All Forum Posts by: Jeff V.

Kay,

I do not have all of your answers but I may be able to point you in the right direction.

First, If your buying all cash the source of the funds are irrelivant.  

Second your lender of the Refinance will dictate the terms  on which they will do a re-fi as well as any seasoning.  Lender will also let you know what paperwork they require, but typically it's 2 yrs worth of tax returns, a current financial statement and they will run a credit check.  Be sure and ask these questions during the interview with a potential lender.

Regard to the logistics of the money and how it gets to closing...  Depends on how you structure the deal...  sounds like your family will not be doing a secured loan?  If thats the case you take posession of the funds in your account then have the bank cut a certified check to go to closing with.

IMHO... Taking money from your family to invest with and offering no security in the deal is not a good deal for your family members.  I'd look at a way to secure their interests in the deal and worry less about your seasoning requirements.  You should do whats best for your investors always.

Hope this helps.

Jeff V

For anyone looking for the same information here is a link to a simple way to accomplish the accounting for future CAPEX expenses.

Jeff V

Katherine,

Having been at this for a few yrs now since the post, I realize the Vacancy portion of the question was just my in-experience showing.   

What I was trying to really figure out was Capex budgeting in quickbooks.

Sorry for the confusion. 

Jeff V

@Mark Gallagher

Curious if we could get an update on this note and the outcome of the deal?  Looks like it has been a couple years since last updated.

Jeff V

Conner,

Step 1 - Personal Finance...  Get your Financial House in order and start saving as much as you can while you learn.

Step 2 - Read the beginners guides here just to see what types of investment strategies are available.

Step 3 - Figure out your Short, Intermediate and Long Term goals...  Example Short Term may be growth of equity, while Intermediate would be Cashflow and growth and Long Term Completely Passive Income in Retirement.

Step 4 - Align your strategies that you learned about in Step 2 with your goals from Step 3...  For Example, Flips provide active income and if done properly could replace your primary income but if that's not your short term goal then you may want to do something less time consuming just to supplement your primary income.

Step 5 - Take the Plunge (Take Action) - For your first deal, make sure you have double the reserves available in cash or readily available funds.  You WILL make mistakes.  If your expecting the deal to cost 20k out of pocket have at minimum 40k...  This will get you to the finish line...  you do not want to get half way through and run out of money due to a snag you hit in the first phase...  If you make it to the end you are in a much better position.  You may loose money but will have a great education on what didn't work and can avoid those issues going forward.

Step 6 - Network with others in the industry and build your team.  You will want to have: Realtor, Banker, General Contractor, Electrician, Handyman, Landscaper, Painter, Sheetrock, Carpenter, Roofer, Lawyer, Estate Planner, Bookkeeper ect....  This team will be built through networking over time.  For example, ask your Realtor who their agency uses for repairs on the units they manage... now you have a contact for a good handyman/contractor.  Ask your Electrician what carpenter they like to follow.  Ask other investors who they use for the best General Contractor....ect.

Step 7 - Once you get a few deals under your belt... re-visit the numbers and see if you can refine the process to save money in areas and improve the efficiency of your operations.

This should get you going in the right direction.

Books I would suggest reading:

Rich Dad Poor Dad - Basic concepts of investing, business and real estate.  This will change how you think about personal finances and make you look at things differently.

Cashflow Quadrant - Next Phase of knowing which quadrant you are in and which quadrant you want to be in and how to get there.

Bankers Code - The basics of Time Value of Money, Arbritrage and Returns on Capital in general.

Wealthy Code - More of the TVM type information.

From there pick specific books to learn more indepth on the strategies that you are going to employ... Flipping, Buy and Hold, Creative Finance, Private Lending, Note Buying, BRRRR... ect.

Jeff V

@Jay Koch

I have a few questions regarding your post:

1) If you were to do a seller finance with a wrap mortgage, as in the post, who pays for the property insurance? There are 2 mortgages in place... The Sellers original Mortgage which requires insurance on the property and the wrap mortgage, which should also require insurance... Would the property be double insured, is one insurance no longer needed or how does this piece work?

2) With your newly created note, would it be possible to have the Seller's original mortgage modified to remove the property as collateral and add the new note in it's place as collateral? It seems that this might be a cleaner transaction being you as the seller now own the NOTE, not the property. Not sure about this being the example uses a Land contract/Deed of Trust/Bond for Deed...

3) Lets say you manage to get a deal like this negotiated... How would you go about setting up servicing for the payments...? Would the closing agent initiate and setup this for you or would you have to contact a servicer after the note is created and recorded? Sorry for the noobish question... Just have not ran across this information in my research yet.

4) I know the post isn't really NOTE related per say, but would the Note be just as marketable for selling partials as say seller financing a deal that was free and clear? Curious if one were to create 2 seperate notes and sell off the larger note to pay off the existing first and keeping the second for cashflow, if that would also work being it's a wrap?

I may be getting in the weeds here, but just trying to piece all of this together to actually create some notes through seller financing or at least understand what is possible if I were to purchase one of these notes from another party.

Thanks,

Jeff V

@Scott Hollister

I have not hit this road block personally, so I don't have any more advice than the other posters have provided.  However, I do have a question...   

What was the DTI limit that you were hitting?

I have yet to hit it but this information would be good to know to potentially avoid having the same issue in the future. Possibly even add this to my pre-purchase checklist to be sure this property will not push me beyond the DTI limit and effect my ability to refinance...

Maybe this information will help someone else as well.

Thanks,

Jeff V

@Account Closed

Maybe I mis-understood the question.  I was referring to using "debt vs equity" as in a "loan vs cash" to fund your down payment on your deal.

In my post I was talking about using cash as down payment to increase cashflow, if that was your goal.

Back to your question...  It would depend on your level of experience and that of your partner.  For example, if you need guidance and mentoring it may be better to do an equity deal that way your mentor is motivated to guide you down the path because your goals align.    

Where a debt partner just cares that they receive your interest check and not necessarily that you finish the project because if you fail they can just take the property and complete the work and reap all of the benefits.

I would be very careful about the equity partner...  be sure  you want to be tied to the person for whatever term the deal is for.  It's more involved normally and tends to have more conflict.

Debt partner, things tend to be more straight forward and may be better for more experienced investors that don't need mentoring.

Hope this helps.

Jeff V

Depends on the deal... and your goals.

For example, if your goal is to maximize cashflow and all variables were the same then I would choose the equity deal because it produces more cashflow.

However if your goal is to achieve a higher Cash on Cash return then the debt deal may be better if you are positively leveraged.

Then there is the case where your cash on hand is limited, but you have equity in another property that you can leverage.  Then, debt could carry you through getting the deal done and adding a unit to your portfolio where cash would not in this case.

Again, all depends on the deal being profitable first and foremost and then it must align with your current goals.

Hope this helps.

Jeff V

Buddy,

Are you both going to be active in the business or one active and the other providing funding or credit?

Either way an entity should be used. You never want to do business as general partner. It offers no benefits only drawbacks.

If both are active then a strong operating agreement should be drafted and a lawyer consulted to define who is responsible for what. Also cover all what if scenarios and have this defined in the operating agreement such as death, loss of interest, partner wants out, divorce, dispute resolution, restrictions on what the business can be involved with ect.

Hope this helps get you rolling. 

Ever considered taking them on as debt partner instead of equity? 

Also be sure your goals align. Both agree to hold long term or on a short term flip? Building a portfolio or single JV only?

Keeping profits in the business for a few yrs to accelerate growth or distributing profits annually? 

Some things to think about. 

Jeff V