All Forum Posts by: Hattie Dizmond

Sacrifice. That's how I manage it. I work another 4 to 6 hours most evenings, after I get off work from my corporate job. How much you work will be, at least partially, determined by what avenue you decide to pursue in your REI strategy and how hands on you want to be.

I think it completely depends on what market you're talking about.  There are natural features that drive bubbles in areas like CA and FL.  Think about it.  In CA, you have the ocean on one side and the mountains/desert on the other.  Desirable areas for development are limited to a relatively narrow strip down the coastline.  In FL you're squeezed by oceans and swamps/everglades.  Other areas, like the NE are simply space constrained due to the heavy population.  Now, here in Texas, we don't really suffer from bubbles.  In 2008, when the bottom fell out of RE, DFW didn't crash.  In fact, we didn't even real a real retreat of prices &/or values.  The only impact was a stagnation of appreciation for several years, mostly owing to the fact that lenders locked everything down so much, people couldn't buy properties.  It wouldn't surprise me to see a correction, possibly major, in some of the overheated markets.  CoreLogic is indicating CA could be correcting as we speak.  I've seen a slight weakening in the DFW market, over the last 3 to 6 months, but we are still well below a balanced market, with desirable areas still having an inventory of well under 6 months.  Bottom line, bubbles don't cover the entire country at one time.  Hopefully, a correction in some of the major markets will scare some of the investors out for a while and open things up for the rest of us.

As long as there is space for your investor to make their profit, your assignment fee is fine.  Everyone wants to make as much as possible.  However, no reasonable/serious investor is going to begrudge you your profit.  And, yes, you can do a double close - if it's legal in your state - and bake it in.  However, it will be disclosed in the closing details, so don't think you're hiding anything.  Just be upfront with you investors, don't squeeze them and find good deals.  Personally, if you brought me a deal that met my criteria, after your assignment fee was baked in, I wouldn't care if your assignment fee was $50k.  The fact is, you left enough meat on the bone for me to get my profit. 

First, you can't just "assume" the loan.  There's about a 99% chance that mortgage contains the standard verbiage around acceleration, if the property ownership is transferred.  Which means the bank could call the loan due immediately, without all the lengthy non-sense required to foreclose, if the property is transferred to you.

Second, you need to know, directly from the bank how much it would take to bring the loan current and avoid the short sell.  

Now, if I'm doing my math right, even taking the high-end estimate of the rehab costs and the low-end ARV estimate, you've still got about $105k of potential profit/equity in the deal. What if you partnered with your cousin and did seller financing on the property? All you would have to bring to the table would be the $ needed to bring the loan current. If you have a contractor ready to bring money to the table for the rehab, plus moving money for your cousin, perhaps those funds could be used to cure the loan, then supplement the rehab with hard money? Lots of options, when you have that much potential profit available.

I must be confused.  If you are wholesaling the property, then why are you involved in the closing?  Get your assignment fee and get out.  Otherwise, what you're doing is probably a double close.  Am I missing something?

CapEx expenses are for expenses that can be depreciated (i.e. a new roof, new HVAC, etc.). They are generally fewer and farther between, but they are higher dollar items. If your big ticket items on this property have all been replaced within the last 5-years, you can get by with less for your CapEx expenses. Otherwise, build in 5%, until you have at least the cost of a new HVAC unit each door in your maintenance account.

The Repair category is also known as OpEx.  Those are things that are standard operating expenses and don't do anything to extend the life of the property.  (i.e. plumbers cleaning out tree roots from your septic lines or having windows replaced due to vandalism)

Also, you absolutely have to account for vacancy.  What % you set aside to cover potential vacancies is going to vary based upon the specifics of your property and your market.  Since you're purchasing properties that have a rental history, the current owner should be able to provide details and records to prove the properties occupancy history.  At a minimum I would say 8%.  In some markets, for some properties you might have to go to 10%.

I agree with Patrick.  That 50% analysis scares me, and I hate the idea of having $72k in liquid capital sunk into one deal.  Personally, I don't like the idea of rentals purchased for above around $150k.  That's my preference, in my market.  But, I want to acquire multiple properties, and the more funds & borrowing base I have tied up in one property, the few properties I can acquire.

No.  Putting the property into a trust DOES NOT protect it from the bank's rightful ability to accelerate the mortgage.  All it does is help obfuscate the fact that the property ownership has transferred.  However, if the bank is actually on top of things and sees the transfer, they absolutely can accelerate the loan.

Buying any property Subject To presents the risk the bank/lender will accelerate the loan, unless you have written agreement from the lender or the original loan does not include an acceleration clause due to the transfer of ownership.  

Does that mean you shouldn't do a Subject To deal? No. It just means you need to understand the realities and risks, however small they may be. And, as long as the mortgage is getting paid on time and the insurance is current, the risk is small. Why? Because banks/lenders are not in the business of owning property. In fact, the big banks basically suck at it, and they already own a ton of them. A performing loan makes money. REO properties cost banks money. The one thing banks are generally good at is math. Turning a performing loan into a non-performing REO asset isn't good math.

Absolutely you can be a private lender.  If you have capital or the ability to acquire capital cheaply, you can be a lender.  I have partnered with a gentleman in CO for rehabs.  The first couple of deals, we did a 60/40 split, with him getting 60% of the profit, because he was taking all the risk, and we didn't have a track record together.  Afterwards, we moved to a 50/50 profit split on most deals.  He would either put up all the capital for the purchase & renovation, or he would provide the initial capital and the additional financing.  Unfortunately, he had a change in his life that has tied up most of his liquid capital, but that was just an example.

Bottom line is that there are plenty of folks right here on BP making a killing financing deals.

Welcome!  Let me know if I can be of any help.