All Forum Posts by: Albert Velasquez

 I appreciate your insight @Nathan Gesner 

1. This might be the wrong way of looking at this, but the reason why I would be willing to do 12% interest for 5 years is because when I compare all my options right now it's the cheapest route long term. Over the life of the loan I will only be paying like 50K in interest. Every other loan forces me into a 30 year fixed rate with a total interest payment of 150K+. I could be looking at things wrong though. 

2. That's a solid idea that I could run by the seller. He mentioned he didn't want to hold the note long-term, but if I tell him about the balloon payment at the end of the fifth year he might agree to that. 

3. That scenario could happen, but I feel like since we're getting the property at such a low value already it gives us enough breathing room. Also, since it's a primary residence we're able to pull out 90-95% of the appraised value, that also gives us breathing room. I know the neighborhood really well because I've lived in it for the last 18 years. The neighborhood has high demand, but only like 2 houses go on the market every year. This gives me confidence that values won't drop that much. Also, my ARV was conservative to begin with.

4. I don't have much experience with flips, but my Dad knows construction. If we assume the absolute worst: 25% increase in rehab costs, and 25% decrease in ARV, that would give us a cost of 340K. We can either wait for the market to pick up, or pull out 275K. We'd be leaving 65K in the deal, but it's our primary residence, so I don't think my parents would mind that much. I feel like this scenario is very unlikely in my market though, but I'm still new so I could be naively optimistic.

Thank you for your insight, I'll definitely think about restructuring the terms of the loan.

Hi BP FAM, *LONG POST INCOMING*

My family and I have the opportunity to buy a primary residence using seller finance. Here is a link to the three different loan terms I came up with. Let me give some context:

Single-Family-Detached 

Purchase Price: $225,000 

Down Payment: 60k-90k 

ARV: $400,000

Rehab Costs: $87,500 +/- $12,500

My family is not able to qualify for conventional financing which is why we're going this route. I won't go into the details on why, but for the next couple of years we will be unable to get financing the conventional way. However, our finances are in top shape, and we can afford a PITI payment of $5,000 a month. We won't have the chance to invest for the next couple of years anyways, so we don't see a problem with throwing all our money at this deal. We still have a solid emergency fund, so this isn't as risky for us as it might look.

My family's ultimate goal is to do a flip-grade renovation of the home, then do a cash-out refi to pull 90-95% of our equity to use for other investments in the future. My parents and I are going to be meeting with the owner in the next couple of weeks to discuss these terms I came up with. The motivation of the owner is simply to make money. They have no emotional ties to the property. They're firm on the purchase price of 225k. The owner mentioned a 12% interest rate, and that he wanted a down payment of 60k. The owner did also tell us that he did not want to hold the note for a long time which is why we have it amortized over 5 years. My plan was to first present the owner with Loan C in red, and if it's not accepted we can either go with Loan B or Loan A, with Loan A being his initial offer. If we compare Loan C (my initial offer) to Loan A (his initial offer), I increased the down payment from 60k to 90k, and in turn decreased the interest rate by 2 points from 12% to 10%. 

I guess my question for y'all is, what do you guys think of this? Are the terms for Loan C (my offer) fair? My thoughts are that with a 60% LTV the loan is less risky, and gives him more cash up front? Another question is if there is any way I could help the seller lower their tax bill? For example, if I gave the down payment over 5 years instead of a lump sum all at the beginning, would that change the seller's tax bill?

If there are any tips you guys can give me , I'd really appreciate it. Also, if you have any questions about my situation, let me know. 

Thanks BP!

Hi BP, 

I want to master rehabbing because my ultimate goal is to do BRRRR. I was thinking about beginning with my primary residence. It was built in 2003, and everything is original. It's got like a 90s style to it, and it mostly just needs cosmetics renovations to give it that modern aesthetic. Does anyone have any tips on talking to contractors? I don't think I'm going to be rehabbing until the end of 2022 and would like to get some initial bids over the summer.

If you guys have any contractor contacts, please leave them below. 

Thank you! 

Hi Alan, how are you learning about Subject To. It is something I would also like to learn about. 

Hi BP

I have some cash and I would like to partner with an experienced investor. Do you guys have tips on how to properly vet a potential partner? 

Hi @Arman Bagdasaryan, it's great you're already learning so young. I wish I would've known about the power of real estate at that age. You mentioned some of the things I was going to recommend, but I'll leave them here anyway. 

1. LEARN! Learn as much as you can. Learn about the different parts of the real estate transaction, and how you as the investor can make each part smoother. For example, figure out what would make your lender LOVE to loan you money. 

2. Make sure you find a job, and try your best to stay there for the next 2 years. Don't go around switching jobs every couple of months, it makes it harder for you to get a loan. It would be even better if you could get a job that is related to the real estate industry. Maybe get your real estate license and intern for an established REALTOR. 

3.  Focus on networking at this age. Look for other like-minded young people and stick with them, so you guys can motivate each other. Also, network with established people in the Real Estate industry. If you find someone you really connect with, then they can possibly become your mentor. 

4. Last but not least, find out your "why" cuz you're gonna need it. 

biggerpockets.com/calc 

This link should give you access to all of the biggerpockets analyzing tools. Message me if you have any questions :)  

 I am a fan of the Aurora area. Have some family over there and know a few handymen.