All Forum Posts by: Chris Shipman

@Dawn Anastasi Thank you for the advice. Especially #2 I will definitely take that into consideration when crunching my numbers. If your numbers were set up as though you were expecting 3 months of vacancy out of the 12 months, would that gives you enough wiggle room?

When speaking about doing seller finance deals, I was thinking of ways to try and get the most out of the deal.

My first question is what are typical interest rates one would be paying out to the seller in such transaction? It seems like it would be higher than a typical bank interest rate. Since, from a sellers mind if they (the buyer) were able to just go to a bank and get a loan they would but since they can't, now I (the seller) have the upper hand in the deal.

Second, if I am the buyer in a seller finance loan, am I able to then turn around and rent that property through a property management group? Seems like there would be a lot of money exchanges time rent is due. Tenant >> Property Management >> Me (Owner) >> Seller.

Third, since this whole transaction isn't through a typical bank, is it possible the original seller can come back and want the house back and possibly tie you up in court proceedings about who "owns" the home?

Lastly, if you do a seller finance home is it possible to then refinance the home with a bank 3+ years down the road? My thought behind this is if you don't have to give a down payment with the seller and you were able to keep a tenant in their for the entire time leading up to the refi you would essentially of paid nothing during this time and gotten it for "free". I understand there would be some costs, paper work for the transaction with the seller, some maintenance, etc but beyond that you would not have had to put any money down on the home. Is this correct as well or am i missing something obvious?

Forgot one. If you do a seller finance home is it possible to then refinance the home with a bank 3+ years down the road? My thought behind this is if you don't have to give a down payment with the seller and you were able to keep a tenant in their for the entire time leading up to the refi you would essentially of paid nothing during this time and gotten it for "free". I understand there would be some costs, paper work for the transaction with the seller, some maintenance, etc but beyond that you would not have had to put any money down on the home. Is this correct as well or am i missing something obvious?

In my on going quest to learn about this new world of REI, I have been trying to flex my muscles in the brain to understand the ways in which everyone else is successful.

When speaking about doing seller finance deals, I was thinking of ways to try and get the most out of the deal. 

My first question is what are typical interest rates one would be paying out to the seller in such transaction? It seems like it would be higher than a typical bank interest rate. Since, from a sellers mind if they (the buyer) were able to just go to a bank and get a loan they would but since they can't, now I (the seller) have the upper hand in the deal.

Second, if I am the buyer in a seller finance loan, am I able to then turn around and rent that property through a property management group? Seems like there would be a lot of money exchanges time rent is due. Tenant >> Property Management >> Me (Owner) >> Seller.  

Third, since this whole transaction isn't through a typical bank, is it possible the original seller can come back and want the house back and possibly tie you up in court proceedings about who "owns" the home? 

Any feed back would be great. Thanks for the help all.

@Wayne Brooks Thanks for the info. I agree and do not think those numbers are completely realistic. I was more of just using those numbers for simplicity of the math. One of the questions I thought about after posting was is it as easy to just refi a house right after buying it and making repairs, <1 year after getting my name on the house can I turn around and pull gained equity out. All of the numbers could be raised/lowered/readjusted and the call on whether to move forward on the house can be done but not sure if pulling out the equity is as easy just going to a bank and showing them an appraisal with a number and say give me the equity.

@CK Hwang Thanks for the info. I agree and do not think those numbers are completely realistic. I was more of just using those numbers for simplicity of the math. One of the questions I thought about after posting was is it as easy to just refi a house right after buying it and making repairs, <1 year after getting my name on the house can I turn around and pull gained equity out. All of the numbers could be raised/lowered/readjusted and the call on whether to move forward on the house can be done but not sure if pulling out the equity is as easy just going to a bank and showing them an appraisal with a number and say give me the equity.

I have just joined BP and I am trying to get all my ideas out there and let people who have more experience than me (which is none, so shouldn't be hard) tell me why it is a terrible idea before I make the mistake...

I would like to get into buy and hold properties but it seems like raising capital to expand will become a major issue very quickly.

I have read a few success stories and heard some pod casts that use the idea of using investor's capital to buy a house for cash. Then fixing up the home (still with investor's capital) and once done refinancing the home, paying off the investor and then moving forward with either selling the house outright or putting it up for rent.

I imagine my plan going as so:

1. Find a foreclosed home/something undervalued and using investor's capital to buy. (Lets say $80k which should/could be worth up to $200k)

2. Using the investor's capital and fixing up the home. (Spending $20k on rehab)

3. Once the home is done refinancing at the $200k value (Lets say an 70% loan to value, pulling out the $140k)

4. Pay off the investors $100k + 20% ($120k)

5. Left with an income property in which you are ~$140k into but a value of $200k (plus the $20k from the refinancing)

6. Either renting it out or selling.

What are some of the glaring issues with this "plan?"

I have just joined BP and I am trying to get all my ideas out there and let people who have more experience than me (which is none, so shouldn't be hard) tell me why it is a terrible idea before I make the mistake... 

I would like to get into buy and hold properties but it seems like raising capital to expand will become a major issue very quickly. 

I have read a few success stories and heard some pod casts that use the idea of using investor's capital to buy a house for cash. Then fixing up the home (still with investor's capital) and once done refinancing the home, paying off the investor and then moving forward with either selling the house outright or putting it up for rent.

I imagine my plan going as so:

1. Find a foreclosed home/something undervalued and using investor's capital to buy. (Lets say $80k which should/could be worth up to $200k)

2. Using the investor's capital and fixing up the home. (Spending $20k on rehab)

3. Once the home is done refinancing at the $200k value (Lets say an 70% loan to value, pulling out the $140k)

4. Pay off the investors $100k + 20% ($120k) 

5. Left with an income property in which you are ~$140k into but a value of $200k (plus the $20k from the refinancing)

6. Either renting it out or selling. 

What are some of the glaring issues with this "plan?"

@Jeremy Zindel Is there a limit on doing this? Besides the fact the wife would kill me if I made us move into a new house every year and begin renting out the other, it seems like the bank/government would catch onto this and disallow it at some point.

Thanks @Account Closed for that idea. Is it typically that easy to get a refinance when you've held the property for <1year? Or is that what your saying when you said finding a lender that will do refi with no seasoning?