All Forum Posts by: Russell Strom

Athena and Samson, any updates? I am starting my application with them now too and would like to hear any tips or things to watch out for. I still cannot find any negative reviews or complaints about them and it's been a couple of years. Thanks for your help!

Hi everyone, I never tried the residential backflipping program. I ended up getting a mentor through my local REI and I have been working with him on flipping short sales. Still interested in the residential backflips, but haven't found anyone with experience in it to talk about their experience.

Jon, thanks for replying even though I went off topic. I am going through some of the threads about how people got started and will continue to read them to learn. I definitely understand that the money won't come fast or easy. I've looked into wholesaling, but seems just like you said, very hard and not a lot of money for each deal. I do need cash coming in and am actively looking for a job. Hopefully, I will find one soon and then with the income, I will be able to save up for a down payment on an investment and it will be easier to get a loan. It sounds like this technique is almost impossible. Joel, I should have asked how many failed deals they had before this worked. I'm sure it is a ton! And they are just using their students as bird dogs and taking 90% of the profits. It is a great deal for them. Maybe I should just make up a course and sell it. Just kidding! David, it does have some far-fetched assumptions and it sounds like it will be almost impossible. I need to focus on learning more about how people got started because even if this technique does work, it does not sound like it's for beginners. Thanks again everyone for replying!

The value their giving you is teaching you how to do it and funding the deal. If this works, and I am skeptical too, it would end up costing you most of your profits as well. That's why I'm trying to figure out if it could work on my own.

To pay for the note I would use a hard money loan or transactional funding. I would try to do a simultaneous closing (close on the note and the refi) or close to it, so that I would only need a short term loan.

As to why the bank would sell the note, I have been trying to research if it is possible and have been finding some people that do say it is, but I don't know how steep a discount they are getting the notes for. I know these courses are designed to sound way better than they are and have bogus money back offers where it is impossible to meet the criteria to get your money back, which is why I won't buy the course. I'm sure that some of their students do a deal or two, but most probably never do. I won't give up trying to see if we can make this work, but I will be very careful and skeptical.

How did you get started investing in real estate? My wife and I have bought and sold 4 REOs (actually we live in one of them so we only sold 3), but they have not made us very much money. We live in San Diego and the RE investment is very competitive and we both lost our jobs so we don't have much to work with. What do you recommend for us to start with? Wholesaling? I hear that a lot of sellers or banks will not take contracts that are assignable. Have you ever used a land trust to get by that? Thanks for your help!

Shawn, good point, I should have thought of that!
Jason, they said that banks are willing to take a discount on a performing mortgage for a few reasons. They mentioned that underwater mortgages are much more likely to default so the banks would rather not have them. Second, they said that the owner of the loan at this time was probably not the originator of the loan. It may have been sold 2-3 times to different banks, etc. each time at a discount of at least 20%. So the discount you would get from them may not actually be a big loss for them. Third, they mentioned federal legislation that requires banks to have cash on hand of 7-10 times the amount of bad loans they hold or risk being shut down. With so many defaulted loans out there, the banks need to hold a lot more cash and they are willing to sell riskier underwater mortgages at a discount to get cash. These all seem true, but I am no expert, that is just what the gurus said. What do you think?

Beyond the price, they also said that you could only keep $10k of the profit from each deal (they would keep the rest). Another reason I don't want to buy their program. To avoid the slicing and dicing they said to go after jumbo loans because they are much less likely to be securitized. What is another name for this technique so I can look at past conversations about it and see what people have done?

Thanks!

Hi everyone,

I listened to a webinar the other day that had an interesting idea. They called it residential backflipping. I'll try to lay out the basics from that webinar here (this is what Peter Conti and Jerry Norton were saying):

Characteristics of house/loan that are good candidates for a back flip:
-It must be a high end home with a loan of $417,000 or greater (these jumbo loans are less likely to have been packaged and sold in a security, which makes them much easier to deal with and profits are larger).
-Owners must owe more than the house is worth.
-Owners want to keep the property.
-Owners don't want to hurt their credit (short sale, foreclosure, etc. are other options for them but will destroy their credit).
-Owners must be current on the loan's payments.

4 Steps to completing a back flip:
1. Establish the current value of the house-make sure loan is greater than value.
2. Determine the Price to Buy the Note- Take 80% of the current value of the home (the owners will be able to refinance at 80% LTV to pay you off once you buy the note). Subtract the amount of your profit (10-15% of the current value). This will give you the highest price at which you can buy the note.
3. Exit Plan, Owner Approved-Get the owner pre-approved for the refi at 80% LTV.
4. Buy note, close on refi-They said you could do this in 7 to 10 days, but i'm not sure why you couldn't set up a simultaneous closing.

Here is an example they gave (they said it was from a real deal):
$1.2 million loan
Value of $1.05 million
$800k refinance amount
$700k Note buy price
$100k profit

I am interested in doing deals like this because their are a lot of high end homes that are underwater in my area (San Diego). Here are my questions:
Has anyone ever done anything like this?
Are simultaneous closings on this type of deal possible? This would limit your risk of the buyer walking after you have bought the note. Are there other ways you can think of to limit this risk?
I think the best way to find owners that are underwater is advertising (craigslist, bandit signs, etc.), does anyone have other ideas?
Can anyone recommend any hard money lenders or transactional funding lenders that might be willing to do this type of deal?

I do not want to pay for the program ($1000), I really want to learn how to do this on my own, so I really appreciate any help or advice anyone can give. The program will give you access to lenders and tell you how to do it all, but they will only give you $10k per deal out of the profits, so I'd rather get the whole profit. Thanks for your help and ideas!