All Forum Posts by: Jeff Ballus

Hi AJ, is it a good deal. Just because the realtor said $500k doesn't necessarily mean it is a good deal. Do some comps, if you need help with this I'm happy to help. Why do you want to buy it? A value add opportunity? Are you gonna BRRR it? Do the rents cover the mortgage? Assuming it is a decent deal, can you offer him different terms and see if you can fund it with a smaller entry cost which might make it easier for you to find the cash (hard money, a partner to fund the cash and share in the ownership). Say 10% down ($50k) instead of the 16% down he wants. If he owes a mortgage on it maybe the rate is low and you can buy the property "Subject to" the current mortgage (take over his low rate mortgage and pay him the balance with seller finance at 6% to save you some $$). Happy to discuss all of these strategies over the phone just shoot me a dm. Good luck!

Hi Dustin,

Have you thought about a partnership where you partner with someone(s) with the capital to purchase it outright and you split up the proceeds? Are you planning on managing it yourself? If so, a money partner might be interested in partnering on it if they can get some passive benefits from it as long as the cash flow is right.

OR

Can you put enough down to limit the lender's exposure and make it palatable for them to lend say 50% of the deal so they don't have 80% LTV exposure?

Yes, personal guarantee and/or collateral should suffice. Let us know what ends up working out for you. Good luck!

Looks like the video didn't link, just search for "Pace Morby's FAVORITE Note Deal | Creative Finance Masterclass 17 w/ Pace Morby" on youtube.

I personally haven't done one of these before but Pace Morby calls them "dating contracts", check out this video below. This dating contract strategy could also help with your desire to handicap/vet buyers by having them prove to you that they can fulfill their end of the deal for a period of time before the contract becomes fully executed. Depending on the buyer's desire for more "teeth", all of this can be satisfied by stipulations in the agreement that satisfy any of their reservations. What exactly do you mean by "teeth"?

Hi Connor,

Solid, comprehensive analysis! I'm pretty sure there is a way to structure the deal where:

You seller finance the "purchase" and keep the current mortgage in place.

The buyer takes ownership in principal but the agreement is written in such a way where the purchase is triggered at the exact time that your original loan is paid in full. Its basically a future dated purchase and sale agreement.

The bank does not need to know, there is no transfer of ownership until loan is paid in full.

Double check with a solid real estate attorney here but I'm pretty sure this is possible.

Good luck!

Hi Tiffany,

First of all, congratulations on your rental portfolio and locking in some great rates. Now you've got some options. Have you ever thought about selling some (or all) of them with seller financing or doing something creative like the "subject to" method? 

If you aren't familiar with "subject to" it is where a buyer takes ownership of the property subject to the current mortgage. Basically the current mortgage stays in place and the buyer takes over the payments and all of the property management and in a lot of cases the seller gets paid a monthly fee as well. Google "Pace Morby creative finance", he's got so much info on this and how it can benefit sellers.

RE: Seller Finance, A lot of buyers are holding off on buying due to the interest rate environment, dealing with banks, getting qualified, etc. but if you could offer an option to someone to buy your property and YOU become the bank and get paid every month with interest, this could be another option for you.

A good real estate attorney can make these kind of deals air tight for you to limit your risk.

You've got a lot to think about but like I said, SO many options. Best of luck and I look forward to following what happens. Feel free to reach out anytime. 

Great feedback Shafi! Its always nice to see actual numbers with examples and I agree a clear plan would put all minds at ease. So to be clear, say the investor put in $1M out of the $2M purchase price (50% equity holder). The plan is for 12-18 month improvement timeline but the work takes 24 months. In addition to the $1M they put into the project, how would the additional 15% be calculated?

Much appreciated,

Jeff

Thanks so much Ronnie! Good to hear what other investors feel about an appropriate return on something like this. This definitely helps me model out the 5 year plan with 15% return being the goal. 

I appreciate you sharing your input and I'll share any additional helpful tips as I vet them out.

Best,

Jeff