All Forum Posts by: Doug Pretorius

@Jose Thompson your loan officer is correct, for most lenders. You may be able to find a lender who will lend based on the appraised value but in most cases they're going to lend to you based on purchase price.

Down payment is a separate issue. Some lenders require you to have skin in the game regardless of your equity position. Others don't care where the rest of the money comes from as long as they're in it for no more than 80% LTV.

All that said there are several ways you can buy property and end up with an infinite ROI:

1. You buy with hard money or a LOC, rehab, and refinance. If you buy right the refi will pay off the hard money/LOC and the rehab costs.

2. You buy Subject-to the seller's existing loan. The loan stays in their name, you take over the payments, they walk way with their credit intact.

3. You buy with a wraparound mortgage or contract for deed. This works well if the seller has substantial equity that they aren't willing to walk away from but are willing to wait for. Your payment 'wraps' around their existing loan and their equity.

With any of these purchase methods you turn around and rent it, rent to own, or sell with owner financing and your ROI is infinity.

@Juan David Maldonado Yeah either a real estate lawyer or a title company, whichever does closings in your area, should be able to help you out with contracts. You may want to look for a local real estate investment club, they'll be able to point you in the direction of a lawyer/title company who understands seller financing.

@Juan David Maldonado If the seller owns the property free and clear then you just negotiate the best terms you can for them to hold the mortgage. Low or zero interest, no balloon, low or nothing down.

If the seller already has a mortgage then you need to find out how much it is and what the terms are. Then you can buy subject to the existing loan or do a wraparound mortgage. If they're not motivated enough to hand over the deed then you can do a contract for deed.

You should not purchase on a lease option in this scenario because you shouldn't do rehab (even light) on a property you only have an option on.

@Juan David Maldonado I'm excited for the first time in years! I sat out the pandemic boom because I'm a creative finance cash flow investor. Even the most motivated sellers could sell in hours for hundreds of thousands more than they paid. So there was nothing for me to do.

Real estate all across Canada has been hit hard, harder than I anticipated. Many markets are down 25% or more from their highs in March 2022. Interest rates have more than doubled from their pandemic lows. And the federal government just announced that they're backing a rent-to-own program. This tells me that we're going to be in a buyers market for the rest of the decade.

Sub2, contract for deed, wraps, seller financing, and lease options are going to be the order of the day for years to come. As you can tell from the tone of my post I absolutely live for this stuff!

@Brady Ascheman when taking over payments I've always paid the bank directly. And no in 20 years the bank has never called a loan due. I've physically gone to the seller's bank with the seller, sat down with the manager and told them I'm taking over the payments, and the bank has still not called the loan due.

As an alternative to paying the bank yourself you can use a loan servicing company. You can set it up so they will take the money from your tenant, pay you, pay the bank, pay your insurance, taxes etc.

Never, ever, let the seller take your money and trust that they're going to pay the mortgage. Most of the sellers who agree to a payment takeover deal are horrible with their money. Once they leave the house and are no longer emotionally tied to it, the second they start having new money problems they will spend your money on something else forgetting that the bank is going to foreclose if they do that.

@Eddie Kay The most obvious is that a wholesaler can hire an agent to list their deals, assuming assignment listings are allowed by the local MLS. This can result in a lot of extra commissions throughout the year since most flippers will list the finished product with the same agent as well.

All I'm suggesting is that you 'buy' your house hack with a Lease Option (LO) instead of a bank mortgage. Think of LOs as a alternative method of financing the purchase of whatever property you want to buy.

My first deal wasn't a house hack because it was already cheap and occupied by a tenant, but the principle is the same. It was worth $75,000 and rented for $800. I acquired it on a Lease Option for the mortgage payment which was about $600 and the price was to be the mortgage balance at the time of purchase, which ended up being about $60k.

So just like you hope with any rental, the tenants were paying for the property for me. The difference was that instead of having to come up with a down payment and qualify for a mortgage upfront, I didn't have to pay the seller anything (I Optioned it for what they owed) and when the 2 year were up I could have refinanced without a down payment. I ended up selling it for $85k instead though.

There is no interest on a lease and in high priced markets rent is almost always less than a mortgage payment would be for the same property. You can also negotiate that a decent chunk of your rent should go toward the purchase price.  

@Brett Francoeur One of the best ways to house hack in an expensive market is to use a Lease Option. You can negotiate a low (2 or 3%) down payment or even no down payment and a generous monthly credit with an at or below market rent. With the right deal you can live free and have your tenants buy the place for you.

Hi Leandro, I focus on single family homes. The best wholesale deals are found off-market using geographic farming. Occasionally I find a good deal on the MLS too, but I mostly use the MLS for sourcing sub2 and lease options.