All Forum Posts by: Jonathan (JB) Borchers

your initial contract w/the seller will only be for the purchase price with him/her, i.e. $35k - for your assignment of contract that you will have executed with YOUR buyer, you will reference the initial contract and purchase price of $35k, and list the assignment fee (i.e. $5k) you've figured out for the property. your buyer is agreeing to take over the initial contract, then agreeing to pay you the $5k wholesale fee in the other document on top of the initial sales price.

good deal, it sounds like you've got your ducks aligned -

that is correct - the EMD will be paid directly to the seller at closing (or refunded to buyer if their financing already covers the purchase amount)

also, how strict is your seller being on terminology of the EMD in the contract? i'm also assuming he won't allow any escape clauses - and even if you bail during your dilligence he wants to keep the money. so more importantly, make sure he'll accept your escape clauses that allow you to walk if the repairs are way off, etc. last thing you want is no buyers since repairs are jacked up, but your contract wasn't worded correctlly and the seller keeps your EMD.

if selling as low as he is, you should have some bargaining power for YOUR terms.

you as the buyer need to create what's comfortable for you - i.e. EMD to be deposited within 3 days of acceptance of this offer, to be deposited following inspection period, etc. that can give you time for your buyer to front the EMD instead of you.

do you have friends, family, etc that you could borrow from in the meantime? offer them an extra $50-$100 as interest when you pay them back in a month - a credit card cash advance? if these are deals (as they appear to be), then you should be able to wholesale them quickly. and once closed, collect your money and pay off the source of your borrowed funds immediately. the costs of these sources are pretty low if it means not losing a real deal.

yvonne,

any updates on this deal? i'm curious to hear about the latest.

redskins 35
browns 32

i'm sticking to it...

i was looking into buying a property that needed a loan under $50k about a month ago - one mtg broker i spoke with said that especially w/market conditions right now that almost all lenders need a loan amt of at least $50k for an investment prop, and a max 90% LTV loan. she said she'd look into finding me a lender, but then she never called back. i didn't follow up as i chose not to pursue the property.

i work for a lender and they apparently still do loans as low as $30k, but i'm an employee so their programs are different.

my thought is that if it is in an area w/low values, someone has to be out there lending.

my advice is to get in touch w/a great local mortgage broker. the broker will be in tune w/what's going on right now and will give you the generic info you need w/out running your credit/charging anything.

i haven't gotten into my first rehab yet, but from what i see paying 14-18% and a few points w/closing costs seems to be the norm for hard money, at least for beginners. so anything less than that and near prime is great. at an 80% ARV if they can roll the closing costs and some interest payments into that loan it will make it even sweeter.

i would only think that since this lender offers traditional financing as well, make sure to scrutinize their qualifying standards since they could be more strict w/your documentation.

i only choose to talk to a few select people close to me of my REI goals so i do not have to constantly hear about their "good advice" - my mother is supportive, but since she has no idea how any of this works, she would have a heart attack if i explained i was doing a rehab on a busted property and borrowing at 15%.

i would suggest contacting a good financial advisor before making a decision - it really depends on your goals, and when you want to retire, what kind of returns you want to make, etc.. i would think most good advisors would not encourage you to pay off the loan unless you sell. for one, interest rates are amazing right now (and historically speaking). so you aren't paying much to borrow the money, so don't tie up $31k just to get rid of a payment - however, if you only plan to keep that $31k in a 5% or less money market for 30 years then based on a returns standpoint it could make sense to pay it off since your mtg rate is higher, at 5.8%.

but do you have at least 6 months worth of reserves elsewhere if you did use the $31k to pay down the loan? if not, then this decision is a no brainer - keep the loan open and make sure to keep enough money available.

however, considering you have a grasp of real estate investing based on the rehab of a foreclosed home, i expect that you want to make much higher returns on any investment you make. although a primary residence isn't an 'investment', analyze it as such if you are deciding you might put money there.

i have a decent chunk of reserves saved up, but if i had your liquidity i would look for much better returns w/that chunk. if you wanted to make a solid return to outweigh what you are borrowing w/the mtg, i'm sure that a handful of the investors on this site would offer you at least 10-18% return if you let them borrow some of that money to fund part of their deals. and even though you are making a mtg payment, the 5.8% interest rate is minimal in comparison to getting a possible 15% return (or possible profit share to increase ROI depending on how you structure if you decide to lend your money as a private investor). crunch your numbers - the higher ROI opportunities should be out there for you. the higher return will cover the 5.8% you are borrowing and then some.

but as i suggest, you should talk to a financial advisor first or some other financial professional to see what works best for YOU. it wouldn't hurt if they knew a thing or two about real estate investing either.

welcome valerie -

i'm from the northern virginia area - have fun around the site!

thanks for the replies everyone -

i definitely do not plan to actually buy or sign a contract site unseen. i've just heard of that tactic so you can get a verbal over the phone, and then work on tying up the property in person quickly. and then once under contract you do the due dilligence of estimating market value and repairs. and when the seller is way off (which i definitely expect), you then go and renegotiate the terms since you have evidence to prove to the seller their numbers are way off (contractor's repair esimates and a CMA, etc.). then either the contract falls out or you get a lower sales price. i learned this tactic in a guru course, so was curious of the real world application. i personally wouldn't want to set up an appointment to look at the property if the seller won't even consider my verbal offer based on the hypothetical numbers of the property.

i plan to learn how to estimate my repairs w/experience - but until then my concerns are:
1) even if i get in good w/a handyman, do you find they'll come out w/you when you plan on signing a contract w/the seller to estimate repairs? i would only think they'd come out once you have it under contract.
2) do sellers ever question your numbers when analyzing cost of repairs? do they expect to have a professional estimate repairs or do they seem to be ok w/you the investor doing so?
2) when wholesaling to my buyers, wouldn't they want to see an estimate of repairs from a contractor as opposed to a newbie investor? i know the buyer will prob do their own due dilligence, but i obviously want more credibility to my name when i wholesale.

thanks guys