All Forum Posts by: Farrukh Amini

Investment Info:

Single-family residence other investment in University Park.

Purchase price: $130,500
Cash invested: $15,000

Acquired on terms (subject-to)
3bed/2bath SFR/renovated in 2016/2car garage/6k sqf yard
Purchase price: $130.5k
Down: $5k
Closing and repairs: $10k
(total out of pocket $15k, took over $125.5k loan with 4.5% rate)
PITI: $1347/month
(No other expense as we're the bank)

ROI:
All out of pocket: $4k (20k from buyer - 15k buying costs - 9k selling costs = 4k left in the deal)
Cash flow: ~$350/m ($1700 from buyer - $1347 PITI = 353/m profit)
CoC: 105% ($4.2k annual net / 4k cash in the deal = 105%)

What made you interested in investing in this type of deal?

tired of being a landlord and dealing with tenant/property management, so started to pivot from being a landlord to becoming a bank

How did you find this deal and how did you negotiate it?

through marketing and networking with wholesalers - asked for their trash leads

How did you finance this deal?

own funds (myself and my partner)

How did you add value to the deal?

Buyer needed to relocate for a job transfer and wanted to sell, but due to market prices and the amount they owed on their mortgage, they would've had to come out of pocket ~$10k to sell with an agent. We came in with terms offer and solved their problem saving them about 10k in selling expenses, and giving them money to move and close on the date of their choice. Seller didn't have to list and have the property sit on the market for 60-90 or more days having to pay additional mortgage plus rent

What was the outcome?

Dispo: sell on owner financing with CFD (deed stays with us until paid in full)
Sell price: $161k (Owner financed at 7.9% on a 30yr amortized loan)
Down Payment: $20k (12%)
PITI: ~$1700/month
(Buyer responsible for all expenses and benefits of homeownership)

Lessons learned? Challenges?

Remote market - virtual. Had to quickly reach out to people and put boots on the ground to facilitate the entire process.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Brittney Wikinson with Compass is a beast!

Investment Info:

Single-family residence other investment in University Park.

Purchase price: $130,500
Cash invested: $15,000

Acquired on terms (subject-to)
The buyer needed to relocate for a job transfer and wanted to sell, but due to market prices and the amount they owed on their mortgage, they would've had to come out of pocket ~$10k to sell with an agent. We came in and solved their problem by taking over their payments, saved them about 10k in selling expenses, and giving them money to move and close on the date of their choice. Seller didn't have to list and have the property sit on the market for 60-90 or more days having to pay a mortgage plus rent every month.

3bed/2bath SFR/renovated in 2016/great condition/stainless steel appliances/2 car garage/6k sqf yard
Purchase price: $130.5k
Down: $5k
Closing and repairs: $10k
(total out of pocket $15k, took over $125.5k loan with 4.5% rate)
PITI: $1347/month
(No other expense as we're the bank)

Dispo: sell on owner financing with CFD (deed stays with us until paid in full)
Sell price: $161k (Owner financed at 7.9% on a 30yr amortized loan)
Down Payment: $20k (12%)
PITI: ~$1700/month
(Buyer responsible for all expenses and benefits of homeownership)

ROI:
selling expenses: $9k (agent commission, MLS, legal)
All out of pocket: $4k (20k from buyer - 15k buying costs - 9k selling costs = 4k left in the deal)
Cash flow: ~$350/m ($1700 from buyer - $1347 PITI = 353/m profit)
CoC: 105% ($4.2k annual net / 4k cash in the deal = 105%)

What made you interested in investing in this type of deal?

tired of being a landlord and dealing with tenant/property management, so started to pivot from being a landlord to becoming a bank

How did you find this deal and how did you negotiate it?

through marketing and networking with wholesalers - asked for their trash leads

How did you finance this deal?

own funds (myself and my partner)

How did you add value to the deal?

Buyer needed to relocate for a job transfer and wanted to sell, but due to market prices and the amount they owed on their mortgage, they would've had to come out of pocket ~$10k to sell with an agent. We came in with terms offer and solved their problem saving them about 10k in selling expenses, and giving them money to move and close on the date of their choice. Seller didn't have to list and have the property sit on the market for 60-90 or more days having to pay additional mortgage plus rent

What was the outcome?

Dispo: sell on owner financing with CFD (deed stays with us until paid in full)
Sell price: $161k (Owner financed at 7.9% on a 30yr amortized loan)
Down Payment: $20k (12%)
PITI: ~$1700/month
(Buyer responsible for all expenses and benefits of homeownership)

ROI:
selling expenses: $9k (agent commission, MLS, legal)
All out of pocket: $4k (20k from buyer - 15k buying costs - 9k selling costs = 4k left in the deal)
Cash flow: ~$350/m ($1700 from buyer - $1347 PITI = 353/m profit)
CoC: 105% ($4.2k

Lessons learned? Challenges?

Remote market - virtual. Had to quickly reach out to people and put boots on the ground to facilitate the entire process.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Brittney Wikinson with Compass is a beast!

Selling with owner financing is possible even when there's an underlying loan. As long as your loan is not a USDA loan (which has an occupancy requirement for the life of the loan) or a reverse mortgage (which I doubt is what you have). FHA loan also has an occupancy requirement for the first year of the loan.

To sell on terms you have to make sure to have sufficient protection in case of the buyer default. You have two routes to go in your case: sell on a Wraparound Mortage (Wrap) or Contract For Deed (CFD). They're similar concepts with one main distinction: in a Wrap the deed transfers to the seller and in CFD the deed stays in your name. When I personally sell on owner financing, 90% of the time I will cell on CFD because it gives me better control since I still have the deed (keep in mind that while in most states you are able to go through eviction to get the house back in case of default, some states require you to foreclose - no deed-in-lieu). If you sell on a wrap then you have to foreclose to get the house back.

Now, to structure terms, you'd want to make it favorable to you, but also be reasonable so it makes sense to your buyers. For example the interest rate you"ll offer has to be higher than your underlying loan, amount of downpayment, always amortize longer than your underlying loan, see if you want to put a balloon in to encourage earlier payoff, etc. To determine the interest rate and terms you'd look at your current market rents for a similar property and structure your monthly payments within a $100 range above or below that rent rate so it makes sense for the buyers to buy instead of renting. 

I'd be happy to run some numbers and give you examples but I'll need to get more information from you, like the rent rates in your market, your exit goal, your loan PITI, whether the property is a homestead, etc.

Talk to the owner to see if they would hold a note on the 2nd position on the balance

Hey,

Don’t know of any private lenders at the moment, but am curious as to what kind of rates and terms you’re expecting from a private lender to hold the 1st. I might be interested if the numbers work

I live and invest here. Jersey City got really competitive in the last couple of years. While it is a lot harder to find any cash flowing properties, there are gems out there. You just have to keep looking. The areas that I still see opportunities are Greenville, West Side and Bergen Lafayette, but even these depend on your ROI goals. You might be around 12-13% CoC if you can find a duplex with a bonus unit, but very rare if you're shooter for more.
be careful with Greenville and parts of Bergen Lafayette and do your due diligence. Some blocks are a D and attract only lower income tenants which most of the times are high maintenance tenants. Nothing wrong with that if you get into that class neighborhood with the right expectations and preparation. I have investments in Greenville, Bergen Lafayette, West Side, and JSQ so feel free to ask any questions. 

@Ian Cramsey is the local agent/investor in Hudson county. Reach out to him for any help. 

I'm not an attorney or tax professional, but what I personally do is I put each property in a separate trust and with beneficial interest assigned to LLC so properties do not have any overlap

Can't comment on LLC transfer but I've transferred my properties to my living revocable trust and never had a problem. My LLC where I'm a member is the beneficiary of the trust.

I haven’t specifically done this so I can’t comment, but either way your best bet is contacting a few lenders and asking them. They would give you the most accurate info as they would be the ones refinancing the loan for you.