All Forum Posts by: Greg Larson

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $330,000
Cash invested: $3,000
Sale price: $380,000

This was a light cosmetic live-in flip located just outside the city limits of Chicago. I did all of the work myself of cleaning up an overgrown exterior landscape, removing outdated mirrors from the walls, fixing spots on the walls that had gobs of adhesive (to hold up the mirrors), painting, and fixing a ventilation issue near the furnace. I turned around and sold it 11 months later for a $47,000 profit (before capital gains tax)

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

I represented myself on the purchase and the sale because I am a licensed realtor. I worked with Blueleaf lending based out of Freeport, IL

Hi all,

I was working on a deal this week that unfortunately fell through due to the seller changing his mind and deciding to leave the property to his son.  

Anyway, I gained very valuable experience in negotiating with the seller and with forming a partnership where I find the deal and my partner brings in the capital.  

What my partner and I worked out initially was that I would bring the deal (which cost several thousand in marketing to find) and carry the debt in my name, and my partner would bring the capital (20% down) and a boatload of property management and rehab experience that I don't have yet. We agreed to split profits and losses 50/50.

After we discussed and agreed on the above, my partner sent a text and said he would like to add that "if we sell this asset in less than 10 years, my initial investment is returned before we split the remainder. Or if the asset should be destroyed and an insurance claim is paid"

My question is, does the clause that he wanted to add sound fair to you?  I know my partner is bringing in 20% (approximately $40k), but I'm also spending valuable time and money acquiring the deal and carrying the debt in my name indefinitely, which is worth a lot in my opinion.

Anyway, I am new to forming partnerships so am looking for experience from others who have walked this path before me.

Thanks in advance for any advice.

Hi BP,

I have an appointment scheduled to go look at this property next Tuesday.  I'm hoping to hear opinions from other investors on the best way to handle a situation like this.

Situation:

A vacant home was burglarized and vandalized while the seller was in the hospital.  He says they gutted the place and stole everything including the AC.

He's now living out of state with family, because the subject property is unlivable.  

Numbers:

1300 sq ft ranch home.

I haven't seen the place yet, but I'm anticipating $80 - $90 /sq ft in repairs which would put the full rehab estimate at let's say $120k.

I've looked at comps and pegged the value to be approximately $215k.

The seller owes $85k on the property still. His monthly PITI is about $850

Solution:

The best solution I can think of here is to wholesale this deal to a fix & flip investor that would take the property over subject to and bring in their own funds for the rehab.  Then, eventually refinance when their rehab is complete.  However, I'm not sure that the numbers support that yet, plus a profit for the investor and an assignment fee. I'm hoping that I show up and the rehab is far less than what he's telling me, but that is wishful thinking!

Thanks in advance for any suggestions, strategies, or feedback you can provide on this situation!

Quote from @Luther Wilson III:

What would be your down payment amount and monthly payment?

The price isn't as important if you plan on holding for a long time.  A 30 yr note at 0% is stellar...  I think what would be more important is your total out of pocket costs and the potential cash flow.

You'll want to make sure your other monthly estimated costs are on point too...  When you run your pro forma how does it turn out?

If there's no pre payment penalty and no balloon then that's even better!  :)

One more thing, please, tell me you would be getting the deed at closing?  What's the deal there?  Is it a true owner finance deal, a lease option, or a contract for deed?  There's differences to each and you for sure will want the deed, sir!  :)

 I'm shooting for a $5-10k down payment plus closing costs.  My thinking is that any significant updates could be done in a year or two during tenant changeover and partially funded by the year 1 and 2 cash flow.  It looks to potentially cash flow $180 per unit from Day 1 after budgeting 4% repairs, 8% cap ex, 11% management, & 5% vacancy.

To answer your question on the deed, yes I would be taking the deed upon closing. That's how my offer was structured anyway.

Quote from @Scott Mac:

Just a few things that come to mind.

If it is only worth $222, and you pay $345 you will be upside down on it until it reaches $345 in value.

Meaning you will have to take a loss to sell it for less before that time.

===

Figure out a $222 bank loan for 30 years (all cost involved), how much total out of pocket when you get to 30 years.

Figure all of the payments you will make on the #345, which should equal $345 after 30 years.

What's the difference.

===

Also your taxes will probably be reset at $345.

Also, also a HELOC will probably only be on 80% value, so you need to get to 20% above $345 in value (vs. 20% above $222) to get a Helock.

Also, you will have no interest payments, so you might want to look at it from a tax angle for yourself too.

====

And No interest in Tennessee...(every once in a while--with certain people, but most want it)....but checking the math is smart.

Either they don't want the PITA of it, or the complicated thoughts of it (look how it throwing you off track a bit), or it's a Biblical reason (and none of the three means your not dealing with a sharpster, because everyone want to line their own pockets the best in a deal).

====

Good Luck!

Great points.  I did not consider the lack of HELOC availability.  I was strictly looking at it from a low down, instantly cash flow perspective.  I'm shooting for $5-10k down, but will see what the seller counters with.

Hi BP,

I'm currently negotiating an off-market duplex deal that would be owner financed. I initially came up with an ARV market value of $222k based on recent comps. When I made my offer, the seller countered at an astronomical $345k for the duplex which I was stunned by. Anyway, I ran the numbers again at $345k with a 0% 30 yr note (no balloon) and it still seems to cashflow okay (slightly less than $200/door after management and cap ex).

My question is, if the property valiue is actually only $222k, and Im buying at $345k but at 0% owner financing, am I "overpaying" for the property in any way?  There would be no balloon on the seller financed loan, it would be a full 30 yr. 

I just want to make sure I'm not putting together a deal that could potentially become difficult down the line.  My goal right now is to produce cashflow that can be reinvested from day 1.

Thanks in advance for your advice and time!

Quote from @Daniel Qin:

Quote from @Greg Larson:

Quote from @Daniel Qin:

Hey Greg, if you are still looking for one, some mortgage lenders have loans that wrap in rehab cost. That might be something you want to look into. The rates are higher than primary residence loans but much lower than hard money loans. As far as I know they can do 30 year fixed, and if you don't like the rate you can cash out refinance after a few months.

Do you know what they would require for a down payment amount?  I would love to go this route but am being stalled with capital.  I'm working with a total of $40k capital and have to keep some in reserves after the purchase.

Minimum 15% of the purchase price and rehab cost, but just keep in mind the lower the down payment, the higher the rate and point fees. I’m in the process of working with them myself. Happy to connect you.

 Thank you.  I'll send you a dm

Quote from @Daniel Qin:

Hey Greg, if you are still looking for one, some mortgage lenders have loans that wrap in rehab cost. That might be something you want to look into. The rates are higher than primary residence loans but much lower than hard money loans. As far as I know they can do 30 year fixed, and if you don't like the rate you can cash out refinance after a few months.

Do you know what they would require for a down payment amount?  I would love to go this route but am being stalled with capital.  I'm working with a total of $40k capital and have to keep some in reserves after the purchase.

BP,

I'm located in Knoxville TN and I've found this off-market triplex deal that I'm looking to takedown and self-manage.  It needs approximately $50k in rehab.  (see below report)

I have $40k in my bank for reserves, so I'm trying to do this deal with no money down.  

Are there any lenders that can make this happen?

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hi BP,

I'm working out an owner finance deal and I'm curious what would happen if the seller passes away while our agreement is still in place.   Would I just start making payments to the heirs of their estate?