All Forum Posts by: John Matthews

@Loren Thomas Would I buy that? Not for a longshot - but my market is much cheaper than yours.

But more importantly, I can't see that place cashflowing at that point, so no.

Just to make numbers easy, let's assume you somehow get 0% down financing, your mortgage amount is at least $3073/mo. Using the 50% rule ( you're already in the hole almost $1000/mo). You're really only betting on appreciation at that point, which is a dangerous game IMO.

Even at 20% down, you're looking at -$384/mo, which doesn't make sense. Maybe you can fudge the 50% rule to 40% since it's in a nice area (I assume, for that price), but even then you're only making $30/mo, which is just a waste of time in my book.

I think you'll need to find a better deal, or find a way to negotiate down to a better deal. This doesn't really start to make any sense to me unless you can get them down to $525k, where you might be only just breaking even with 20% down.

Just my two cents.

Ok, so there's this one property I've talked about on other posts before. I put an offer on it before I found out it had structural issues. With the help of the SE who looked at the place, I gave myself a hard number that I was in or out on. If they reduced the price by 20k, I'd buy it, otherwise, the deal was dead.

So they came down 16k. I said ok, but only if they hold a note for 6k for one year, no interest, with a balloon payment principal only in that one year. They agreed.

All was good until my heard money lender said they don't do seller financing. Period. 

I'm going to keep trying to get them down to 20 (the seller no knows how much the property needs in work, and that it's got foundation issues, so who's going to buy from them?), but does anyone have any suggestions for ways that I can save this deal and have it still make sense for me?

I've thought about recording the 2nd mortgage (seller finance) after the deal goes through, so the HML doesn't see it, but that definitely seems like a grey area of legality, and I'd like to use them again, so I don't really want to do it. The other thought is to have the seller hold a non-secured loan of 6k, which I think is ok with the HML, but I haven't asked yet. Do sellers ever do that? The only other option I can think of is to give them a lien on my CAR (which I own free and clear) but I'm not so sure that'll fly either...

Anyone have any other thoughts as for how to make this deal work out?

@Steve Francis I'm actually looking at montco for some properties as well (particularly norristown becuase it's cheap, and they cashflow, definitely not for appreciation!).

It definitely depends on your risk tolerance, but if I were you, I would use HELOC first for the 20% down, and get a mortgage if you could, and keep the cash as a reserve, but that's just me.

I have been in touch with a few contractors, but haven't worked with them enough to put my name behind them (not that my name means anything yet!) but hopefully in the next couple weeks/months I'll feel comfortable referring one or two!

@Fandor Malebranche Jr Welcome to BP. It's not necessarily for everyone, and you may or may not qualify, but hard money is another option. It's definitely expensive, but it'll do a few things for you. It'll force you to find better deals, because of the added cost, and it'll force you to have some level of added due diligence (professional appraisal / inspection) and they have skin in the game, so they're likely to sort of walk you through the process, if that makes any sense. This all coming from a newbie who's just barely on the brink of his first (buy fix refi and hold) deal, so take everything I've said with a grain of salt. But it's another tool in your tool chest.

Good luck, and if there's anything I can help with, don't hesitate to ask.

@Andrew Rottner Good call on moving to CO. My fiancee and are are likely moving there within the next few years once she finishes up with school, either when she places for residency, or afterwards. Maybe I'll see you out there!

@Jesse T. So I'm actually the buy and hold investor. The plan is to cash out refi in 6 or 12 mo. (I already have a lender in place.)

Though I agree, he doesn't seem motivated enough - but I do think I could have done a better job at figuring out why he wasn't interested in seller finance and addressing that issue, but I was afraid of being pushy.

At the end of the day, we ended on good terms, and he said he'll call if he changes his mind - not as good as getting the deal, but better than burning the bridge.

@Brian Gibbons Thanks for the link, I'll be checking those out tonight or tomorrow.

So I've been negotating with a FSBO seller over the past few days and I wanted to

get some constructive feedback on things I could have done better.

Here's the story:

Seller posted house on Craigslist, looking for a quick sale. I got the address from

him by email and told him that I'm a hard money buyer and can close in 2 weeks

without an inspection contingency (but that I did have a financial contingency),

then I called him to find out what he was looking for, how much work it needed,

etc. to see if we were in the ballpark. On the phone I learned that he's a previous

investor, this is one of his last properties, and he owns the house outright. He

bought the house 23 years ago for 70k. It's gone well, but he's been trying to sell

off his properties as he's getting older and doesn't want to deal with it - it was

a good time for him to sell now because he's finishing evicting a family currently

renting. I asked him how much he thought it was worth, and he said he didn't know.

I was however able to find out that he was willing to part with it for 70-75k

without losing too much sleep over it. We talked for a bit more on the phone and I

feel as though we had good rapport at the end of the call. He invited me to come

see it the next day to assess the repairs necessary.

I showed up on time, another cash buyer was just leaving when I arrived. We walked

through the property and continued talking - I now know about his kids, and his

life, etc. - we continued building the relationship / trust. I estimate that the

place just needs cosmetics - about $15k in work. I left without giving him an offer

on the spot, since I still wasn't confident in what it was worth. He understood. I

said I would have an offer for him in the next two or three days once I had a

chance to have a realtor run comps for me. After I left he had a realtor come see

the property to get a feel for what it would be worth if they were to list it.

After another brief phone call the next day he sent me some comps that his realtor

sent him. Note: This property is hard to price (as are most I assume) because it's

on the boarder of this not so nice town, and a nicer town. That said, based on my

relatively inexperienced review of the comps, I estimate that the property would be

worth about 70k. It's worth noting however that should an appraiser pull comps from

the next town over (which I understand has happened on more than one occasion with

my realtor in that area) the place will more likely be valued at upwards of 100,

maybe 120+, it's hard to say. My realtor sent over comps last night, reflecting the

same.

So today I call him back and ask him if he's had a chance to review the comps, he

said yes. So I asked him what he thought the place was worth now (I just listened

to the Michael Quarles podcast so I was trying to implement some of those

strategies). He was reluctant to put out a number first since he said that was my

job, (he chuckled). I awkwardly talked him into giving me his estimate by saying

something along the lines of, I want to make sure that he's getting the most he can

- if he think he can get significantly more than I'm going to offer him, I didn't

want to insult him. He understood and said that he'd be willing to accept 75k again

(which isn't far from the comps, but it's also what he said he'd be willing to

accept before we knew what the place was valued at). So I repeated this number back to him, trying to do the "so you'd accept 75k...hmmm..." sort of in the way that Mike does it in the podcast, disapprovingly. I was quiet for a bit and let him keep talking. "Well I know that I can list it and maybe pull some comps from the next town over and maybe get 85k - after closing costs, I'll pocket about 80...so I'm happy to accept 75k cash right now" So I said, ok, so how important is it to you that you can close in 2 weeks with me, versus the property sitting on the market for an average of 150 days? He said it's important to him, that's why we were talking in the first place. I don't quite know how I got to the next point (I wish I recorded the conversation!) but somehow I didn't know how to move the conversation forward with him reducing his price, so I told him my strategy. As I write this I realize I shouldn't have done this, but I didn't know how to proceed. So I told him that at that price I'd only get $48k in hard money, and it wouldn't make sense to me to put in the extra 22k to close and another 15k to repair the place. He understood but didn't budge. We ended cordially - he said he'd call me if he changed his mind, but he'd rather just hold onto it and list it, but to call if I change my mind.

So about 2 hours later I thought about seller financing. The deal WOULD make sense to me at 70k if he held a note for 70 and I paid whatever closing costs there were, with a balloon payment of 70k in 2 years (after a refi). We'd had the conversation before and he said he wasn't interested in seller financing - he just wanted to be done with it. So I brought it up again as a way for me to offer him the full amount he was asking for. He sounded not ameneable to it, but I tried to explain it positively. "I know you said you weren't interested in seller financing, but it was my understanding that you don't necessarily need the money, you just want to be done with this now, and you don't want to worry about it anymore..." I told him that we could structure it however made the most sense to him, but it would make sense to do a 70k note, interest only, with full principal payment in 2 years (or sooner). I also said, if he really wanted to be done with it, he could then turn around and sell the note on the market (for a bit of a discount since it wouldn't necessarily be seasoned yet). The end of the conversation went that he'd rather wait the 3 months to get 75-80k outright, then get 50 now, or 75-80 in two years. I think in his situation seller financing would have made perfect sense to him but that I didn't explain the benefits well enough because I didn't want to seem pushy when I handled all of his objections. The one thing that I think would have helped would be to have this conversation in person, slowly to make sure he understood, but in the interest of time, I didn't do that.

At the end of the day, we hung up again on good terms and he said he'd call if he changed his mind.

Ok - that was way longer than I thought it would be. Any suggestions on how to do that better?

@Mark Esposito That's almost exactly what the SE said. There's one downspout that goes underground in that corner. We've no clue where it goes. So it's likely either clogged or rotted through or both, and dumping all of the water right at the footing of the house.

Should I get them to take the price down and decide to take this on, I'll definitely look into ramjack or similar. Everyone has told me is all but useless to jack the house up at this point (as I'll break all the windows/create more cracks in the already hard to replace stone on the outside in the process), and that the goal should be to just stop it from settling further, do you find that to be true as well?

@Steve Babiak Good to know - thanks Steve. Can you point me to where you found that, btw?

@Jeremy Tillotson Agreed. Thanks, sir. Same to you.