All Forum Posts by: John K.

@Freddy Pettiford

Ok. This is what I would attempt to do, with this deal.

It's time for some reverse engineering. 

The problem with this deal, is the interest rate. That is an extremely high rate, for owner financing. My rates, are usually secured in the 4-6% range, mostly on the lower side. The seller deserves to be paid a premium, but not a 5 point premium. 

Since you know what the seller wants, 100k, this is how I would now approach her. 

Principal:  85,000

Term: 15 years

Dn Payment: 10%

Int. Rate:  4.5%

This makes your principal, $585 per month. I don't know your taxes or insurance, so you will need to add that in, to get your true payment.

This term, pays her just over 105K, in half the time. She of course gives up a ton of interest, doing it this way, but if you frame it correctly, she just may realize that 30 years, is a really long time to be holding a note. 

Obviously, you can play with these terms, however you want, to make it a bit more enticing for her. 

You're welcome.

I appreciate the offer, however I do not do JV wholesale deals.

@Jonathan Roughton

I would guess that many wholesalers just use the TREC 1-4 contract, that you can get online. 

https://www.trec.texas.gov/

My contract was reviewed and reworded, by my attorney to better suit my needs. I would advise that you sit down with an attorney, so you fully understand on how to wholesale, in Texas. It is legal, but only if you follow the rules. 

@Austin Walker

I can't speak to their value, because I generate my own leads. However, I will point out something that you need to take into consideration. These "leads" are sold to what, 100s or even 1000s of people. How likely is it that you find a good lead, that hasn't already gone under contract?

I hear you. There are always those stories, in any strategy. 

My opinion, it failed because they treated OF and L20, as rentals. Getting only 2k down, after putting 2k down, is foolish. These are buyers, not renters. I accept no less than 8% down, period. I always collect more than I put down, so if it does go bad and I have to foreclose, I am using their money to do it. The mindset is completely different with my buyer, then that of a renter. My buyer has considerably more money at stake, not just first and last months rent. Let's be honest, that strategy offers very little security to anyone. I always say that collecting security deposits, just reduces your losses by that amount, when it does go bad. 

If the motivation is wrong, or if you are under funded (sub 2, especially) or you look at REI with rose colored glasses, bad things are going to happen.

@Denise James

You need to find out the actual ARV, not go off the tax assessment. This is not always reflective of the actual value of that home. It could be much more, a little more or even less.

@Jay Hinrichs

For sure. 

@James Wise

The 2 strategies that I use against LE deals, are as follows:

1. My system alerts me to any property, that I identify as being in the GO ZONE. This is what I refer to as a neighborhood that has an historical record of consistently strong appreciation, over a period of time. For me, it's 10 years. Let's say that number is 8%, per year. In a little over 12 years, I would be looking at doubling my money. Even if I wanted to capitalize it in 10 years, I would still be doing very well. Since landlords are more concerned with cash flow, they wouldn't be looking at LE deals, thus never see this opportunity. 

2. The most lucrative strategy, is to wrap this into an OF deal. My deals are 9.5% interest, if I secure a sub 2 at 4-6%, I'm doing pretty well. The beauty of this strategy, i have ZERO expenses, and my cash flow is considerably more than $100-200 per month.

As far as the DOS clause, I don't lose any sleep over it. I know banks are known for doing some pretty dumb things, but if they are foolish enough to call a performing 4-6% note due, only to risk having to resell it at 3%, there is not much that can be said about that.

Yes, there are those people that think they make more money by taking advantage of a sub 2 and letting it foreclose, they make a few grand. However, those that do this to actually make real money, actually do help the seller. Our payments are always on time and it's the seller's credit that gets the benefit. 

@Jay Hinrichs

I have no doubt that there have been many investors that have failed at the low equity game, but I know several, that are killing it. Those that know how to do it, including myself, make substantially larger returns, than most rentals.  

I would be willing to bet that the number of failed LE investors, pale in comparison to the number of failed rental portfolio's. I don't track those numbers, but I wholesale/buy a lot of properties from rental portfolios, that are failing.