All Forum Posts by: Jeff Cichocki

@Jenna Walker, 

it all depends on how the process works in your county. Some counties require a down payment at the time of the auction while others require payment in full. 

1. Down Payment = You put up the DP, the HML will finance the rest. Some will give you back some or all of the DP; most will not. Most want to see you with some skin in the game. Rehab funds are almost always available.

2. Payment in Full = You can still use HM, but it would be as a refi to get most of your own funds back plus the rehab funds.

We are not all the same, but we are out here. You will need to find a lender that will work with your situation.

Good luck!

@Jeremy James Hartman,

I have to agree with @Hai Loc. It's not that you asked to borrow 20k. It's the way you asked for it. Not providing any details doesn't help us or you secure those funds. You very well may have a great deal that's worthy of funding. Can you provide details? If it's a good deal, I'm sure someone will want to help.

@Jacquelyn Dockery,

I'm sorry, but I half disagree with all the nay-sayers above. Boot camps and mentors can be invaluable. Yes, you will be sold to during the event. Yes, I understand that everyone hates to be sold to. I do to. But, there is always great information and great networking opportunities at these events. There will be lots of people there that are in the same boat as you. You may very well find someone that you will become good friends with and help hold each other accountable. I can't tell you how much going to events has helped me over the years (yes I've been sold to more times than I can count, but I left my credit card in the room so I wouldn't be tempted in the moment).

I have bought coaching and mentoring packages throughout my career. Some sucked and some were life changing. All were valuable. The ones that sucked helped to show me what to look for. Some people will say that that is an extremely expensive way to learn. I would argue that it's a lot cheaper than losing my backside in a couple of deals.

There is a lots of advice that is freely given here on BP. Some good; some bad. But all of it is from well intentioned people who want to help. Unfortunately, none of us truly know the position you are in. The best we can do is to think we understand; our perception based on our own experience and what others have told us. However, you are the only person who can make the choice as to whether or not mentoring is for you. You are the only one that can decide whether or not to go to a boot camp. You are the only one that will benefit or not from your choices. No one else here will be harmed by whatever you decide; good or bad.

Don't take the decision lightly, but also don't just listen to the negative comments either. If you make your decisions based solely on the negativity, you will miss out on a ton of opportunity in your real estate investing career. You may even end up walking away because you end believing it's too hard.

I wish more people would give out advice from both sides of the aisle. But, that's not how the human mind works. For some reason, we are attracted to the negative. If you think about it at all, you will realize that more good has come from the things you've done than bad. And so it is with attending seminars, boot camps and having mentors.

Anyway, just my two cents worth. I hope it helps to shed at least little clarity on how to make the best choice for you.

Good luck!

@Alex Jean Baptiste,

You can absolutely get the seller to do seller finance. As buyers, we do all the time. You can also give them back a piece of the deal (cash flow, equity or both) in trade for the $200k discount. We've done that in a few cases.

I'm not a fan of your margins being thin though. If your margins are too thin and a furnace needs to be replaced, will you be coming out of pocket? You need to make money. You need to make enough that the property can support itself. If it can't it's not a good deal for you. The seller will understand if you're open and honest about it.

Since the seller is intrigued with seller finance, after you tell them that you need a deal that cash flows for you while being good enough to make sure that they are getting paid, ask them for help in solving the problem. The world of creative finance is only limited by your lack of imagination. You can literally make the deal anything you want as long as it works for both of you.

Also, there are potential tax savings to the seller to sell to you over time. Look up "installment sale" via the IRS and learn the rules. Your seller may be more agreeable to the discount if you can show that you are paying for it with tax benefits to them. Just a thought. We've used this strategy before as well.

Lastly, if the seller has more than 500k in equity in the property, it may be possible to structure the sale in such a way that they could pull approximately 95% of the cash out of the property and not pay any taxes on it for up to 30 years (yes this is completely legal and the IRS has documented rulings about its use). It sounds too good to be true, but it's a very little known strategy. I'm helping a friend work on selling off 2M worth of small apartments do this. He's pretty stoked at the possibility of it.

Good luck!

@Richard Boyd. I'm sorry to say, I haven't met very many anywhere in our entire state. It's not they don't exist. But, they're a very rare breed here. If one happens to reach out to you, I'd love the referral if you don't mind. As a lender, we do a lot of creative financing with investors (not home owners). But I'd love to work with them as a buyer.

@Helene Vanderhaeghe,

Sometimes the best deal we ever do is the one we don't. I understand your anxiousness and desire to get this deal done, but at what cost? The negative cash flow makes it a bad deal. I'd be worried about the guy who's willing to lend you the money. Is he really hoping you fail so that he ends up with the property?

Speaking as a lender, there are two things that have to met first and foremost in every deal that hits my desk. They are...

1. Is it a good deal?

2. Are you the right investor for this deal? In other words, do you have the capacity to make it successful?

I'm sorry. But based on the information provided, you fail on rule #1. And, because you're insisting that this is a good deal, you now fail on rule #2 as well. As a lender and as an investor (I'm both), I'd run from this one. This may be a good deal for someone else, but it sure doesn't look like a good one for you (IMO). I think you're setting yourself up for a financial hardship. If I'm right, that hardship will bleed into other parts of your financial life.

Good luck!

@Cody Beard, it's a lead Gen site. I've looked at it. All it does is scrub public records to find lender's who are not entities. It assumes they are private lenders.

The trick is to find the lenders that have done more than one loan. If all they did was one, it's wishful thinking that they'll fund you. Most of them sold their house with seller finance. That does not qualify them as a private lender.

Good luck.

@Pete Storseth,

There is a lot of free help here on BP. Some of its good, some of it awful. All of it is given by well intentioned people. The problem is, you have to figure what's good and what's not good on your own. It's hard. You don't know what you don't know. Lots of bad advice sounds good.

A good mentor will accelerate your growth and help you weed out out the garbage advice. Remember, you get what you pay for. Those that say to never hire one are not giving you the best advice. They are just giving you their opinion. It may or may not be right for you. In the end, you have to decide on your own if it's something you want to do and if feel it's worth it.

It's not an easy choice. I've hired mentors who sucked and I've hired mentors who were life changing.

Good luck. I wish you the best.

@Stephen Rager,

It's no where near as easy as they show in the webinars. However, if you can leverage Hard Money or Private Money to get the acquisitions and rehab portions of the project done, it is possible to refinance your way out and land with little to no money out of pocket. There are lenders who will refinance these projects and give cash out at the time of refi (within reason). The better the deal, the better the chances. Obviously, if you can leverage HM or PM to get going, you'll be preserving your cash better and creating additional opportunities for yourself in the process.

Good luck!

@Timothy Howdeshell,

Unfortunately, the scenario you paint won't work for most HML's. Lenders want to be in first position. If the HML is willing to do the deal, they'll want to take out the first mortgage and the seller. They'll want the whole thing. If that works for you, you'll be able to refi into something else after.

The basic numbers you quote are good for LT financing, but will be difficult to get 100% covered by a HML. Most HML's want you to have some skin in the game. This usually comes in the form of some sort of financial participation from you. I'm not sure there's a way around it using HM.

However, if you can find a private lender, you may be able to pull it off. You should still give them 100% of amount financed (risk is exponentially greater with every position behind 1st the lender gets). You want your lender to be safe and secure.

As a side note... Have you asked the seller if they would lend you the money to do the rehab? It's not common, but I've seen it done.

Good luck!