All Forum Posts by: Josh Gaddy

I'm hoping some of you smarter people may be able to shed a little light here. I came across an off market deal for a 15 unit storage complex yesterday. They are all 10x15. 14 are rented for $75 and 1 for $100 so the revenue is currently $1,150 a month. It also comes with a build able lot than can be expanded on or sold. He's asking $110,000. I have no experience in storage units but it seems like a good deal. Any advice?

Thanks for all the replies guys this is really helpful.

Ned Carey You make a good point...I can afford several months of a $800 payment but if they do thousands worth of damage I'm up a creek.
Joseph Bodek I like the idea of assigning the lease option here especially if I can't negotiate a free option with the seller. If he sticks by 3K maybe I can sign him up and find someone for $4K and pocket $1K.
Brian Gibbons I am going to have to read through your link about CFO's a few more times but it seems to be about finding a creative way to have consideration in the deal without using cash? Thanks for that info, I definitely don't want to be caught in a bad legal position. Also, the deal is in SC but I haven't had a chance to seek quality legal advice yet so do I certainly like the idea of assigning the LO and getting out like Joseph mentioned. I really would like the 300-400/month in positive cashflow though.
Steve Might I have been marketing a rehab that I recently completed as a lease purchase and have gotten tons of people interested in who "claim" they can put down 5-7K....I haven't checked them though so as Michael states I may be dreaming. (I recently inserted a tenant and sold out to a national buyer though so I stopped marketing for TB's)
Michael Carbonare I see what you mean. Ideally, I'd like to put nothing down and have 60 days to find a TB and make a profit on the front end, monthly, and at final sale. I believe the house is worth $130K based on good comps which puts the DP at $3,900. I'll can start off my negotiations at 0 but what if the seller stands pat needing money down...move on to the next or do you have an idea I can use a backup plan?

At the end of the day I'd obviously prefer the deal where I make a profit on the DP, monthly, and at the sale. If I am off base with the high DP that TB'ers would be willing to pay then is there another way to go? I don't think negotiating a 45-60 day inspection period will be a problem but I definitely need a 3-4K DP to make me feel comfortable with the risk of carry or fix up from a bad tenant in a sandwich LO format.

Maybe a wholesale LO make the most sense as a backup here since I 1)still need to learn my best legal format 2)there will be too little DP left to be comfortable with a sandwich LO?

You guys have really opened my eyes here and I am so glad I posted this. I'm hungry to make this work but I've got to start off on the right foot.

Jeff, I've got a few good contacts in the Ft. Mill/Rock Hill part of SC in the Charlotte Metro. PM me if that's where you are looking.

I got a call off of one of my craigslist ads from a guy who has recently been told he's transferring in 30 days so he is needing to do something with his house fast. He doesn't have enough equity to wholesale or rehab so I'd like to give a shout out to Jason Hanson for the BP article "Are You A 1 Trick Pony" article which I read the night before taking this call, prompting me to read about lease options so I'd stop wasting leads with less equity.

Jason's article: http://www.biggerpockets.com/renewsblog/2008/9/24/are-you-a-one-trick-pony-how-to-profit-in-todays-real-estate-environment/

Since I have never done this before I'm hoping you guys can give me some advice on whether it makes sense.

Specifics:

The home is valued at $133K based on good MLS comps.
Comparable houses in the neighborhood rent for $1250/month

Seller owes $95K but won't take less than $118K
Seller needs 3-5K to get set up in new location
Seller mortgage payments are currently $650/month.

My plan is to offer a lease starting in 45 days with $3K down and $800/month (covers all his expenses and maybe a bit more) with a 36 month term and an option to buy for $118K.

I have been getting lots of tenant leads lately so I'm confident I can find someone to put down $5-7K (minimum) and pay $1200/month with an option to buy for $130K.

In that scenario I'm thinking I would net $2-4K on the up front option fee, $400/month, and $12K if it sells down the road.

1)How do the numbers and deal structure look?

2)Also, I read another Jason Hanson article "10 Documents You Must Use When Doing A Lease Option" Those documents sound expensive for me and time consuming for my lawyer (maybe not he works with lots of investors). Unfortunately I don't have much cash or time to throw around on this deal. So IF the deal makes sense, any advice on how I could find boiler plate lease option documents quickly without leaving myself dangerously exposed or should I bite the bullet and call my lawyer Monday AM?

Thanks in advance for any advice.

Shawn Davenport Shawn, sorry for the slow reply. Unfortunately, this deal has fizzled since the last post. The seller fell of the face of the earth! I've called like 10 times....no response.

In terms of exits though I decided to stay away from the sub II...heeding the advice of the more experienced K. Marie Poe and Mike above! At $117K I would be sitting at about 78% ARV. Too high for most investors but I recently sold a rental (in worse overall shape than this property) to a national buyer at about 92% ARV so I would have pitched to them as a buy and hold or appreciation play.

I have also been talking to a few passive corporate guys with self directed IRA's who I planned to pitch it to as a buy and hold as well.

I planned to tack $1500 or $2000 as a finders fee in those situations. Not huge but it could have been the start to a great relationship with a new buyer....especially since all I had in it was time.

Mike Neubauer K. Marie Poe Thanks for the advice guys you really steered me right on this one. I am close to getting this one under contract for $117K. I have about 40 days to make a deal work and I think it is finally starting to sink in for the seller that his options are limited.

Thanks again.

This is a great help!

Currently he has about $9K to spend. The offered to start catching the $17K up with that $9K but he said that the bank turned him down. (so he says)

You hit the nail on the head with the price...I think a more realistic price for a quick sale is about $150K so if I can show him a more realistic picture of his situation there seams to be some equity since he only owes $107K.

I don't have a prospective buyer yet but I have several people I plan to pitch this to.

At this point he has tentatively agreed to the structure of the deal above. As someone more experienced, if I'm going to go back to him and revise my pitch, what direction do you think could be more lucrative to a prospective investor?

When you say get the home under escrow do you mean tie it up with an option?

I think this is the correct category for this post, I apologize if not. I'm hoping some of the more creative and seasoned souls chime in on this one...

I cam across a guy, in my hometown Charlotte, NC, who recently went through a divorce and he got the house. When the divorce was proceeding neither party paid the mortgage and it is now in arrears $17K and payable immediately. He can't pay due to an injury and his inability to work for the next 6 months. He has his court date VERY soon where the judge may postpone or schedule a sale in the next couple of months.

Currently he has the house on the market for $172K and the realtor says it's "under valued for quick sale." He claims to have an appraisal for $200k+ but I'm not sure if I believe him. All of the free sites peg the value at $172-195K. Conservatively, I think the home is worth $150k. Its very nice and kept up and VERY rentable because you can walk to the regional hospital. Nice neighborhood good schools etc.

He currently owes $107K which he says includes the $17K.

He is willing to get creative but says he will file bankruptcy to retain the house before he lets someone just pay the $17k and pocket the equity. He proposed for someone to pay him $17K and when he sells he will pay them back $24K.

I don't have the $17k to catch him up so I haven't found a way to be a principal here anyway but I thought I could pass on to some more stable guys at the REIA in exchange for a little tutoring or even a finders fee.

My thoughts on how this deal could get done are:

The investor pays the $17K to catch up the mortgage and takes ownership subject to the existing financing.

The investor works out what profit they desire...lets say another $15K on top of their $17k in the deal.

The investor who now owns the property puts the property on the market to sell.

The investor agrees to give the homeowner the remainder of the sale proceeds after the mortgage, their $17K + profit is paid using a second lien or some other type of instrument to give the homeowner contractual right to those proceeds. Investor is in complete control of the sale, timing, etc.

So house sells for ........................................$150K
mortgage after $17K catchup is paid off.......<~98K>
investor gets $17K+$15K profit....................<~32K>

Homeowner gets the remaining $20K - soft costs but is only paid after the investor and lender are paid in full.

If the house only sells for $135K tough luck for the homeowner the risk lies with him. If it sells for $190K like he thinks it should he gets to pocket the $35-40K

Not sure about this number but I think that the investor only loses if the house sells for $115K or less (~98k payoff + 17K out of pocket) or if the bank calls the loan due on sale.

Maybe I can even work a few grand in as a finders fee for me...

Any ideas or thoughts? Am I way off base? Sorry to be wordy.

Hello all,

Its been a while for me...I'm glad to be back around here learning as much as possible!

I was hoping to get some advice on a wholesale deal I've been working on.

I found a 3 unit rental property and the owner is willing to sell it for what I think is a good deal so far. The 3 SFR units on 1 property are completely paid off and gross $1100/month. The landlord says he can get more. The tax value is 178K and he is willing to sell for 75-90K. The comps in the area...according to zillow show a comparable house sold recently for 59K. That was 1 house as opposed to 3 on a lot 1/3rd the size of this one. There are also homes in the area sold for ove 200K recently so its a decent area. The lot is zoned so that 10 units are possible.

I have several questions:

1)Should I try and contract the house at a wholesale price based on rental income, SFR owner occupied comps, or potential development opportunity. My feeling is rental income...but I'm just not sure. It seems, based on using the 50% rule, a buyer needing to cashflow $100/door, and me needing to pay a 60% wholesale amount that I could pay VERY little for the property and I feel that its worth more even wholesale value. Does anyone have suggestions on which technique I should use to come to the wholesale value I should pay?

2)I'd like to know more about the rental incomes and home comps in the area. Anyone know of a good way, other than zillow and rent.com, for me to determine rates and comps in an area that is 3 hours from me without access to MLS? Rent.com and other sites are worthless in this particular city and I dont trust talking to random realtors about it.

If I have brought up previously covered topics, sorry about that, I tried searching but did not find the answers so far.

Any help is greatly appreciated. He is ready to sign that option and I think I may have buyers, so I feel like I am on the cusp of a good deal!

Thanks,

Josh

I have been thinking of buying partially built homes from builders in financial trouble for quite some time now. I have investors lined up, and a construction company to finish them. The part that I am missing is the deals. I was hoping someone could shed some light on ways to find builders in financial troube who need to unload their homes to someone with the capability to finish them. There are lots of these deal out there, but I have not been able to lock one down. Should I use the same techniques as some of the preforclosure guys? Should I contact the banks? Can anyone get me on the right track to find these types of deals?