All Forum Posts by: Jonathan Towell

Yes, to the seller, you are bringing a cash offer. It is considered a cash offer because you've already got the loan approved and the money is ready to fund. So, you don't need to check any loan contingencies. However, that doesn't mean you shouldn't have an inspection contingency. If, however, you are buying it with cash and without an inspection, you could tell the seller that you can close in a few days, which might let you negotiate for a lower purchase price.

In the scenario where there is a loan with interest, and the interest is all your father-in-law receives (he isn't getting any of the profit after the sale), then he is indeed a true lender and this is a true loan/mortgage. You'll record the interest as an expense and the principal as a liability (see a CPA or bookkeeper for more details).

If you are concerned about making interest payments during the flip, you can modify the terms of the loan with your father-in-law to accommodate. For example, the loan could have no payments due in the first 12 months. However, interest is still accruing. This way, your father-in-law still makes some money, he just won't see the first payment for 12 months.

@Lorraine Pennington There are plenty of patient investors, but they are definitely outnumbered by the impatient. Just ask my buddy W. Buffett.

Hi @Ethan Moore ,

Sounds like a neat opportunity. We have done the same thing with two storage facilities.

1. Is there a phone number to call if you want to lease? If so, call that number. If not, look up the owners in the county tax records. Or, ask the workers at the gas station how to contact the owners.

2. If you are saying the Net Operating Income (NOI) is going to be $48k ($4k x 12 mo), then maybe you could expect between an 8-10% cap rate, which would value it at $480k - $600k.

3. Don't find a commercial real estate agent on a deal that you find. Just go negotiate that thing with the seller. No need to involve a middleman on a small deal like this (in my opinion).

4. I'd ask the owners what they want to do with the property, etc. before figuring out something creative. There are a lot of creative ways to finance deals like this, but it all depends on the needs of the sellers.

I hope that helps. I wish you the best!

Hi @Marc Latreille ,

My advice: Focus on getting the first deal. Find a seller who will finance 80-90% of the deal and an investor who will put in the rest. Pledge your vehicle or some asset as collateral to the investor. This puts nobody in a second mortgage position.

If nobody wants to seller finance or invest in your deal, ask yourself these hard questions:

1. "Is my deal analysis off? Maybe investors see the hole in my plans that I can't see." This problem can be solved by more practice and study analyzing deals.

2. "Is there something about my presentation or personality that is putting off investors?" A lot of people do not consider the possibility that they aren't listening, dressing appropriately, being professional, or demonstrating good character. Most investors are primarily concerned with the person, then the deal.

The challenge is that you are working under a challenging restraint. If an investor with cash for down payments looks at 50 deals for every 1 he closes, you are probably going to have to look at 100.

I hope that helps. I wish you the best!

Hi @Nick Fegley ,

Sounds like a great dream to me. I expect you to comment on this post in 7 years to let us know about your success!

Hi @Shannon Moyer ,

I hope these answers help!

1. Since the money is coming out from an IRA, he should check with Merrill Lynch on the tax implications. The amount he can withdraw will depend on the type of IRA and his age (maybe other factors too). Merrill Lynch can probably also advice as to the easiest way to transfer the money. Perhaps he can just write a check?

2. The IRS will just look at your returns, so you'll just want to make sure you get the reporting right. You may look into hiring a CPA to prepare your returns.

3. Yes, splitting the proceeds is a good way to do it. In that case, your father-in-law is no loaning the money... you'd probably just consider him an equity investor. A loan comes with an interest rate and is paid before the equity holders get paid.

4. You probably don't need a lawyer on a small deal like this, provided you have a good, trusting relationship with your father-in-law and you don't want to do this through a business entity (like an LLC). You also don't "need" an accountant as the bookkeeping and as tax preparation for a single deal are not super difficult. However, if you want to focus on doing the work for this first deal, outsource the accounting would not be a bad idea (see #2).

5. You're asking good questions! Keep reading and learning.

I hope that helps. I wish you the best!

Hi @Lorraine Pennington ,

I'll take a chance at a response...

Anytime you can return your initial capital in 1-3 years, it is probably a pretty great deal, regardless of asset class. As you know, to make that work, you have to improve the value of the property quite a bit in a short period of time. That takes a combination of smart rehabbing, diligent management, and a good location.

Is 4.5 years too long? I guess that depends on a lot of things. Markets can turn quick. So maybe a 3-year return is reasonable one year, but unreasonable the next. Or, maybe the deal is big enough that the overall returns are worth the longer wait?

IRR is another metric that you might consider in your deal evaluation.

I hope that helps. I wish you the best!

Hi @Amanda Prater ,

I'd be a little surprised if a new phone messed up a home closing. That said if something happens to cancel the deal, know that you are made with infinite worth and there is no reason to let one voided deal ruin your day. Just keep on going!

I hope that helps. I wish you the best!

@Barbara Garrett

I've never done wholesaling, but if I understand the concept correctly, I think you would want to get the property locked up in a contract to buy before you try to sell it. Your contract could have a 30 or 60-day close date. Your goal is to get the property marketed, contracted, then sold on assignment on the close date. If you have the property under contract, you can be more open about the address because you've got it locked up.

I hope that helps. I wish you the best!

@Ben M.

If I understand the question correctly, what you're looking to do is "refinance" before the hard money loan term expires. A conventional lender will want to see that the property is cash flowing, probably with 1.2 DSCR (debt service coverage ratio) and an appraisal that shows you have about 20% equity (each lender will have different criteria). You'll want to speak with a loan officer.

I hope that helps. I wish you the best!