All Forum Posts by: Henrik Frank

Don't some people use lease options for this very purpose? This is definitely not my specialty, but I thought I saw that mentioned elsewhere. You get small down payment from buyer, lease payments during the 6 monhts and they close when the seasoning is over (or whenever they can qualify).

Can any of the lease option specialists extrapolate (or tell me how wrong I am :wink: )?

We are looking at picking up a couple of condos in a complex where we already own rentals. They are easy rehabs for us because we already know them inside out, but I'm concerned about our future buyers being able to get financing. We financed the last unit we purchased (the next ones will be bought with cash), but the lenders seemed to be very concerned about the high NOO rate in the complex. These units are frequently used for rentals, so the percentage will always be high.

What are your experiences with buyers getting financing when the NOO rate is high? Are there ways around this (e.g. certain lenders don't mind?). I'm aware of lease options, but we need to get our cash out at the time of closing in order to move on to the next projects.

I am contemplating trying to pick up one or two REO properties for rehab (assuming I can get them at prices that make sense). However, I'm worried / confused about the seasoning requirements. I would likely be financing at least one of the purchases - likely through conventional or maybe through a hard money lender (never tried that before).

The issue is the seasoning. I keep reading about 90 day FHA requirements and 12 months cash out requirements. What do these mean for me?

90 days doesn't seem like a big deal to me (these are side projects and I'd likely take that long to finish them), but 12 months is a long time. Would I not be able to buy cheap, rehab and sell at a higher price for 12 months????

Does the situation change if I pay cash for a property?

A unit in my complex (Townhome, 3bdrm, 3bath, app. 1700sqft in Newport Beach, CA) received NOD on 10/14/08 for the amount of $5121. The loan was orginally made for $434K back in 2003 (I don't know what the balance is today). My best guess as to the value of the unit in today's market would be a minimum $550K (3 similar units have sold for between $550K and $650K in the last 3 months). I don't know the inside condition of the unit (they were built in 1973 and some a very dated - others have been fixed up very nicely). The unit has plantation shutters all around (which is usually a sign that it has been kept up well or upgraded since those are $$$).
Is there a possible deal to be had here? If so, which approach to take? Wholesale? Rehab? Subject to?

I'm very capable of doing a full rehab of the unit (if necessary) - I know the details quite well from doing my own unit.

Would anyone more experienced be willing to do a JV as a teaching experience for me and split the profits?

With regards to the deals, others can probably give a better answer, but I have a hard time finding them. It seems everyone is watching the REO sales and when the prices drop to the level of the most recent sales (or just below), they get picked up quickly (at least in the areas I've been looking in).
A lot of places are bargains compared to what they sold for 2 years ago (some selling at 25%-50%), but are they bargains compared to what they will sell for tomorrow? I guess that's the million dollar question...

Anyone ever dealt with them? I'm having a hard time getting them to respond to a listing they have had for 100+ days and when we went to look at the property, signs and lock boxes had "disappeared" - much like described in here:
[LINK REMOVED BY ADMIN]

Just wondering if anyone has had any experience with them.

Thanks!

Looking at the SoCal prices, it seems most areas are very far from being able to offer rent / price ratios that would satisfy the 2% and 50% rules. In my complex (Newport Beach), a $700K townhouse typically rents for $2700-$2900 and you have $350 in HOA. You would have to the house for less than I paid in '99 to have positive cash flow. In Palm Springs, Palm Desert, it looks like you could possibly come closer to the 2% and 50%, but still not quite. However, in "less desirable" neighborhoods (I'm looking at Desert Hot Springs and Indio), it seems you can come much closer. Prices are lower (some rehab typically needed), but rents aren't that much lower.

Do you find that low income neighborhoods make for better rental investments?

Thanks!

It seems the flow of communication from REOs is extremely slow. The 3 day offer has gone out the window - it typically takes weeks between each correspondance. As a hands-on and pragmatic kind of person, this is difficult for me to deal with. One REO in particular has never responded to a submitted offer and has never responded to any of my agent's messages.

In general, I know calling seller's agent is frowned upon, but is that still the case in today's REO market? Do you call direct? Why would this be bad? It would seem we could negotiate a deal and I could submit an offer based on that deal in a matter of minutes rather than weeks and weeks if we talked directly.

I'm not looking to cut my agent out - he does a lot for me and certainly deserves his cut - I'm just looking for more direct communication...

What are your thoughts?

Thank you all for your answers. I know first hand about special assessments and HOA fee increases (I have had $10K in assessments and my HOA has gone up by 50% in the years I've been in my current place).
However, I still can't seem to rid myself of the thought of getting a "nice" condo for a starter rental. It seems there are so many things to learn and fewer things to go wrong with a condo. In addition to that, the Palm Springs / Palm Desert area seems to have a much larger proportion of condos than most other areas.

So - I'm still thinking about it. I have one under contract, but I'm having second thoughts about that unit. I had a low offer on a similar unit, but lost it to higher bids. I have a 3rd unit at around the same price, but it would be a better buy (slightly larger and with an additional bathroom), but the REO has never returned any of my agent's calls...

It seems I'm learning as I go and learning by the hour.

Thanks again!

Since many condos have outside and structural maintenance built in to the HOA fees - do the rules still apply? I realize that some maintenance always will be necessary, but it seems some of the bigger ticket items can be avoided? Obviously, you still need to count the HOA fees on the expense side...

Thanks,

\ Henrik