All Forum Posts by: David Turner

I'm in the process of purchasing a 32 unit building. I was able to use the banks against one another in order to get better and better terms. Most banks seem to only want to do the 5 year loans as Joel said. If they will go longer it is at a much higher interest rates. One thing I was able to negotiate though was a fully amortizing loan. It will be a 25 year term that is fixed for 5 years. That way I won't have a balloon payment.

As for the broker fee, I was able to negotiate that down some also. The banks I talked to wanted 1% processing fee. Mortgage broker wanted 1% for himself, plus another 1% for the bank. Told him I was going else where because he were offering the same rate as another bank, but the other banks fees were lower. He came back with a 1/4 point lower rate and dropped his fee to .75% and the bank dropped there fee to .75% for a total of 1.5%. Figured the extra $3,400 was worth the lower rate.

Just know that the terms the banks offer you are not set in stone. They will negotiate pretty much every part of the loan if they like you and the deal.

Samson Kay, you say that gross income is 90k. Are you sure you mean gross or do you mean net? Cap rates are based off of Net Operating Income. If it is Net then I think this is a home run. Here in Texas cap rates have dropped to around 8-9% so a 13% cap is phenomenal. You cannot compare apartments to each other based on size or neighborhood. You base them on income. If this is indeed a 13 cap and other apartments are going for 10 then you have no room to negotiate. Be happy for the 13 and move on.

If on the other hand you really did mean gross income is 90k then this is a horrible deal. Going by the 50% rule your net income would be around 45k which makes this a 7 cap. Not good at all if similar apartments are going for 10. If it is approx 45k net then want to pay less than $450k if you want it at a 10 cap. This would be in line with your 400-500k comps.

DFW REI Club meets every Saturday morning at a Country Club in Halton City. The group is ran by Greg Wilson and Robin Carriger who inherited the group from their mentor. It costs $20 in advance or $25 at the door which includes a breakfast buffet. When I have visited their were approximately 30-40 people in attendance. I was told that membership tends to fluctuate with the economy and that they are busier now that things are improving. They have some sponsors that often show up and give a little sales pitch.

At the beginning of each class they do a thing called thumbs up/thumbs down where anyone can stand up and present a deal they are considering and everyone votes whether they should do it or not.

The classes cover a range of topics. Greg and Robin say that it is designed where if you go every Saturday for 6 months then you will learn all you need to know. One time when I went they had a mortgage broker that discussed different loan programs and what was needed to qualify. He also discussed how to get your buyers qualified. Another time they discussed some of their best deals and some of their worst deals.

Robin is the wholesale guy, although he is also a rehabber and Greg does rehabbing. They both have courses they teach. I took Greg's rehab course. I think it was around $3-400 for a two day class. It was full of great information. We spent most of the second day visiting houses on the MLS and estimating repair costs. At the end of the day we had the opportunity to put offers on the houses we saw. Overall I felt it was worth the cost.

I've been to the one in Halton City several times. It is real good. It meets weekly as opposed to most that meet monthly. The two guys who run it really know their stuff. They are willing to help out anyone who asks. I highly recommend this club.

I'm under contract right now for a 32 unit. I have been talking to a couple of local banks and a couple of mortgage brokers. Both of the local banks have offered 80% LTV. One of the mortgage broker is saying the best he can do is 75% but he is hesitant about even being able to do the loan because it is in a C area. Said he thinks the banks might be scarred off when they see the area.

The other mortgage broker works alongside the listing broker. The listing broker has been pushing me to use this guy. Originally he said the best he could do was 75% LTV but after I told him I had two local banks offering 80% he said he could get me 80%. Friday he called me saying he has a bank lined up. They lend in this neighborhood all the time so that shouldn't be a problem. Offering me 4.75% on a 25 year amortization. 5 year fixed with a term length of 10. I would prefer a longer fixed and don't really like the idea of a ballon at the end, but the local banks are offering me 5.5% on a 15-20 year amortization for 7 years fixed. Figure it will be worth the lower interest rate and longer amortization.

Omayra Carroll I would recommend you talk to small local banks. The big nationals generally won't give investors the time of day. A year before starting investing I opened a bank account with a local bank and kept significant deposits in that account while adding to them as much as possible. This gave me a good track record and made the bank interested in keeping me as a customer.

Omayra Carroll I would recommend that before you talk to a broker that you talk to a bank or two. Get pre-approved so that when you do go to a broker they know that you are serious. Most brokers won't pay you any mind unless they know that you can perform. A pre-approval letter shows them that you can perform. It means that due diligence has already been done by a bank and that they've already looked over your finances. It also shows that you are serious if you've taken the time to gather all your financials and give them to a bank.

This is standard practice for MF. Do you really think that anyone interested in a 300 unit complex is going to inspect every single apartment before even making an offer? Making an offer/contracting to purchase does not mean that you are locked in and cannot back away. During the due diligence phase you can walk away for any reason. Once an purchase contract is in place you can then inspect and re-negotiate based upon any deficiencies you find. Its really not any different from buying a house.

If you go about demanding to see the entire place before even writing an offer then your going to come off as a inexperienced/uneducated/non-serious buyer Brokers and sellers will either not want to deal with you and ignore you or try to take advantage of you.

I was wondering if anyone had ever heard of Darius Barazandeh or had used his program "Texas Houses for Pennies II". It seems like it could be a good program since it focuses solely on Texas tax sales, but I can't seem to find solid reviews on the program. The only reviews I can find are on the pages trying to sell the product. I don't want to spend $197 on a junk program.

So Jon Klaus, what local REI clubs do you recommend? I see there are 4 or 5 locally. Which ones have you been to and what are your thoughts on each of those?