All Forum Posts by: Larry Chafe

Welcome, glad to see so many locals here.

Larry

Greg,

Buy and hold is a game that takes some investment capital and takes time to realize your returns. For the RE investor that is in need of capital, I would not recommend using a HML. HML are expensive and best for fix and flip, where you get in, and get you capital to make the deal/repairs happen, then you flip and everyone cashes out. For your situation, I would recommend finding 100% owner financed properties where you can cashflow and don't need much out of pocket. And - even better, find out who the cash buyers are in your area then find motivated sellers get properties under contract that you can wholesale to other investors. This way you can build capital with almost NO RISK, then move on buy and hold when you are more established.

Good luck - Larry

I can see you are trying to help this seller the best you can. However, if the seller has no equity, they have nothing, and would not stand to make any money on any type of sale. In fact, to sell traditionally they would have to pay out of pocket to sell it. If they truly want out of the property, then you buying from them and taking it off their hand IS THEIR WIN. You, as the investor can and should pursue buying this as an owner financed deal. Depending on the terms of the existing loan, it may not cash flow and may not be a good buy&hold. May be better to find an end buyer to take it over, where you earning your money from a down-payment from the new owner. If you wanted to share some of that with the seller, that would be up to you.

Agree with Bryan, the software is very good. The main purpose of the REI matcher system is match properties (sellers) with buyers. Every investor can maintain their own personal database of each. The system will report a match to both investors when a posted property matches the criteria for a buyer. Then a deal can be made between the two investors that represent the buyer and the seller.

The only downside i see with the system, at least here in socal, there are very few properties posted. And the ones that are, are deals that are not that great, - meaning hard to find a buyer for. But I think that is just the nature of this RE market that we are in. Buyers for median priced and below properties selling with owner financing and with a reasonable down payment are VERY, VERY EASY to come by - craigslist - bandits signs - all day long. No need to post it in REI matcher and potentially have to share your profit with another investor's buyer. Also, perhaps there aren't enough investors in the system here in socal.

The software also does other things very well like keep track of your leads and email them. It also does more things now, like analyze deals, generate contracts. It even sets up websites for you.

Larry

Amy,

Anything more than -20% equity is a good rule of thumb where it is past the point of any type of sub-to or creative financing deal is possible.

Larry Chafe

Andrew,

As a RE investor you can give your friend some guidance in this situation. This is a common problem for many home sellers, they owe about the same as what the house is worth. When they list with a realtor, the house is priced to the loan and not priced to the market. So the price is just a little too high, and it just sits on the market with no offers. You mentioned it needs some updating, and that makes it even harder to sell.

So your friend has a couple options, and none may be exactly what they want.

1) Lower the price, and sell it traditionally and come up with some money out of pocket for closing costs.

2) Don't sell and wait till the market improves (could be long wait - depending on local market).

3) Keep it and rent it out.

4) Sell it sub-to (as you mentioned). This is my area of expertise. If your friend doesn't mind staying his loan staying in place for a while, there are many possibilities. You can get a buyer that brings a down-payment, where you and your friend can get paid. Depending on how good his loan payment is and how much people typically pay for a house payment in the area, he could even wrap his loan and make a little money every month.

So you should explain to him what is possible, but also explain the risks with a sub-to. And he may have a hard time finding a new loan right away. (He may need to rent for a while). Its something you and him have to be comfortable with. (It's definietly not for everybody) But if done properly can be very rewarding.

Good Luck,

Larry

Robert,

Your numbers do look pretty good. It couldn't hurt to try to negotiate away the balloon payment, and/or better price. The last thing I would consider before jumping in is; the demand for housing in that area. Is there good employment to be had in the area? Look at vacancy rate and months of inventory for sale of homes and townhomes in the area.

If your exit strategy could possibly include selling the property, I wouldn't want to be close to having to make a balloon payment and be unable to find a buyer at a good price.

Good luck.

Larry

Clayton,

Glad the situation didn't develop into something more. I had some of my mailings looked over by an RE attorney I had on retainer at one time. And he said the same thing basically; Avoid using the words or "stop foreclosure" or "foreclosure" at all. Google "MARS Act", this is the federal law (in addition to any state laws) you need to be in compliance with.

But don't let this discourage you. There are alot of honest RE investors like us out there, that are providing a useful service to people in trouble and are honest and not scam artists. My mailing say something like this now: " If you're behind on payments, that's OK, we often buy from people behind on payments". And "we can help you avoid any negative consequences". You could also say something like "don't be a victim of the bank".

If a police officer or anyone ever calls you and asks about it, and what you do to help them. I would tell them: " I buy their house from them". Then they are helped, and they no longer have the problem. No scam, doesn't cost the homeowner any money.

So don't be discouraged by this, and keep marketing.

Larry

Robert,

Your deal sounds good so far (the owner finance part especially). The key piece of information missing here is what is the FMV? Look at what comparable properties have sold within the last 6 mos. Most investors would want to be buying and walking into some equity. Especially when we are putting cash down.

What is the sellers level of motivation? (reason for selling). Do they need to sell due to financial distress? Why aren't they listing it on the MLS and getting the full retail price? The balloon payment doesn't sound like something I would want unless there is sufficient equity, so that i know i could sell anytime during the 5 years and walk away with a decent profit.

Good luck.

Larry