All Forum Posts by: David Waldy

Hey Josh, I think your very first step should be to evaluate your goals as it pertains to your girlfriend. Not to get all up in your business, but, you should think very very seriously about buying a “forever” home with someone other than a spouse. I know that’s not specifically what you were asking, however it’s is the first thing that stood out when reading your conundrum. It sounds to me like you and your girlfriend might have opposing goals and that could lead to more problems down the line and I have a feeling could be a part of the struggle you’re having right now. You asked for pointers on what to do, and I feel like that’s a great place to start so you can both be in agreement moving forward. If you aren’t an agreement moving forward, you could be on a very slippery slope. Being in agreement on whatever the next step is will be the best decision, regardless of what it is. Wish you all the best!

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Hey BP Fam,

We found an off-market, distressed Foreclosure that didn't sell at auction and Freddie Mac took it back. Contacted broker in charge a month ago and he did the "set-out" and initial review yesterday... Went well, but the broker told me the house is a wreck. We haven't seen the inside but will be able to in the next few weeks prior to it being listed. We fully intend on a mid-term (2-4 year) live in flip.

Externally, the house is GORGEOUS. Other than minor cosmetics and landscaping.

We qualify for a traditional mortgage and the house would be owner-occupied. And we would plan to do a rehab loan to at least get it livable.

BUT.............

Biggest issue is the bank won't finance the property due to the current condition.... (mind you, none of the below issues scare us and there is a chance that some of these issues will actually be rectified by Freddie Mac prior to listing according to the broker. He said in most cases, they will opt to do just enough to "Get it sold".)

- No HVAC/HEAT - units/compressors taken by previous owners.

- Full cosmetic rehab including flooring

- Roof Replacement

- Septic Backup

- Small Kitchen Fire (Appears to just be stove and hood)

What options to do have to buy this home?

We don't have the cash and bank says it's too much of a risk...

Are there alternative loan options we can present to the bank so they feel confidant approving the loan or another route we can go to seal the deal?

Any advice would be wonderful!!! - House is supposed to be listed in the next 30-60 days according to Broker.

Hey BP Fam,

We found an off-market, distressed Foreclosure that didn't sell at auction and Freddie Mac took it back. Contacted broker in charge a month ago and he did the "set-out" and initial review yesterday... Went well, but the broker told me the house is a wreck. We haven't seen the inside but will be able to in the next few weeks prior to it being listed. We fully intend on a mid-term (2-4 year) live in flip.

Externally, the house is GORGEOUS. Other than minor cosmetics and landscaping.

We qualify for a traditional mortgage and the house would be owner-occupied. And we would plan to do a rehab loan to at least get it livable.

BUT.............

Biggest issue is the bank won't finance the property due to the current condition.... (mind you, none of the below issues scare us and there is a chance that some of these issues will actually be rectified by Freddie Mac prior to listing according to the broker. He said in most cases, they will opt to do just enough to "Get it sold".)

- No HVAC/HEAT - units/compressors taken by previous owners.

- Full cosmetic rehab including flooring

- Roof Replacement

- Septic Backup

- Small Kitchen Fire (Appears to just be stove and hood)

What options to do have to buy this home?

We don't have the cash and bank says it's too much of a risk...

Are there alternative loan options we can present to the bank so they feel confidant approving the loan or another route we can go to seal the deal?

Any advice would be wonderful!!! - House is supposed to be listed in the next 30-60 days according to Broker.

Justin, if you want to follow Scott Trench’s plan, you need to have a secure “financial runway”. My wife and I are in almost the exact same situation as you, however we have spent the last three years cleaning up $50k plus in personal debts. We are a few months away from being completely debt-free other than our mortgage and will be able to build a significant emergency find prior to our first acquisition. Patience sucks, but to be sitting where I am today makes the process 100% worth it. Having debt payments on existing loans and then adding to your debt load with ZERO margin is a recipe for disaster, foreclosure, or even bankruptcy. I’ve seen it happen to people I love dearly. If you are going to forgo paying down your debt, you need to at least have some type of emergency fund/contingency savings. Everyone assumes that they are smarter than the system and unfortunately the talking heads tend to be the ones who are the anomalies. Just keep in mind that life always happens. People REALLY lose jobs. AC units REALLY do go out. Vacancies REALLY occur. Relationship REALLY do fall apart. Don’t get me wrong. I don’t mean to come across as a negative Nancy. However, I think most people tend to be overly optimistic as it pertains to real estate and often make decisions without looking objectively at the actual numbers. I will echo what others have said about it really coming down to your acceptable level of risk. Just keep in mind any number of small setbacks could be “catastrophic” with regard to your financial situation if you don’t have an accessible capital short of earned income. Granted, smaller risk means small reward. That said, risk is a very real part of life and unexpected things can be mitigated when you expect the unexpected by having a proper cushion and plan. Obviously, we can’t plan for everything. However, Scott Trench clearly outlines in his book that the first two parts of his teaching involve building a solid financial runway PRIOR to building your assets. If you maintain your existing debt load and then take on more debt and have anything go sideways, you will be required to go further into debt to handle those issues thereby incurring additional debt payments which ultimately is taking you in the opposite direction of your goals. Best of luck!

Thank you Caleb and Simon - Very very informational answers! I greatly appreciate you taking the time to reply.

I'm going to plunge into some more research. This is a great starting point!

Good afternoon Bigger Pockets Fam!

I'm in the beginning stages of my REI career and cannot seem to find the answer to what I feel like should be a pretty straightforward process.

When using private money or family/friends money what are the actual steps in acquiring, holding, or distributing those funds when needed.

For Example: (Hypothetical)

Say my uncle Joe or my friend Suzy wants to earn more on his/her $50k than what the bank is giving him in a money market savings. They don't trust the stock market or other more exotic investment vehicles and don't want to fool with land-lording or the process of acquiring real estate etc...

Trust is not a barrier and they see me as a vehicle for which they can make a good return on their money, of course understanding the normal risks. They trust me and are supportive of the idea of my purchasing a rental (using their money for a downpayment/repairs/etc - basically however I see fit) and then handling the actual day to day. They want to be as hands off as possible other than providing capital and earning some interest on their money.

My question is this: How do I physically use those funds in various transactions like down-payment, closing costs, contractors, property management, etc etc... From what I understand, it's not as simple as him writing me a $50,000 check and then me dispersing it. 

So where does the money "sit" until it needs to be used? I feel like this should be obvious, and I'm sure my ignorance is showing, but I cannot seem to find a clear answer...

--Do we need to set up a joint account?

--Do I need to have an attorney help us set up a special account?

--Does they just write me a check?

I want to make sure we are doing everything legally and with minimal tax implications. (avoiding gift tax, etc) and we would need to keep it separate from his/her personal finances for accounting and tax purposes....

Also, do things change if I have an LLC and use private investing the same way as listed above? Does this start to move into syndication??

I don't want legal issues due to a misstep with the SEC.

Any advice would be greatly appreciated!!!

This was an excellent resource - Just finished the read through and added it to my folder of resources with markups and highlighter for review when searching for new properties.

Thanks J!