All Forum Posts by: Doug Pretorius

@David Evans Just pick up the Virginia state realtors contract with any state-specific disclosures as @Patti Robertson said. Then add a sub-to clause.

@Hugh Smith Sub-to and contract for deed are 2 different things.

Sub-to is where you buy the property and the deed is transferred to you immediately like a normal sale, but the mortgage stays in the seller's name.

Contract for deed is an agreement where the deed stays in the seller's name until you complete the terms of the agreement at which point the deed transfers to you.

Privacy laws greatly restrict the data we have access to here in Canada.

@Eric Berkner Seller financing can be found on the MLS but the terms usually suck, high price, high down payment, high interest, interest-only, balloon payments etc. If paying a premium for the privilege of not going to a bank excites you then the MLS will work just fine.

If you want discounted terms you need to become a problem solver. Great deals aren't negotiated in a back-and-forth over minutia like when you buy off the MLS, they're created by solving problems.

Cold calling and door knocking are the fastest and most cost effective ways of reaching them. PPC and direct mail are expensive but also easily scalable.

Quote from @Jeffrey S.:

Has anyone heard of Kris Krohn and his "compassionate financing"? He does lease options with no set price. The price is determined at the time of execution of the option based upon an appraisal. In addition, he works in "equity" by crediting the option payment and a portion of the monthly rent off of the purchase price (appraisal). How can this work given the warnings above?

As @Shiloh Lundahl already explained. Applying the option fee or rent credits toward the purchase price is a recipe for disaster in the US. You run afoul all sorts of financing, consumer protection, and tax laws.

Keep it clean and tidy. If the house is worth say $500,000 today and you expect with appreciation it will be worth $580,000 in 3 years. Buy an option from the owner for $500k and assign the option for less than $80k to a tenant/buyer. That way they will have the opportunity to buy that house below market value in 3 years. If your option fee is reasonable (say 3-5%) they will instantly have ~10% equity if they decide to exercise their option so they don't need the option fee or any portion of their rent to be applied to the purchase price.

Better yet, find a motivated seller and get the option at a price that's below even today's market value, giving the option instant value.

@Jimmy Chao Oof sorry to hear that. This is exactly why I got out of landlording 18 months after I started investing 22 years ago. Haven't had an out-of-pocket repair since. I cannot recommend doing owner financing enough.

Quote from @Matthew Cartwright:

I have been looking to start a partnership over the past two months for real estate investing. What I am seeing is that properties appear to be way overvalued, i.e. properties that are only generating $7-8k in rents per month are priced approximately $200-300k over what they should be to generate a 10% CoC ROI Y1. My question is am I setting my return goals too high or are properties just that overvalued? I have read that the price listed is just the owner's opinion, but surely they are basing the price on some sort of data. If a businesses true value is derived from all of its future cash flows discounted to present value, then how can some of these owner's be so far off?

Are you looking at SFH or MFH? SFH are valued based on emotion and sentiment not ROI. MFH is more likely to be valued on ROI but sometimes gets swept up in a buying frenzy too.

Quote from @Colby Burt:

Here in Canada for small lists we can pull up to 100 numbers for $0.50 each. That would be fine for something like calling expireds although I'd rather just go knock on their door. Otherwise we'd need to pay for additional area codes. Or you can buy them all for $48,000 a year LOL! I think I'd rather do mailers or PPC at that point.

Quote from @Colby Burt:

So you limit the call to asking whether they're thinking of selling, how much they want for it, when they want to sell etc. And follow up at their door with your offer to buy.

Although in the US that isn't too bad. It's only $66/year for each area code. Here in Canada it's $2,875.

Quote from @Colby Burt:

It's very clear from the rules Braden posted that the DNC is nothing more than a tax. The government saw a lot of business being done by phone and a lot of voters upset about getting called. So they killed two birds with one stone. They give their constituents a feel-good list they could opt-in to and get to charge businesses for access to that list. And if you don't pay to play you can get fined heavily.

I am curious if anyone has tested out the limits of surveys though. Surveys are exempt from the DNC rules. So can't you just call through neighborhoods asking the survey question: "Are you thinking about selling in the next X days/months?"

Quote from @Ryan Taylor:

Why do you think 5yrs or less the odds are pretty low of the note being called...are there audits that take place after a 5yr mark?? I would almost think the opposite...the first 1-3yrs being the most risky...after that, hopefully a track record of payments being made would just keep you under the radar...I'm i thinking about that correctly 

No there are no audits that I'm aware of. I just threw out an arbitrary number of years where it's unlikely conditions would prompt banks to go searching for loans to call. The shorter the timeframe the less likely they will call the loan.

I always like to tell new sub2 investors the story of the first sub2 deal I ever did. I went with the seller to their bank, sat down with the manager, and told him I was going to take over the payments. We signed the paperwork for all of the loan notifications to be sent to me instead of the seller, I even showed him the contract where I was agreeing to take responsibility for the sellers payments.

Would you like to know what the manager said?

"Doug, you're crazy! Are you absolutely sure you want to take on the responsibility of paying someone else's mortgage?"

No he didn't call the loan due.