All Forum Posts by: Christopher Robert Noland

 Find a lender first.

I use Crexi way more than loopnet to find deals.

This is market dependent, but, most class B properties are not going to offer cashflow unless purchased outright.

 Legally you were never expected or bound to offering the commission.

Now you can simply only pay the selling agent, and the buyers agent has to inform the buyer that they might have to pay - in an ideal world....

The risk of not offering to pay the buyer side is the buyer can tell their buyers agent to skip houses where they would have to put out for the commission, it may result in less offers on your home.

It is now ultimately up to the seller, but in a for sale by owner.... you are not signing any listing agreement with a listing agent so, again the buyer's agent would need to pay the agent.

If you are an agent selling your own home off-market FSBO, check your state laws on disclosure etc.

 I have a course that teaches exactly what you are looking for, message me if you need help with your strategy for finding these properties off-market and creative financing.

If you need help finding off-market properties, and learning to analyze the cost of repairs I might have a resource you might find useful.

Quote from @Erin Attwood:

Hey, my name is Erin. 
I'm 37 years old and brand new to real estate investing.

My goal is cash-flow from a multi-family via house hacking for my first property.
My goal is to do my first deal on a 4-plez by March 6th, 2025.

I live in Tampa, FL which seems to be a good market to start for my goals.

Thank you for having me here!!

 Let me know if you need help in how to find properties off-market in that area.  Prices in Florida are pretty high now, so, you might have to do some digging if you want good cashflow, depending on your strategy.

Your deal structure involves a hybrid approach of a land contract, "subject-to" financing, and flipping. Here’s a breakdown of how it works, and some key insights:

1. Overview of Your Plan

• Sellers Falling Behind: You plan to give them $10,000 to move out and catch up on bills.
• Existing Mortgage: You would take over their mortgage ($125,000 at 3.25%).
• Repairs: You’ll invest $20,000 or less in repairs.
• Exit Strategy: Sell on MLS for $220,000 after repairs, then pay off the existing mortgage and take the profit.

2. Land Contract vs. Subject-To Financing

Let’s compare the options and assess your current structure:

• How It Works: In a land contract, you (the buyer) take equitable title to the property, make payments toward the mortgage, and eventually take full ownership after all payments are made. The seller retains legal title until the contract is fulfilled.
• Advantages:
  • Lower Upfront Costs: You can avoid closing costs typically associated with formal closings.
  • Control: You can take control of the property to make repairs and sell it while leaving the original financing in place.
  • More Flexibility: Compared to a novation, a land contract offers you more control over the property since you hold equitable interest.
• Risks:
  • Seller’s Cooperation: The seller retains legal title, which can complicate things if they change their mind or their financial situation worsens.
  • Resale Issues: FHA buyers may require the deed to be in your name for 90 days before they can purchase, which could slow down your resale plans.

• How It Works: In a subject-to deal, you take title to the property while the seller’s existing mortgage stays in place. You make the mortgage payments on their behalf.
• Advantages:
  • Full Ownership: You gain full legal title to the property while keeping the favorable 3.25% interest rate.
  • Control: You have more control over the sale because you hold the deed.
  • Simpler Resale: Since you hold title, you avoid the complications of a land contract when reselling, especially to FHA buyers.
• Risks:
  • Due-on-Sale Clause: The lender could potentially enforce the due-on-sale clause if they find out you’ve taken title, though this is relatively rare in practice as long as payments are made.
  • Higher Closing Costs: You would need to close formally and cover title, closing, and potentially transfer costs.

3. Insight on Your Proposed Plan

• Title Search: Conducting a title search is a good idea regardless of the structure to ensure there are no outstanding liens, claims, or legal issues that could complicate your plans.
• Memorandum: Filing a memorandum or recording the contract with the county provides some protection by clouding the title and ensuring your equitable interest is recognized. This is a key step if you move forward with a land contract.

• Avoiding a Formal Closing: Skipping a formal closing saves on costs but increases the risk. Without a formal transfer of title, you’re more vulnerable if something goes wrong with the seller (e.g., bankruptcy, further liens, or disputes). If you’re confident in the seller’s cooperation and financial standing, it may be worth the risk, but it’s important to assess this carefully.
• Balloon Payment Option: If you go the subject-to route, you can include a balloon payment structure to mitigate the lender’s risk or the seller’s concerns, while giving you time to repair and resell the property.

4. Resale Considerations

• FHA Buyer Requirements: You're correct that FHA buyers typically cannot purchase a home that was sold less than 90 days ago. This could impact your resale if you plan to flip the property quickly. If you anticipate an FHA buyer, subject-to financing might be the better route since you would hold title for the required period.
• Non-FHA Buyers: If you target conventional buyers or cash buyers, the 90-day rule won’t be an issue, which could give you more flexibility in choosing the structure.

5. Recommendation

Given your goal of minimizing upfront costs while keeping control, here’s how you might proceed:

1. Conduct a Thorough Title Search: Before committing, make sure there are no surprises in the title. This will give you a clear picture of any liens or claims that could affect your plan.
2. Consider Subject-To Financing: This gives you more control over the property, simplifies resale (especially if an FHA buyer is involved), and eliminates risks associated with the seller retaining legal title.
3. Weigh the Risks of a Land Contract: If you’re looking to avoid closing costs, a land contract could work, but ensure that the seller is financially stable and cooperative. Also, make sure to file the necessary documents to protect your interest.
4. FHA Buyer Strategy: If you think you'll be reselling to an FHA buyer, go the subject-to route and hold the property for at least 90 days. Alternatively, target non-FHA buyers to avoid this issue altogether.
5. Consult a Real Estate Attorney: Ensure your contract language is solid, especially with regard to title protection, seller obligations, and your rights in the event of default or dispute.

By balancing your need for control with the costs of formal closing, you can structure a deal that works for both you and the seller while protecting your investment.

4o

When it comes to tenant screening, it's important to balance your right as a landlord to protect your property with compliance with Fair Housing laws and local regulations. Here's how to approach this situation:

1. Denying Based on Court Records

Yes, you can generally deny an applicant based on publicly available court records, such as evictions, judgments, or warrants in debt, as long as the information is accurate and you apply this standard consistently to all applicants. If you find that the court records contradict the background check (e.g., an eviction that isn’t reflected), you can use that information as part of your screening process. However, ensure that your decision does not violate any anti-discrimination laws or local ordinances.

Make sure that:

• The records are accurate and pertain to the applicant.
• You have established written criteria for tenant screening, which should include reasons for denial such as prior evictions, judgments, or debt-related issues. Applying the same criteria consistently helps protect you legally.

2. How to Deny the Applicant Tactfully

For the applicant whose family member was recently served with an eviction notice, it's wise to be cautious about how you communicate the denial. You don't want to disclose that you've conducted an extensive personal investigation into her situation, especially if you’ve gathered information not directly from the application process. Instead, focus on the criteria you’ve set for tenant approval.

Here’s a professional and neutral way to phrase your denial:

• Keep it General: "After reviewing your application, we have decided to move forward with other applicants who more closely meet our rental criteria."
• Be Polite and Final: "Thank you for your interest in the property. We wish you the best of luck in your search for housing."

This approach avoids any specific mention of what you found and keeps the denial grounded in general terms, which helps minimize the chance of confrontation or claims of discrimination.

3. Legal Considerations

• Fair Housing Laws: Ensure your reasons for denial comply with the Fair Housing Act, which prohibits discrimination based on race, color, religion, sex, disability, familial status, or national origin. Local laws may also include protections based on other factors such as source of income or eviction history.
• Disclosure Requirements: If you are using third-party screening services like SmartMove or another credit reporting agency, you must provide the applicant with an "adverse action" notice if you deny them based on the results. In this case, since you're denying based on your own research (court records), this may not apply, but it’s good to stay familiar with these rules.

4. Final Thoughts

While you have the right to deny applicants based on relevant court records, always do so in a consistent and fair manner. By setting clear screening criteria and using neutral language when communicating with applicants, you reduce the risk of legal issues and maintain professionalism.

Seller financing can be a great way to sell a property while offering flexible terms and potentially earning a higher return than traditional investments. Here's a guide to some common terms, rates, and factors you might consider when structuring seller financing for your rental house in Memphis:

1. Down Payment

• Typical Down Payment: 10% is a common down payment for seller financing, though you can set this anywhere between 5% and 20%, depending on the buyer's creditworthiness and how much risk you want to take on.
  • Advantages of a Higher Down Payment: The more a buyer puts down, the more equity they have in the property, which can reduce your risk of default. A higher down payment also demonstrates the buyer’s commitment.
  • Flexibility: You can adjust the down payment based on the buyer's credit history, employment stability, and ability to pay.

2. Interest Rates

• Current Seller Financing Rates: Seller financing rates tend to be higher than conventional mortgage rates due to the increased risk for the seller. Currently, typical interest rates for seller financing are 7% to 10%.
  • 8% Interest: Offering an interest rate of 8% is a good starting point. If the buyer has good credit, you might go lower, while buyers with poor credit might justify a rate closer to 9% or 10%.
  • Market-Based Adjustments: Keep in mind the current prevailing mortgage rates (which are currently around 6-7% for traditional financing) and adjust accordingly to stay competitive while still reflecting the added flexibility of seller financing.

3. Loan Term and Amortization

• Common Term Lengths: Loan terms for seller financing vary but often range from 15 to 30 years to keep payments affordable for the buyer.
  • Balloon Payment: Many seller-financed deals include a balloon payment due in 5 to 10 years, at which point the buyer would need to refinance or pay off the remaining balance. This allows you to cash out earlier if needed.
  • Example: You could offer a 30-year amortization schedule with a balloon payment due after 5 or 7 years. This makes the monthly payment more manageable while still giving you the option to exit the deal earlier.

4. Monthly Payment Amount

• Rent Comparison: If the property would rent for $1,500 per month, you may want to structure the financing so that the monthly payment is similar to or slightly below this amount.
  • Example: A $180,000 loan (after 10% down) at 8% interest on a 30-year amortization would result in a monthly principal and interest payment of about $1,320, which is close to the rental value and should be appealing to buyers.

5. Qualifying the Buyer

• Creditworthiness: Just like a bank, you should assess the buyer's creditworthiness. You don’t have to be as strict as a traditional lender, but it’s wise to check their credit score, employment history, and income stability.
  • Flexible Terms for Stronger Buyers: If a buyer has a strong credit history and steady income, you could offer better terms (lower interest, smaller down payment, longer balloon).
  • Tighter Terms for Riskier Buyers: For buyers with weaker credit, you might require a higher down payment, a higher interest rate, and/or a shorter balloon period.

6. Using a Loan Servicer

• Loan Servicer Benefits: Using a loan servicing company is a smart move, especially for first-time seller financing. They handle:
  • Monthly Payment Processing
  • Escrow for Taxes and Insurance: They ensure property taxes and insurance are paid, which is essential to protect your interest in the property.
  • Record Keeping: They also maintain records, which can be invaluable if any issues arise during the term of the loan.

Conclusion

Given the details of your property and the $200,000 sales price, a possible scenario could look like this:

• Down Payment: 10% ($20,000)
• Loan Amount: $180,000
• Interest Rate: 8%
• Amortization: 30 years
• Monthly Payment: Approximately $1,320 (principal and interest)
• Balloon Payment: Due in 5 or 7 years (this allows for refinancing or payoff while giving you some flexibility).

These terms are flexible and can be adjusted based on the buyer’s credit, down payment size, and negotiation. Also, having a loan servicer handle the logistics will make it easier to manage the transaction while ensuring that taxes and insurance are handled correctly.

Always consult with a real estate attorney to ensure that your seller financing agreement complies with state and federal laws.

Invent it using AI technology if you can't find one.  It will probably make more money than rentals if it is unique enough.