All Forum Posts by: Jason S.

Originally posted by Nick Furlough:

I need to get $135k out of this property to break even. My buyers can only get approved for $127k. They are willing to pay the $135k just have no means to do so. They have tried to gift, borrow, up the mortage and nothing works. I really need to get this property moved. What are my options? Can they sign a promissory note for $8k and not disclose to the bank? I dont want to lose this deal over 8K but my original asking price was $159K. I have no more room to move. Any advice is greatly appreciated.
Holding costs are $600/mo

Thanks!

Nick

1. Please do not make the mistake of trying to "make" this happen. Never push the limits by trying to "go around" the rules - most "go arounds" especially these days are 100% illegal.
2. It sounds like the sum of demands on the property with closing costs are $135K? Or is this your personal "break even"? If it is a personal break even then determine if it is legal for you to carry the second and do so.
3. If the $135 is a sum of demands on liens against the property, and you are losing - start asking all parties for concessions.
4. When you say they have tried "gifting" or "borrowing" why does it not work? Because they cannot "borrow" it or you cannot figure out how to apply the borrowed funds to the deal? Same with "gifting" - what do you mean? They have someone to "gift" it but you cannot figure out how to work it in?
5. The buyer - are they FHA, VA, Conventional, Hard Money - where are they getting their funds from?
6. You are a "banker" - make certain you in no way use your fiduciary capacity to "make this deal" happen - You know about the $8K - do not imply nor in any way not disclose the $8K - you can get in very big trouble for that.

Originally posted by nationwidepi:

Make sure that each person who says no to you at first is kept in a database of some sort. Each time you complete a deal, make sure all the "no's" hear about it. You will be amazed at how they all come to you down the road "asking you" if they can get in on your deals.

The above is superb advice!

I looked around a little and it is possible that you have a barrier to borrowing because the amount is so small? It appears that several of my sources do not want to go so low because they cannot make enough off of the points.

You may have done some of the following....but if you haven't:
1. Try going to any and all investment club in your area and ask ask ask around!
2. Ask Realtors if they ever closed deals where the buyers had hard money? Then get the address, look up the deed, see the lender, and call.
3. Look up Trust Deeds at your assessor office and scan for non-bank lenders.
4. Go to B lender (probably not many of these around any more) or banks and ask who they refer deals to... I knew a banker that was approached by customers to send them the loans they could not do (this of course was against policy so they did not do it but.....)
5. Find a mentor in your area that will partner up with you, then using the quoted advice let the others you know with money how successful you are ...
6. If you are in a smaller city, go to a nearby larger city and ask around - Realtors, etc

Also - this may help but not in acquisition but in exit - go to note buyers and ask their seasoning requirements etc - some are as little a 60 days. Show them you financials and what you are trying to do and then see if they will buy the note from you.... you may take a hit on profitability but after some time it will get better. If they want to discount the note in order to increase their return try giving them a higher interest rate and keeping your equity position - all things the same it is better to pay a higher rate on a smaller note than a lower rate on a larger note.

If you are still "in play" with this deal let me know and I may be able to get you a solution.

Most HM will want 20% cash participation or at a minimum 10% (but usually 20%) and will have a max loan amount of 65% after repair value but that is a guideline - all depends on how much they like the home and area.

The repairs you mentioned paint and carpet could cost you as low as $5K or $6K (or less) for a $420K La mirada home (assuming median price sq ft of $238 I am guessing it is around 1765 sqft). Closing costs on the other hand may add to the deal somewhat.

Either way if it is still viable then email or PM me and maybe I can help.

Ways to save money:
1. Keep seeking out competent help - ask ask ask other re-habbers for a referral to their "drywall guy" or "tile guy".
2. Have the contractor price out labor only - you provide all the materials on the job site ready for him to work - this way they do not have to waste time at Home Depot and they are not marking up materials etc and you should save a lot of money. They also are not having to plan for anything - they end the worker - save the contractor effort time and hassle and you will get a better deal.
3. Shop around - a lot - watch for sales - just bought 5 pre-hung interior doors on sale at Home depot for $44 each. Sure I may find them cheaper elsewhere with A LOT of looking but this was a great deal.
4. Plan Ahead! - if you are painting & replacing doors and baseboard and everything is the same color - have everything on site so if the painter is using a sprayer - they paint the doors and everything at the same time.
5. I have said this before but it is worth repeating - know what you are paying and talk to others - a lot - compare notes and always be looking for a better deal.
6. Find the outlet stores for tile, carpet, cabinetry, granite - you name it. Seems like every town has an area where these stores locate themselves - shop these stores also - Home Depot and Lowes are NOT always the cheapest provider. I just bought a lot of laminate flooring from a guy that was closing his shop. $0.89 sq ft with 9 color choices - Home Depot has some at $0.99 sq ft but only 2 colors and neither matched what I was looking for.

OK thats enough on this for now - but work at it and you will save many thousands on every project - some deals that were "not doable" might jut become "doable".

Originally posted by Rob Beeman:

Are ther any web sites that allow a person to search for rental comps, nationally?

I have been using Google Maps.

Type in address or city or zip code or whatever into Google Maps. To the right of the search bar it says "other search options" - select Real Estate. A new window will appear in a "frame" to the left and select "For Rent".

Puts many rentals on the map with little red dots - hover on each dot and see the asking rent.

Because your numbers are tight you may also want to factor in the number of homes that banks are holding but not listed (shadow inventory) in your area as well as number of homes that are coming soon - e.g., those in Notice of Default and/or Notice Trustee Sale status.

Quite frankly given what you have shown, it does not look like a good deal. To net a max of 13% (and that's your top top number could easily be less) after cost of sale as shown in previous post... way too risky (in my opinion of course)

As has been mentioned price is dependent on what you are doing - ready for rent - or ready for new buyer?

1. All Wood Cabinets - $1800 installed (10 pieces)
2. Granite - 2 8' slabs installed 1 sink $700
2.5 Kitchen Fixtures - $250
3. Flooring - $1,500 (some looked fairly nice)
4. Drywall - $700
5. Paint - $1,500 ( assuming not messing with that textured wallpaper/vinyl)
6. Windows & Slider - $1500
7. Range & D/W - $750
8. Bathroom Vanity - $500 with fixtures
9. Walls (except for deliberate holes), Doors, and door frames look pretty good.
10. Treat the deck $??? sorry do not know
11. The overall condition inside looks like the last tenant/owner did "care".
12. Now add a couple grand for everything I missed and you are exactly at the same numbers the others quoted.


As for it being a good deal - well it depends on your market - ours has fallen further than the numbers you mention for a "fixer".

There are a lot of crazy new rules and "crazy talk" of crazy new rules revolving around all types of lending.

Have not heard of sharing 1st year default liability that would be a tough sell. It certainly would favor banks and wipe out independent mortgage "shops".

The back end profits you mentioned (most of which is called Yield Spread Premium or YSP) is certainly on the chopping block.

It looks as if all the rules, as all over regulation does, favor the big players and originators like Banks and are focused on destroying the independent broker. This has been the goal of banks for many many years - by eliminating the YSP etc they remove the money they pay to the individual brokers and hence "Lower the cost of origination" <---- that is something you here from Bank Execs all of the time.

Originally posted by Vikram C.:

Greg, do you know what construction costs are like in your area for these homes that are selling for $75K? That is, how much per square foot would it cost to build one?

Riverside County:
1. Developer Fees $17,000 per door.
2. School Fees $6 per foot.
3. Permit/Inspection/Plan Check Fees $4,000
4. Water Meter $5,000 (if you are lucky)
5. Gas - minimum $1,000
6. Electric $500 - $5,000
7. Septic or Lateral and Connect Fee - $5,000 either way

So to build a 1,200 sq ft home you are starting at $39,700 minimum per lot.

If you build at under $29 sq ft and the land is free you can pretty much break even...... no wonder building has stopped and unemployment in the County is 16%+