All Forum Posts by: Grant Kemp

I'm glad you loved the podcast!!

I personally stay in non rural areas because I want to have the biggest pool of available buyers that have 10% as a down payment. i find as you get more rural people want to give you 5% or less. 

As far as marketing, sub2 homes are in the same marketing lists as all of your other houses. The only thing is that you may want to cater to low to no equity deals since that something that is uniquely subject to.

And when marketing you need to be aware of the TILA "trigger terms" which at it's core means just stay away from putting terms on advertising. You can say something like "low down payments" but you can't put any numbers or you have to disclose a bunch more stuff. 

 *sigh* I'm on vacation with my wife and have neither the time nor desire to get into another cyber war with you over this. The other poster is right that whenever you're involved it devolves into a borderline slanderous set of replies where you seem to feel that whoever is most aggressive and verbose is the victor. 

I reply only because I know others will eventually read this thread. Yes, I have read Dodd-frank entirely. Yes, there are only select sections that even remotely apply to us, so the need for reading the rest was more a bragging right than anything. Yes, I literally spend 50-75 hours every week doing nothing but seller financing (both for my own portfolio and as an acting RMLO for other investors.) Yes I have gone through auditing process with the CFPB unscathed (as have all of the other RMLO's I know currently in this business). 

Bill is NOT CURRENTLY an auditor and is not currently doing this business to the best of my knowledge. 

I have run all of what I do by an entire counsel of lawyers: case lawyers, standard real estate/title attorneys, and Dodd-Frank specialists. 

To all future readers, please be aware that whoever yells loudest is not always right. Please take a look at bill's post history to see the manner in which he posts and make your own decisions. Read the laws for yourself or choose whomever you believe to be "in the know" and work with them. 

Again, I don't have time to mess with the reply I know bill will have, as I am trying to enjoy a long deserved vacation. If anyone ever has DF questions or owner financing questions, I will be more than happy to address them. 

I'm sorry, Illinois is one of the few states to not adopt the national license yet

The good news is that since you've yet to do 3, you are not yet required to abide by RESPA or by SAFE. I would be happy to give you some other guidance on things you'll need to look at, but I'm hesitant to throw them up here in the case that someone down the road wants to ignore the 3 and 5 de minimus rules and feels like they got enough info here to go do it. I'll PM you. 

thanks @Daniel Harnsberger 

@Shera Gregory the best thing to do is contact an RMLO who originates owner financed loans for investors. Depending on your volume, it may or may not even be legal for you to collect a form that tells you what you're looking for (if you've done over 5 in a rolling 12 month period you must be licensed to do so). You can view it once collected by an RMLO, but you yourself wouldn't be able to after those 5. 

Because there are so many laws and important pieces to meet, and because Dodd-frank has no de minimus rule, it's really just much wiser to have an RMLO do this bit for you. 

I am licensed in Virginia and would be glad to help you, but by all means feel free to go with someone else. I'm not saying any of this to force you in to using me, it's just that you really need someone in your corner on these transactions. Much in the same way you wouldn't expect to draw up your own deed of trust/warranty deed, and would instead consult an attorney or title company. 

One tip I will give though since you mention dti is that there is actually no maximum dti for someone at your volume of transactions (less than 500 in previous calendar year and less tha 2 billion in assets). 

@k. Marie Poe we do provide proper prescribed disclosures to our sellers as written in the Texas property code

@joe gore Mindy is an RMLO. I do not know if she buys houses sub2 though. Just from knowing her seminars that she does at the rei clubs I'd bet she was only teaching people how to correctly originate, and they were expecting her to know about aub2 which isn't necessarily her expertise. 

I'm sorry, I see I've been called a few times to the thread.

@k. 

@Account Closed I'm sorry if it seems I've dropped out on convos where certain people are posting, if you look though my posting in general has dropped pretty significantly due to how stinkin' busy we are right now buying houses.

Anyway, I haven't had the time to read through the entire thread here but it seems like there's a lot of good information coming from a lot of knowledgeable folks. At the end of the day, my story remains the same. Due on sale is something that should be fully disclosed and explained to all parties of the transaction, and anything less than this is taking advantage of folks. While I have not seen a due on sale clause called on any of my properties, that does not mean it won't happen in the future. I haven't seen an increase in DOS in the market, but it shouldn't be ignored if others are seeing an increase in the calls. We should always have our ears to the ground to see how the market is going.

As with anything in life, you have to weight the risk to reward and make a business decision. If you feel that DOS is too much risk then don't do a sub2 transaction. If it's a risk you're comfortable with, then do the transaction. Just make sure your seller and buyer have a full understanding of exactly what that entails and if they're on the same page as you then you've got a deal.

I hope I didn't actually say 90 days in the podcast!!

@John Jackson is right, it's 180 days before the added requirements pop in.

Thanks for the bat signal, @Jerry Puckett 

@Sid Siddiqui That's actually a much simpler answer than I think you'll believe, but the answer is that you don't need to do anything. Your underlying lien already has escrow, so when you sell the wrap, your buyer will be paying the same escrow account. You'll just have an agreement with your seller and buyer at closing that's an assignment of escrow funds. I also recommend you have your buyer bring a 1 year pre-paid insurance policy to the closing table which would replace the existing insurance. Just make sure you work with someone who's had experience with this so you can ensure the names are all listed correctly on the insurance policy. The other option is to add the buyer on as a named insured on the current insurance policy.

Don't forget to employ an RMLO for processing your buyer. With having only done 1 property, you're not required to adhere to SAFE or RESPA, BUT Dodd-Frank has no De Minimus rule and still applies. You want to shoot for a Qualified Mortgage in order to gain the protections QM status affords you in court (heaven forbid it ever goes there). Also, make sure your attorney has done wraps before and is providing adequate disclosures (like the underlying lien disclosure as required by Texas state property code). Many attorneys just draw up a note and DT then call it a day. In my opinion, this is FAR from adequate for a deal of this nature.

Christina, do you have an update? As always, I'm glad to pitch in where I can.

My guess is going to be that you'll be priced out due to the seller's down payment needs. Typically, in my experience, when trying to buy from landlords or other people that would consider themselves "investors", they want a 20% down payment. Unless you have the capital to cover that, it makes it quite challenging to get the deal done.

One way I've gotten around that before on a package deal like this is by buying one of the properties all cash, and the rest with owner financing along with lower down payments. I'd love to hear how y'alls meeting went though so future readers can see what goes on in these scenarios.

returns are hard to really say "you're going to get x deals from y pieces of mail" because so much relies on your knowledge, ability to negotiate, and ability to get the deal done. 

However, I think the biggest factor that seems to be missing in your work up is the down payment. You'll look to collect about a 10% dp on these properties (sometimes more) when you sell, so you can very easily recoup your 6k marketing costs in one or two houses just from the up front money you're receiving. Then you're receiving cash flow of a few hundred dollars a month for 10, 15, 30 years or whatever it is you make your note for. The returns are astronomical at the end of the day. 

That being said, you're right that this is a volume strategy. But for that matter so is a rental. I know plenty of landlords that are only getting $300-$500 a month. In order for you to live off of your rentals you're going to have to have several going for you. The big issue there is having to factor in repairs and vacancies which isn't something you really have to worry about in sub2 and wraps. 

@jerry Puckett does a great job on his marketing campaigns. He's got a knack for figuring out a good list to target and he's got a lot of experience on the marketing end. I've used him personally to pick up properties in the past and am currently working with him to ramp up fairly large campaign of 1,000+ letters a week. I've never not bought a house off of a campaign he put together. 

All that said, there are lots of moving parts to a sub2 transaction. More than pretty much any of the other strategies, so just like with any marketing campaign you should know it's the marketers job to get your phones ringing, and nothing more. If your campaign doesn't turn into closed deals but your phones were ringing be very cognizant of the fact that your marketing manager did their job.