All Forum Posts by: Account Closed

Kudos for getting on here and beginning the journey to financial freedom. I'd suggest you begin by hustling your face off until you have your personal life in order and atleast 6 months of living expenses set aside.. then start putting money away to start investing. 

In the mean time, if you haven't read them already:
Rich Dad, Poor Dad
The Millionaire Next Door
Set For Life

Welcome and good luck! 

@Lee Gierszewski Don't wait. Don't walk. Use the new found information to leverage a better deal.  "Empty the lower unit prior to close or drop the purchase price by $X". If you're on the fence about it, why not take a shot? Get it how you need it, or get it for cheap (er).. or walk. 

@Taylor Silker Loan is for 309k, if the appraised value is 348k you're at 88% LTV, no lender anywhere is going to give you a non-owner occupied loan against the house until you get it down below 75-80% LTV ($261k-$278k). At that LTV you're not going to get a 2nd position loan against the property either. Stick with your original plan, and sell it. Make a few $, and learn a whole lot of lessons.

Kudos for taking a step back and looking at all other opportunities to profit from the property, but you need to gain the discipline to simply execute your original exit strategy. You're going to give yourself a lot of unnecessary stress if you continue to second guess your plan. I'd love to have all the $130k ARV hoarder houses that i've picked up for $20k-$30k.. but the plan was to get in, get paid, and get out..so i got in, got paid, and got out. Don't second guess yourself.

Sidenote, never ever base your financing decisions off what it would rent for as an AirBnB.. lots of folks in my market getting burned real hard right now for doing just that, after the city put the kibosh on short term rentals.. if it doesn't make sense as a regular rental, don't do it. 

@Taylor Silker Have you looked at any of the larger hard money lenders? Some of them have interest only loan products to bridge the gap between short term and traditional financing. Last one i looked at was Lima One Capital. The rates are pretty high, but if you're looking to keep it, its an option! Good luck

Term Length: 2 years with 1 year extension option

Property Types: Single-family detached residences, 2-4 unit residences, condominiums, and townhomes

Single Property: Yes
Portfolio: Yes
Minimum Loan Amount: $50,000
Maximum Loan Amount: $2,500,000
Maximum LTV: 75%
Minimum Credit Score: 660
Debt-to-Income for Borrower: None
Minimum Number of Properties: 1

@Melissa Rivera  

Wholesaling by assignment:

1. Find distressed property
2. Sign purchase and sale agreement with seller

3. Find a buyer
4. Sign assignment of P&S agreement with buyer

5. Buyer takes P&S agreement and assignment of P&S agreement to title co

6. Buyer closes
7. You pick up your check

Here are a few of the many issues the fauxsaling gurus won't tell you abut:

1. Does your contract actually give you 'equitable interest' in the property? (Go speak with an attorney)

2. In order to find a buyer, you're going to have to market. You can market your interest in the contract, but as soon as you include photos of the property, you're no longer marketing the contract, you're marketing the property..and brokering without a license.
3. In order for your buyer to buy, they're going to want to see the property; so by showing the property, you're brokering without a license.
4. What do you plan on telling the seller when they ask why you're bringing people to look at the house? If you're up front and honest "I'm selling the house to another investor" the usual response is.. "Then what do i need you for.. I could do that myself" 
5. What happens when the seller shows up to closing and someone else is on the other side of the closing table.. and they realize that you were basically full of sh!t the entire time? 
6. Understand the basic elements to be criminally prosecuted for "Fraudulent Inducement" (and see if it sounds a lot like "wholesaling" to you
a. The defendant made an intentional action, statement, or omission 

(Falsely claiming to be a cash buyer, misrepresenting your intention and ability to close the transaction)

b. The misrepresentation was material to the decision to enter into a contract

c. The plaintiff reasonably relied on such misrepresentation
(Seller decides to sell based on your misrepresentation of being a cash buyer & having the intent and ability to close)

d. The plaintiff suffered some degree of injury, usually economic harm

  

How to avoid all this?

If there's enough equity, find a private money lender to fund the deal for a few points or a percent of the profit. Buy it. Sell it for a profit. 

If there's not enough equity, learn how to get on title (ex: Sub2) "Mr Seller, there isn't quite enough equity for me to buy the property outright, but i would be willing to help you out by simply making your payments for you until i can fix it up and sell it" Boom, you've just landed a Sub2 deal.

There's nothing wrong with simply assigning a contract. The issues arise from the deceitful techniques taught by the gurus and fauxsaling cheerleaders on BP

Good luck :) 

@Khemaro N. Here's a great article by the man, the myth, the legend @Ben Leybovich on why to avoid those type of properties! If this is your first rodeo with D-class properties, it's a must read.

https://www.biggerpockets.com/renewsblog/2015/03/03/why-you-cant-make-money-on-30000-houses/

@Alice K. All i see when i drive by houses like that are high income earners leveraged up to their eyeballs. I prefer to drive by the middle class neighborhoods and ask myself "How do i buy ALL of these?" 

"The Millionaire Next Door" really changed my perspective on material possessions like that :) 

Keep hustlin'! 
- Lloyd

@James Rodgers Its a good realization to have. I personally don't believe that business model is sustainable for more than a year or so. Eventually you're going to end up 1. in court 2. having your reputation as an investor trashed when a seller feels taken advantage of 3. being contacted by your state RE commission for brokering without a license. 

Find a private lender who will lend for short terms (1-2 months) for a few points. If there isn't enough equity, learn how to get on title (sub2). 

@Gabrielle E. Pride and an unwillingness to admit defeat. Like folks that keep beat up old classic cars on their properties and just let them rust away. They've told themselves for years, that they're going to fix it up and sell it. So by taking a low-ball offer (low to them, but what it's realistically worth) and selling is admitting defeat.

I actually just went through it with a seller this month. The house was boarded up by building and codes in 2009 and vacant since 2007!! He had been paying the mortgage for 10 years on an empty house, telling himself he's going to get around to fixing it up..

Breaking down the numbers for them usually works.. The conversation i had with him went something along the lines of:

"listen i know you love the house, but every month it sits empty you pay $$ a month just in interest alone to your lender, $$ in taxes, $$ in overgrown grass bills from the city.. thats money you could be spending on your family each month.. in addition to the $$ that i'll give you in cash for the house right now"

@Brody Jett

Wholesaling by assignment of contract goes like this

1. Find distressed property
2. Sign purchase and sale agreement with seller

3. Find a buyer
4. Sign assignment of P&S agreement with buyer

5. Buyer takes P&S agreement and assignment of P&S agreement to title co

6. Buyer closes
7. You pick up your check

The issues with this are:
1. Does your contract actually give you 'equitable interest' in the property? (Go speak with an attorney)

2. In order to find a buyer, you're going to have to market. You can market your interest in the contract, but as soon as you include photos of the property, you're no longer marketing the contract, you're marketing the property..and brokering without a license.
3. In order for your buyer to buy, they're going to want to see the property; so by showing the property, you're brokering without a license. 
4. What do you plan on telling the seller when they ask why you're bringing people to look at the house? If you're up front and honest "I'm selling the house to another investor" the usual response is.. "What do i need you for.. I could do that myself" then what value do you bring?
5. If you get past that point with no issues, what happens when the seller shows up to closing and someone else is on the other side of the closing table.. and they realize that you were basically full of sh!t the entire time?

The easiest way to avoid all this is to buy it or get on title, then you can do whatever you want with it. Clean it up, throw some lipstick on it, and sell it. 

If there's enough equity, finding short term financing will not be a problem. If there isn't enough equity to cover the cost of financing, get on title (Mr. Seller, there isn't quite enough equity for me to buy the house outright in its present condition, so how about this, i'll make your payments for you until i can get the house fixed up and sold"   boom, you've just bought a house Subject To.

I used to think "what's the harm?" until i saw how many "wholesalers" are deceitful and willing to leave sellers high and dry when they can't find a buyer. Imagine your grandparents are bordering on bankruptcy, and as an absolute last resort they decide to sell their house fast. Someone swoops in and says "I'll give you cash for it!" .. prayers are answered, and they start making major life decisions based on the fact that they think this person is actually buying their house for cash... then.. they don't. What would YOU think if that was YOUR family? Getting jerked around for 30 days thinking all their problems are solved by this "cash buyer" .. then getting left with nothing.

In the age of social media, jerking a seller around will not only come back to bite you in the a$$, but it gives every other investor a bad name. 

The sooner you understand that the vast majority of contract assignors are operating illegally, and most don't last very long as "investors" the better off you'll be.