All Forum Posts by: David Dey

 Matt

I've got to agree with @curt smith on this one.   Unless incredible terms have been worked out or an absolutely amazing price, I would want to do my own negotiations.  

Good job, with getting the due diligence done though. That is worth quite a bit.  Get as much info as you can about the infrastructure of the place. (water, sewer, garbage, p&l, rent roll, what reports do they run?  Any violations with the city/county/EPA/etc., why are they selling, Do they self manage or have management in place, do they have a mtg/dot, would they consider taking any of their purchase price in payments, how many lots, family park or 55 and up, are these individual owners or park owned, what's the ratio of home owner to investor in the park, etc)

The more details you can get, the more info you can provide, surveys, water tests, all the reports you can get your hands on, then turn them over to your buyer, you will be worth your weight in gold.

Feel free to PM me with any questions and details, as I may be interested.

 Send me an example in pm and I'll see if I can figure you a free work around.

 The cool thing about buying a multi family property, whether a duplex or bigger, you are dealing with an investor.  This means that there is room to negotiate and they are already predisposed to negotiating and deal making.  

The first and most beneficial source of OPM is your seller.  See if they would be willing to accept any of their purchase price in payments.  (Sounds less aggressive than owner financing)  

This way you can get much better terms than private money and much less headache than a bank.  (Hint, if they don't bring up interest rates.. Neither do I.  How does a 0%interest rate sound to you?)

You can always use a blended interest rate scenario getting a first mtg of 20% to 70% from a private lender, and have the seller carry back the balance in a second.  I have been able to work many "no money down" deals with this scenario and the blended interest rate helps cover the higher cost of the private money.  (Ex:  100k purchase price, 50k first to private lender at 10%, 50k second to seller at 0% = no money down and a 5% blended interest rate)

Hope this helps

there is a very unique phenomenon that is occurring as a result of the mtg meltdown in 08.  

Of course, we are all familiar with the fact that there was a little fraud going on during 03-07.  When banks realized that they could package their loans and sell them to Wall Street, it became less about making good loans because you were going to have to service them, and more about volume.  You know something is wrong when a guy working at McDonald's can buy a 500k home!!

Well as a result, there are thousand of homes across the country where the banks have determined that they have too much liability to actually take possession of the house.  

You see, the homeowner only has the right to sue the bank if they actually experience loss.  So whether it be bad paperwork, bad assignments, or outright fraud, in these situations banks determine not to take the property and leave it in a state of limbo.  

There are two times in a file in default when a bank, or rather their lawyers, will look at a package and determine their next steps.  Once at the beginning of a foreclosure, this is where they review the situation, make sure they are in good standing, and know who all they need to serve.  Once at the end of the foreclosure, again to make sure they got everything right and named everyone.  

If they find something at the beginning they may not even start a foreclosure, however, if they find it at the end.  You will see something very unique.  It could be right up to the sale date, but you will see them actually  cancel the sale date, reverse the judgement, cancel the foreclosure and just walk away from the property and stop paying the taxes.  Leaving it as what we call a zombie property.

Now they don't remove the mtg 90% of the time, (yes they will release the mtg about 10% of the time and boy is that a bonus). They just stop paying the taxes and walk away. 

The reason they leave the mtg on is twofold.

1) if the owner is still in the house, well then it's just a waiting game.  Sooner or later they may want to sell the property and do a Shortsale.  If that happens, then it's no harm, no foul.  

2)  if the owner walks away, as many do when they receive a foreclosure notice, and the bank stops paying the taxes, then the property will eventually go up for taxes.  

We go after number 2) and if we can make a deal, we just stop the property going for taxes and use the property for taxes.

In Florida, we pay no more then the equivalent of 1 years rents on these properties, so as an example, if we get $850 per month, the most we will pay for the property is 10,200.  And we have had many cashflow for years now.  

Just ask yourself a question,  if you have 60k, which would you rather do, buy 1 house that rents for 850, or do what I do sand buy 6 houses, each renting for 850 per month.

 Andy

Did you ever give it a shot and how did it work for you?

 You are very vulnerable as someone new at this. That is why I suggest that you partner with an investor in your area.  PM me if you want and I will give you some pointers on how to do that.

 Keith

Your scenario puts you in with significant "skin in the game."  Your sweat equity in sourcing the deal and building the houses AT COST are more than enough reason to partner with you.  You are waiting to get paid when the deal is finished just like your partner.

You most definitely deserve your equal split in the profit.

The original scenario, does not.  They will be building a profit into their first bid "unless specifically agreed to otherwise," and then additionally collecting 50% of the profit.  This is double dipping in my book.

 That's what I was hoping it would be, and fun too.  

I'm actually writing out the next one... So stay tuned!!

 Man!!!  That was the best idea yet!!!  You da Mac daddy Poobah!!  I see a reality TV show, maybe a run for president, and most definitely a comb over in your future!!! 

Keep at it!!

 Alec

I fully agree with you, that part of learning is asking questions and getting ideas, and this is a safe place to do that.  My only concern was that you may have been throwing the cart before the horse.  In offering the money out, hoping that some Good Samaritan investor will take your money and magically quintuple it, asking for trouble.  Again, nobody takes better care of your money than you.

Take it from someone who lost a lot more than 60k to a hustler, and that was as a seasoned investor. I hope you learn from my mistakes as much as from my sucesses. 

Your MBA is a great STARTING POINT for the evaluation of the financials, but there are so many more aspects to a deal than just the financials.  Keep in mind, our industry's business is (or should be) "professional problem solving," every deal is unique.

You need to be ready with contingencies for when the unexpected happens.  

My recommendation, is that you don't get involved with a partner on something that you couldn't take over without your partner if need be.

Also, don't back a project that you wouldn't buy yourself for the backing amount. 

(Ex: a house that is worth 100k ARV bought for 50k with 10k needed to bring it to the 100k value. In this situation, the 10k to bring up the value needs to remain in escrow for either your partner to finish the work or you to finish the work)

And most importantly, stay involved!!  Trust but verify!! Don't just take their word, be a part of the process.  This benefits you two ways, one: it keeps you from getting screwed.  2:  it furthers your education and experience level.

On a purely hypothetical question of "what would you do with 60k?"  That's a great question and a great excerise for all of us.  (I would and am investing in zombies houses)

P.S.  I hope I hadn't insulted you when I said what I said in the first post.