All Forum Posts by: James Harkness

Find a property with a motivated seller. Make an offer and get the property under contract. Where you sign the sales agreement, put your name and/or assigns, and make the purchase contingent on obtaining financing. Find a buyer who will pay more than you for the property, assign the contract to them and collect your profits.

Those are the basics.

I think the question is if anyone can help with financing for a purchase price under 100k. With most lenders, if you qualify, there is a pricing hit of about 125 bps.

Sorry, I misunderstood you. Most people here say that the 50% rule is a good benchmark for maintenance, and that over time, it is a very accurate measure.

Have a reputable contractor do an inspection and give you an estimate for the repairs

While I think it is unfortunate that people are losing their homes, I do not see what there is to protest. It seems to me that people in today's society gained a sense of entitlement when it comes to real estate. They tend to forget that they signed a legal contract obligating them to pay back a debt.

As an asset manager, I deal with people every day that try to negotiate terms on modifications, saying that a 3% rate isn't good enough. They don't seem to remember that we don't have to do anything to change their interest rates at all, and that if they don't make their payments, they lose their property according to the terms of the note. There is nothing in the note that says, "should you fall behind on your payments, we will lower your payment to something that YOU deem affordable".

Just my two cents. Maybe a bit of a rant, but really people...

Nick, thank you so much for taking the time to write that blog post for me. Very helpful.

Thanks Nick. Enjoy the concert. I look forward to your reply.

Thank you Nick. I know you are right. I guess that I was hoping that you wouldn't have to use the "purchase price" of 100k when determining the loan amount when it may be worth 175k if you purchased with the original financing in place. Maybe sit in the property for 3 months with the old financing and then refinance based off of the 175k appraisal rather than the 100k purchase price. However, I know that the appraisal will come in low after you buy it for 100k. I've been in the mortgage business for 3 years, and know that this probably would never work, but have never really worked with investors using creative financing, so I didn't know for sure.

On a different note, what exit strategy do you recommend when purchasing subject 2? What has the best returns, and what have you had the most success with?

Thank you very much for the responses. I definitely get what you are saying. I guess I am just wondering if you purchase a house in the way that I mention in my example, you have instant equity with no money down other than what you pay to short the second.

If you refinance, you should be able to do a cash out refinance to cover the out of pocket cash (and then some if you wanted) and still have a lower monthly payment than you would if you were working off of the 200k's original amortization schedule. If you were looking to hold onto the property as a rental unit, then this would help to make it cash flow better. With the payment based on the 200k loan amount, you might not be able to cover the mortgage at all with rents (hypothetically speaking).

If you just did a standard short sale, then you would only be able to get financing in the amount of the purchase price. This would likely require a 20 percent down payment. Don't know if you need me to explain more to understand what I'm saying/thinking, but thats the gist of it.

Does this make any sense at all, or would that just be an all around bad idea?

Another post on here got me thinking. This may or may not be a rare situation to come across, but for the sake of my question, here is an example:

Suppose you come across a home owner who has a first and second mortgage. Say the original first lien was in the amount of 200k, and they have paid it down to 100k. They now have a second lien in the amount of 75k. They have no equity because the property value has dropped. They are having trouble making payments, have bad credit because of it, and cannot refinance because of their credit and lack of equity.

If you were able to step in and do a short sale on the second lien (10% of value), and purchase the property subject to the first lien, could you refinance? Purchasing subject to, you would be making the payments based off of the amortization of the original 200k loan amount. Refinancing the 100k loan over another 30 years would obviously greatly reduce the payment. I imagine that there would be seasoning issues and that this wouldn't be possible, but maybe some of you could shed some light on it for me.

Thanks in advance for the help.