All Forum Posts by: Joshua Durrin

Great feedback all. I've been thinking about this dilemma for a few days more. Just popping back into the forum to realize our thoughts coming into alignment. I was thinking along those same lines @Brian P. by approaching her with an offer for a portion (ie 1/3) cash and the remainder carried back in a second position note for a period of two years additional to enable me time to force appreciation in the property. Response to her is drafted and going out in the mail today. Thanks for all the feedback. I'll keep you posted on the progress. 

@Devan Mcclish @Brian P.

Thanks gents. Great point on the cap rate. That was the light bulb I was forgetting. I was looking at comps on the MLS based on recent sales. Using the cap rate on a property like this, even though many sellers would balk, is definitely the right way for me to be looking at it for my business.

The owner is approaching triple digits in age. She said her heirs want nothing to do with being a landlord and are likely to sell it anyhow. So she was being somewhat proactive at settling her affairs. I asked about alternative sales strategies and she mentioned she'd rather have the cash to disperse. 

Very curious about the nugget you have. If you know of anyone I could work with, I'd be interested in doing so. I'm a newbie taking action and would very much appreciate the guidance. 

Little more info... units are rented in full under market. Currently bringing in about $5k per month. Full potential after renovation is about $8600 per month. Renovation won't be too extensive, but electrical is not to code. Exterior looks well kept, but dated and owner said interior was in good shape. Estimating the ARV to be $1.4M by comps, though comps are somewhat difficult to determine due to the uniqueness of this property. Owner is looking for somewhere close to $1M in cash at closing to pass onto her heirs. I have some capital, but not access to all of it. Would love to find a partner to make it work but not sure where to begin with finding one, especially when the property is not in contract.

I recently launched a marketing campaign and received a call back on a four unit property valued at about $1M. It's a bit out of my league for myself but there is definite potential. Being new, I'm not sure what I should do. Any advice?

@Eric Z. 

Hi Eric, any updates?  I'd be curious to know how your campaign went.  Keep me posted if you come across a deal too.  

With syndicates I know you can't publicly advertise per se for investors without complying with strict and complicated SEC laws.  However, is it legal to publicly advertise for private money lenders?  I wouldn't be claiming any sort of return rate or anything, but I might discuss with those that responded to my ad generally my business plan and acquisition strategies.  

Don't forget also that downturns are particularly bad for novice flippers that bet on appreciation. If you purchase your hold-rental property properly today and manage it today where the expenses are paid and you're cash flowing, a down turn in property values has less meaning for you than a flipper. Granted, rental rates are also susceptible to change, but when under a lease, it's far less frequent than today's retail market fluctuations. Moral... buy right and manage well.

Congrats @Arlen Chou.  Thanks for posting.  @Michael Quarles is speaking tonight at the meetup in San Jose.  You going? 

Hi there,

I read in a couple of posts and listened to show 70 about subject to deals but didn't find these questions answered. I wonder if you fellow BPers might be able to help me understand a few elements of subject to deals that I haven't been able to find firm answers to yet.

1. In California, I’m under the belief that when you disclose the take over of the loan while in escrow to the lender that the lender has a certain time-frame in order to request a revision of the existing lien. Once that time-frame expires (90 days in CA if I’m not mistaken), then the lender forfeits by default their ability to call the note due to the take over and change in ownership, thus eliminating the risk for the note being called at a later date for this reason. Is this true?

2. In the interest of full disclosure and risk mitigation, don’t you always want to notify the lender of the subject to arrangement? That would also start the clock ticking for them to “[bleep] or get off the pot” with their call of the note too, no? ... thus further avoiding the risk of having the note called unexpectedly down the road.

3. Despite the points in question 1 (assuming their accurate), the lien holder often also places restrictions on further encumbering the property, say, with seller financing or a second position loan to cover the equity spread for instance. This too gives them the right to call the note due if you do so. I suppose you just work through it with the primary lien holder in that case to either restructure the loan or find alternative financing? Granted, you’d lose the amortization benefit I suppose. Restructuring would be most beneficial for the lender because they can do so without losing their first position from what I understand. But what is their incentive for wanting to work with me as a buyer to enable this transaction to go forward in the first place?

4. Perhaps most important to the seller, they remain liable for the mortgage on paper… that is, it’ll show up on their credit report until paid in full (or worse, defaulted, foreclosed and written off). This also creates a hardship for the seller in trying to buy their next house and move on with their life. How would you address this hurdle with/for them? I’m under the impression that there is a document that you can provide to them absolving them of the payment responsibility when they apply for further credit. But doesn’t that have to be also signed by the lien holder too?

I appreciate you taking the time to help me. I look forward to the feedback.

Great job! Congrats! How did you find this property (if you don't mind my asking)? How long did it take you? I'm just starting out myself and have been looking in my market with much less satisfactory results. Losing steam, but I'm determined not to lose at this "game." Thanks.