Originally posted by @Ezra Nugroho Nugroho:
@Kevin D. It's technically similar, except that typically you'd buy a seasoned note on a personally owned property. Let say someone buys a house with a seller financing with 20% down, at 7% loan 15 years amortization rate. That 80% seller's loan will be recorded as a lien on the property. Later on, say 10 years later the seller needs a lump-sum of cash, the seller can sell that note to some one else, let say you. So now the buyer will be paying the remaining monthly payment to you. Typically the seller will take less than the note's value to get the lump-sum. That way your yield is actually much higher than the original 7%.
If the buyer fails to pay; you, being the lien holder, can actually foreclose the property on the buyer. Although messy, you may end up getting a property for quite cheap. Still takes a bit of research to find good notes. Did you say you don't want any work at all?? :)
Actually, if Note's too hard, RIETs is too boring, but you absolutely have no time, maybe buying turnkey properties is the way to go.
If turnkey produces too little, then you gotta talk to Yoda :)
@Ezra Nugroho Notes sound fascinating.... except for the foreclosure part. I heard it could take up to 2 years or 10k cash for keys... but it's something to keep in mind if I feel adventurous. I agree that "Yoda" has been very helpful in my learning, as well as others who I spoke to in the previous meeting. Learning the pitfalls of investing was extremely valuable.
I did hard research on everything under the sun, especially turn keys. The funny thing is, I think I pissed off some turn key operators with the questions I asked. I'm sure it may work for some, but it wasn't for me. Purchasing C/D level rehabs where they put in 20k rehab and then turn around to sell it for 60k over their purchase price is great if the tenants are quality and the cash flow is true. I read some of these listings with "A- level neighborhood" that a quick Google search will tell me it's not even close. I actually had tickets purchased to fly to Atlanta next month, until I interviewed some of the property managers there. They charge one months' rent to find a tenant and then 10% per month so they can "manage" your property." And if I want to fire them, I have to pay them their 10% anyway until the end of the contract. Let's just say out of state makes sense if I live there or have a friend who can manage properties for me. Otherwise, I'm purchasing properties to line the pockets of others.
@Account Closed Your advice has been sage and I have decided that out of state investing is not for me. I agree that there is no such thing as passive out of state investing. Having crunched my numbers, property manager fees will absolutely destroy cash flow if I try to purchase properties in the "B" or "A" neighborhoods. The "C" and "D" properties come with its own set of problems.
I actually got qualified for properties in Atlanta. The rent covered PITI, but once I calculated in reserves and vacancy, plus property management fees, I would be breaking even or in the red. Plus, the fact that properties really do not appreciate and actually lose value due to inflation (and the fact that I do not know the neighborhoods), I nixed the idea. I think it's awesome that many here got it to work for them. It just wasn't for me once I put in the raw numbers.
I do have to thank you for turning me on to commercial properties and syndications though. I can evaluate it just like I evaluate stocks. I think I may have found my niche! =)
