.

[Michael Roman]

@Hector Vazquez congrats on taking the step and going full force. I think your results speak volume for the work you are doing. Can I ask you how you structure your deals? You are putting 25% down + costs of closing and the seller finances the rest. What are the rates you are getting and how are you able to pay off the house in 36-40 months? I look forward to your insight.

[Hector Vazquez]

Thanks for the info, do you mean the recorders filing? Is there and easy way to search?

Not familiar with Morris, I’ll research. They sell their properties on contract?

[Hector Vazquez]

Btw sorry for the typos just noticed that Siri botched a paragraph 

[Hector Vazquez]

Michael, I usually put 10 to 20% down, seller usually pays closing costs (they are less expensive given it’s only a contract execution, the deed passes at fulfillment of contract).  Rates are anywhere from 6 to 10%. It all depends how motivated the selllr is. The beauty of it is that you can negotiate anything both parties agree are generally c class neighborhoods, and the seller is wanted to get rid of their portfolios and are looking for steady cash. The term in year vary from 4 to 30 yrs, and the amortization is usually 20 to 30 years.

However this plan only works if you scale up fast because you need to create enough surplus in cash to pay contracts soon. So everything in surplus goes to additional principal payments in the contracts. Also I negotiate longer terms for the nw houses I purchase. So I have them in a ladder like rotation, the first 5 yrs I only have two balloon payments, but I have forecasted that I can afford 3 at year 7 and etc... as you pay off, your surplus grows and you get a snowball effect. Of course you have to manage it closely. 

[Hector Vazquez]

@Jay Hinrichs Jay Thank you for the information. Did some reaearch and found the posts here in BiggerPockets and my lightbulb turned on I know what you mean. Thank you very much!

[Jay Hinrichs]

Originally posted by @Hector Vazquez:

@Jay Hinrichs Jay Thank you for the information. Did some reaearch and found the posts here in BiggerPockets and my lightbulb turned on I know what you mean. Thank you very much!

YUP  I know exactly what your doing and the asset class that sells on contract and these are prime targets better for them to sell to you for a little more money than get hammered by the local wholesalers who will just be out for blood.. with no care in the world how much these folks lose.. that's what wholesalers do.. its their job..  

[Hector Vazquez]

good point. Thank you so much. 

[Michael Roman]

Originally posted by @Hector Vazquez:

Michael, I usually put 10 to 20% down, seller usually pays closing costs (they are less expensive given it’s only a contract execution, the deed passes at fulfillment of contract).  Rates are anywhere from 6 to 10%. It all depends how motivated the selllr is. The beauty of it is that you can negotiate anything both parties agree are generally c class neighborhoods, and the seller is wanted to get rid of their portfolios and are looking for steady cash. The term in year vary from 4 to 30 yrs, and the amortization is usually 20 to 30 years.

However this plan only works if you scale up fast because you need to create enough surplus in cash to pay contracts soon. So everything in surplus goes to additional principal payments in the contracts. Also I negotiate longer terms for the nw houses I purchase. So I have them in a ladder like rotation, the first 5 yrs I only have two balloon payments, but I have forecasted that I can afford 3 at year 7 and etc... as you pay off, your surplus grows and you get a snowball effect. Of course you have to manage it closely. 

Thank you for the clarification.  Seems like you have a great model that works for you and if implemented properly could work for a new investor.  I appreciate your time.

[Ali Hashemi]

very interesting strategy. It seems like it would be a race against the balloon payments. I’m curious what the price range of houses you’re buying...$50k, $100k, $200k? 

I haven’t read any in depth articles on this approach in BP (but I’m only a casual reader). I’d definitely be interested in a more detailed ‘road-map’ of rapidly scaling buying on seller finances contracts. 

Very cool, thx for sharing