All Forum Posts by: Luther Wilson III

So as some of you know, besides assisting investors with seller finance transactions, mostly for cash flow, buy & hold, single-family home investments, I also help investors with financing for their purchases, renovations and refinancing.

About five years ago, after a business partner and I began to seek out & utilize different types of funding for our real estate investments, I became extremely intrigued and fascinated by that world. That is, in the area of real estate finance, private equity, and funding for property investors. What I came to realize is how critical these aspects of the business are for investors. Especially for those who want to acquire and keep properties for the long term.

As my business partner and I began to leverage his capital along with different types of financing in order to grow our portfolio, I began to see even more gaps and flaws in the real estate investment industry. While submitting applications, waiting for things to be processed, getting ghosted, being "cleared to close", dealing with renovation draw processes, not remembering the fine print, rebutting appraisal values, and so on, my eyes widened. It inspired me tremendously and sort of pissed me off. So much so that I chose to make it part of my career.

You see, I had worked with investors for years as a realtor, connector, renovation overseer, property manager, and order-taker but I wasn't really sure what was happening behind the scenes with the organizations, funding, financing, positioning, liquidity, etc. From time to time a client might allude to how they had made or sourced their capital or how they had been collaborating with others, however, time permitted them to reveal only so much.

It was not until I had gone further into the depths of the real estate investing worlding alongside some trusted partners and clients that things become more illuminated. Since then I have attempted to encourage and educate more people about the reality of real estate investing while emphasizing the importance of sourcing, securing & utilizing capital and debt in a manner that can work more efficiently and, ideally, for the long run.

Over the last year my colleagues and I have been able to successfully do so, helping a number of investors through some rather sticky situations, at the same time continuing to grow our portfolios. And now, we press on, continuing to spread the word.

When it comes to real estate financing and investing, keep us in mind. Not only are we assisting investors with funding, we're able to strategize with them as they use different investment models so they can continue to generate revenue and grow their investing businesses.

The engagement was strong for the post last week regarding a property I believe would make a great long-term investment. We hadn’t even gotten to the juicy part yet!

It’s a single-family home in the Kansas City area, and I gave an example of what some of the numbers could look like for a purchase using traditional investor financing with 25% down.

6205 Northern Ave, Raytown, MO 64133
MLS #: 2496940
Listing courtesy of Rodrigo Pulido - Chartwell Realty LLC

Listed at $199,000 it is now under contract. Houses in the KC market are still being sold rather quickly and remain close to 100% of list price.

So for this particular investment model we buy house that are livable, and we use long term financing or cash. Then we offer seller financing to families helping to create more home ownership, generate cash flow and eliminate a majority of the main pain points rental owners experience.

If you recall this example, I proposed we do a lease option for a $5,000 upfront fee, the cash flow was close to $400 a month and the cash-on-cash return around 7%. Well, it gets better.

No one asked what the long-term exit is like or about the dynamics of the lease option agreement. Tsk, tsk.

On this one we'd do a lease with a 10-year option to buy. We’re going to use 5% a year appreciation as a general figure and in that case the amount needed to exercise the purchase is $300,000.

Refer to the last post and run #’s. If the property was purchased at list price with 25% down using a 30-year, fixed-rate, non-QM mortgage @ 8% interest the current loan amount is just under $150,000.

Here’s where more fun happens. Let’s say our lease option residents stay, take care of the home, consistently pay on time with just a few late payments along the way, and then choose to exercise their option at year 8. At this point our existing mortgage balance is around $136,000.

The house appraises for $290,000 we negotiate a bit, and get it done. Even with closing costs & commissions at 8% of the sales price along with some concessions we're left with $261,000. Subtract out our existing mortgage and we walk away with $125,000. Check the numbers and you will see a cash-on-cash ROI legitimately well above the 20% mark.

Not only were we able to cash flow on this investment for 8 years, but we did it without all the same struggles that all landlords have. Plus, we helped a family get into a home that they can truly call theirs. Not to mention we still enjoyed plenty of tax benefits.

Plug in with me, fam. This is the stuff I’ve been talking about lately. Kudos to John Burley & associates for showing us a more efficient & sustainable way to invest in real estate and encouraging us to keep learning.

You may need more info or want to dig in a bit. We’re here making it go. The market has shifted and more investors are waking up. Send a message or reach out if you want to learn more about how you can adjust & continue to expand your real estate business.

That’s what I’m sayin’, @Alex Olson.  Folks ought to see what the returns are like once the big back end gets paid out.  :)

Here’s an example of a potential investment property that we are encouraging our partners and clients to capitalize on today, right here in the Kansas City market:

6205 Northern Ave, Raytown, MO 64133

MLS #: 2496940

Listing courtesy of Rodrigo Pulido - Chartwell Realty LLC

It's currently listed for $199,000.

The house has 3 bedrooms, 2 bathrooms, a 2-car garage, a full basement and it was built in 1954; Square footage approx. 1,569

Here’s the rub: contrary to popular opinion, you’ll need money to invest in real estate. In order to purchase and maintain the property, cover maintenance and perhaps minor repairs, to cover utilities & other expenses as well as making the mortgage payments and more.

Here’s a breakdown, simply estimates, for what the out-of-pocket costs could be for a investor who uses non-QM investor financing for the purchase; a 30-yr fixed rate loan at 8% interest:

Down Payment (25%): $49,750

Closing Costs (3%): $5,970

Placement Fee: $10,000

Reserves: $5,000

Total estimated cash needed: $70,720

If purchased at list price, your total monthly payment on this investment property, including the escrow for the taxes & insurance:

approximately $1,332.32

Alright, so on the back end, here’s how we make the investment work, for the long term: Do seller financing.

A 10-year lease option is a great way to go if you’re doing a significant volume of purchases. A contract for deed will fly if you’re doing 3 or less per year.

Here's how the cash flow & ROI could look, assuming you do a lease option, as a way to generate cash flow:

Option fee received: $5,000

Monthly lease amount: $1,750

In this scenario you'd have approximately $65,000 tied up in the property "left in the deal".

With monthly cash flow at around $400 month your

ROI: 7+% cash on cash

The cool thing about seller financing is that investors are able to virtually eliminate all of the regular expenses for traditional rentals. That's management, maintenance and more. Along with the headaches and main challenges for landlords.

This is about as close to passive income from real estate investing as it gets. Doing so while enjoying long-term ownership and tax benefits Plus, later on down the road, when the residents exercise their purchase option or if they refinance or resale (depending on how the transaction is structured & handled) you will walk away with a large amount of money. Tap in with me and we can dig deeper into the numbers sometime.

There's only so much I can get to here on a social media post but if you want to learn more about how we're making this happen, connect with me. As the market has shifted there are more investors who are getting on board.

I truly believe this is one of the best ways to invest in residential real estate. Plug in if you want to make it happen or learn more about it.

Luther Wilson III

I remember helping an investor-client of mine purchase 5 single-family home investments between 2012 and 2016. The average cost for each individual purchase was under $80,000.

He proceeded to rent all of them out and still owns them today. Rents have gone up and so have the values! Currently, the average value of those properties is around $200,000.

The moral of the story: Buy and hold. Get in now. Somehow. Some way. Play the long game. See what happens.

Part of our plan (my clients and partners) is to buy houses today that will have or already have a value in the $175k - $250k range and keep them for the next 10-20 years, perhaps longer.

What do you think a $200,000 house will be worth in 10 years? Who wants some of that action?

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Okay, got it.  Let me know how I might be able to assist you with anything.

The ones I've been part of are non QM.  Part of it depends on what's negotiated, how the documents are put together along with how the transaction is handled and structured.  Are you considering doing seller financing of some type?  For yourself or clients?

We do so by being mindful of how many seller finance transactions are completed within a 12 month period.  For those doing more volume, lease options is the way to go. 

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Benefits for Buyers:

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