All Forum Posts by: Champak Shah

****  If you own a house and have $ 80K equity - you can give seller a second mortgage on your  house - so that you will have more equity in apartments -- after repair and rental of one vacant unit - Refinance and get more cash out - for other investment.

*****  I forgot to mention - Hard Money Lenders - will NOT do 80 % loan (purchase price ) - for first timer - and with one unit vacant that needs repairs. Unless NET   cash flow is good from 11 units -  rate will be higher and several points.

******   Seller finance - second is better and cheaper- No points and  low- market rate interest and longer term - say 5 to 10 years.

*****  co-signer brings his good credit score over 800 or 850 plus have good income - say $ 250,000 per year - which will allow for 100 % financing.  
 More over - if he likes 10 % or higher return and tax write off - he will be a silent partner for next 3 or 5 properties and you will be Millionaire (on paper ) in less than Five years ..  if you learn how to find properties and negotiate a good deals - every one wins. many older apartment owners want to retire with steady income - i.e. second mortgage payments.

   Once you ahve three or four - then next one you can buy on your won - with seller finance - without co-signer unless it is bug property.

Good discussion here ...

A   Most out of state commercial lenders will NOT do this deal. Too small loan amount. Also they prefer - something -out of pocket from buyer - 10 % minimum.  Some local - private lenders may do 100 % financing - but Owner second is better choice.

B You mistakenly assume $ 100K equity - cash out when you refinance. If it appraises at $ 500K and you get get 80 % Loan ( $ 400K ) -- you pay off $ 320K - so you get only $ 80K minus closing costs -  some times closing costs can be added to the loan.
yes - you will still have $100K equity but not cash in hand.

C   You need to get vacant unit rented out -- increase rent by 3 % or 5 % on all units and increase cash flow-   wait two or three years then refinance - value may be $ 550Kand get more cash out --- 

D   If cash flow is good - you can also get a Co Signor  or private Investors - like
doctor or lawyer from your area - as silent partner - and some abnks may do 100% cash out loan --  you have to give up some equity to partner ..also I suggest let the partner have all the  tax write off -- have a good CPA --

Welcome to real   world of making money in real estate..... 

A   First you need to invest some money in Books and read --Robert Allen's  Nothing Down,  also there are some online courses by Investors - Wholesalers -- 

Read more in this forum - for next four weeks - about Contracts , Valuation and Wholesaling 

One question  will NOT get you an answer.

B  Wholesaling is NOT that easy ... need to work hard to get leads and negotiate a good price.

C   Need to have a buyers List first - specially cash Buyer - who can close in less than 30 days - some  even close in ten days. They have all  set up with Title company - they will have cash money and tools to perform due diligence and valuation of property etc
His ( her ) attorney will work with bank to determine payoff - on mortgage and some times negotiate lower payoff.

D You need to know - understand how to determine after repair value of the house - ARV. Meaning you should know comps a- in the area -- then when you see owner.. you need to walk through the house and estimate condition and repairs required and estimate cost of repairs. Also you need to know - ask owner about the mortgage balance, delinquency, penalty etc and total payoff ,, -- then estimate the offering price - as 65 % ( preferred ) or 70 % of ARV.

E   As far as contract - goes - most investors - cash buyers - have NO contingency

they perform due diligence before hand and - writes ALL cash offers with Ten days -

subject to Clear Title.

In your case - you can do what is called an " Option to Buy  Contract" -- for as little as $ 100.    If you do NOT find  a buyer in time - all you loose is $ 100.  This is doen in many states . You need to talk to some investors and Pro - RE Agents in your states.

You need to have  a clause that says this contract is assignable  -- OR sometimes - 

you write as a  Buyer - You  /   partner --   OR say subject to " my partners approval".

If you do NOT find a buyer - you can say my partner did not like it- and get out of contract -

F  - How you get paid -- You need to use an  " Assignment Contract " ....   when you have a  serious buyer - you charge them $ 5000  fee and assign contract over to her
( him). Then he is responsible for paying the bank and  closing.

G -- Find out and join some REI - group in your area or nearby city.. and meet Investors and Mentors - who may help you- walk through - they need MORE deals.

I had owner take second mortgage also - for $ 10,000 ( 20 % value) and I took over existing mortgage.

I have personally purchased a house - BY owner ( FSBO ) -- without an agent ---

and rented out for 20 years - it was my first rental -bought in 1981. I was a First Time 
Investor with my full time job.

Talk to 5 to 10 RE Agents and some one will do the comps free or for nominal amount.

Also- talk to some appraisers - and get as is and after renovations - appraisal - for

$700 or $ 800.  

You can also get an inspection ( NOT Free) done and contractor give estimate for repairs for Free.

Must talk over with Tax Adisor who does Real estate - taxes.

Capital gaines is paid at fixed rate 

Depreciation Recapture is added as Ordinary Income -to your job salary 

and you pay tax based on your tax bracket -- 

Basis will NOT change - basis will be what it cost you to build - many years ago ..

IT depends - where you live - what county and city -
There are many other investors- even a large private investor - who buys Tax Liens -

from county --so individual investor have less chance most any state.

Leverage always gives better return .

However -- you said -you understand - how it works with a bank loan.

Just do the numbers - and take out bank loan and mortgage -

$ 1000 per month is good - in Atlanta most people use that - Rent = 1% of purchase price. -- you get $12,000 per year - assuming no other expnese - it is 12 % cash on cash return.

Now you have to deduct - property tax and insurance as well as any yrad work etc doen - then say you may NET $ 10500 --  NET -  so your return will be 10.5 % 

Currently banks are paying less than 1 % -- 

So what do you feel comfortable.  You need to decide how much return do you want. Ad waht is your long term goal - how many will you buy.

For a good house- in good area - less maitnenace and less headaches from tenants -

5 % to 8 % retun is good.

You can increase - your return by Leveraging --say you can get 50 % LTV loan or 65 % Also- it depends -if you have a good paying job - you can get Depreciation and interest write off --that increases yorur eturn..

I was getting 15 % average return with four rental homes - from 1981  to 1993

that included - tax write off - from my   salaried job  -a s engineer.

ZERO ...ZERO .. why do you need to have a Realtor and pay commission?

I have bought direct from owner  adn clsoed with an attorney -- NO commission paid.

A  Do a  good market analysis - get some comps from RE Agent - FREE
    or by Zillow.com - compare features and square feet .. and derive your price - then
    negotiate with owner - offe 15 %  less in first offer --then decide where to stop..

C   Have a bank - prequalify you for loan amount 

D    Ask bank or two RE agents for referal - name of closing attorneys. Talk to those attorneys --in person - face to face - and ask about total closing fees -then tell him to pay extra $ 300 for drawing up Purchase Contract.

E    You should also - read through this forum - different Contracts to understand terms -- also buy ready made contract from offcie depot.

Good Luck - save 3 % commission - to take trip with family --to Disney