All Forum Posts by: Mike Taddy

@Ben Leybovich 

First, thanks for taking the time to reply.  I may have overthought it, which leads to greater confusion with my question.  A few clarifications.

1.  Maybe better stated, I was looking for examples of prepayment penalty.  Your statement about lockout alone helps.  I assumed the penalty (if there's even one) could be "de-escalating" as the note matures.  

2.  I am inquiring about it because the seller is hesitant to seller financing, mostly because he has no experience.  He's an elderly man that thinks in "cash" terms.  So if in trying to provide incentive to him, I wanted to demonstrate the opportunity for continued passive income and added bonus of interest for him carrying the financing.  If he sees that opportunity, I just want to be able to speak to prepayment penalties and not be caught flat-footed in the conversation. Honestly, I doubt it will come up with him, but could arise in legal review.    

Again, I think other than someone providing examples of their prior deals, I think I now have a good grasp of it.  

Thanks again...

Mike

@Jacci Konkle thanks for reaching out.  If able, would like to get your perspective (and anyone else following this thread) for my opportunity in Wisconsin.  

https://www.biggerpockets.com/forums/61/topics/535...

Hey everyone.  Thanks for the replies.  I've sent a few of you private messages.  I look forward to connecting when I return.  

Hey everyone.  Obviously a lot of things to discuss related to Seller Financing (SF).  For the sake of this post, my question relates to early payoff considerations.  I'm currently working on a time-phased purchase of a retiring investor's portfolio.  He's open to the idea of SF over the course of several years to help reduce capital gains versus one year.  Also, and most importantly, it will supplement his current monthly passive income.  

Obviously, "everything is negotiable" in seller financing.  My current plan is to not include a "penalty" against early payoff (if I obtain better terms).  With that said, that time-phased passive income is of great value to him.  If he were to ask about my thoughts on "early" payoff penalties, I'd like to be versed in some options.  Initially, I think the "penalty" would be relative to the amount/time left on the note.  The seller does NOT have SF experience so he will be limited in sharing his proposed options.  

If it helps, consider this hypothetical situation.  This is not the actually deal.   

$100K / 20 Year Mortgage
Home price	$100,000.00
Down payment	15.00%
Total amount financed	$85,000.00
Payment amount	$584.70
Total payments	$140,329.80
Interest rate	5.50%
Interest compounding	Monthly
Total finance charge	$55,329.80
Sum Total to Seller	$155,329.80
Seller Net Gain for SF	$55,329.80

So if I wanted to payoff early, what could I present for options if he wants an early payoff penalty? 

Anyone have examples of this situation? 

Best Regards,

Mike

I think Jon Holdman lays out one of your most important considerations—what and how my much costs await at tenant turnover? I’m in a similar situation. If/when the tenants turnover, I want to to significantly update. The question is as Jon alluded—do you have those reserves now? Higher rents are good, but capital limits what you can do now, there may be a compromise in the situation. Slight increases for next year or so while you build reserves for the updates you want. Best Regards Mike

Ian, Good day. Great questions and many of the same I’ve recently gone through as well. Sorry I won’t “directly” answer your specific questions, but pass along a few things that worked for me in this consideration. - You will get many “it depends” replies—and rightfully so. Each investor’s case is unique to them. - You will also receive advice to consult a lawyer with specific and considerable experience in setting up entities. Ensure they know their RE “stuff” because it’s an important aspect of your business. I advise finding a local RE mentor that can put you in touch with a trustworthy lawyer. - Maybe most importantly, search this site and the internet as a whole for some self-education. Read, digest, and review as much about the topic as you can. Once you become informed on it, you’ll find the choice that best works for you now. Many of your questions have been answered numerous times on BP via posts, blogs, etc. Maybe you’ve read a bunch already and you have specific questions you feel haven’t been addressed here get, so I apologize in advance if I’m no help. Best Regards Mike

Scott, welcome to BP. I’m a newbie as well. If you haven’t already, IMO your #1 objective at this time is to address the personal behavior and events that led to your credit score. Those behavioral issues and decisions won’t solely go away via RE investing. In fact, if not “righted” your situation could easily worsen. My hope is you’ve already addressed those concerns. Even then, we rarely remain objective in our own assessment when the issue is so close and emotional to us (drugs, alcohol, money, etc.). I recommend consulting a trusted friend or family member that can give you honest, objective feedback without “guilting” you through all your poor decisions. If you don’t have that type of person in your life, seek a financial mentor with REI experience (bonus if you can meet with in-person) and lay all of your cards out on the line. By being honest, objective, and humble, you stand a good chance of getting worthwhile advice. If you’ve done all that already, good job and great advice will continue to come from others on BP. Take some time to tour the forums, you’ll find a plethora of others in your situation that have received great advice. Best Regards Mike

Originally posted by @Jay Hinrichs:

Just a thought here.. but if your credit cards are maxed and you have to borrow money for equity in a deal I submit that your really being quite risky.. what happens if the deal does not go well.

I think your under capitalized at the moment.. when you go in as equity it should be with ready cash..

Just sayin..

Reading through this thread, when I got to the credit card comment, this would be my concern as well.   Lack of other pertinent information also lends itself that the OP could use some assessment on the deal and themselves.  If $500 towards a deal is a "carrot" for consideration, other vital issues/barriers exist to funding a good deal. 

Hopefully, I'm wrong and the OP can provide clarification, where BP can help steer him to a beneficial long-term solution.

Best regards.

Mike

@Scott Schultz - private message sent. 

Mike

Hey everyone.  I'll be retiring from the Air Force this summer.  I'm looking to connect with investors in the areas of Green Bay, Appleton, Manitowoc, Sheboygan.  Generally speaking Manitowoc, Brown, Calumet, Sheboygan, and Outagamie counties.  I'm currently deployed to the Middle East, but will be available beginning July 2018.  

I began this venture in September 2017.  Since then, Closed on 2 properties/9 units and 4 more units set to close this month.  I also have a very solid connection in a growing and reputable property management company.  

I'm looking to establish a reputable network.  I can be of great assistance if you're an out of area investor or work full-time and need someone that can get work done during the day.  If you want to develop a relationship with someone that prioritizes integrity and loyalty, give me a shout.  My "word" is my strongest attribute and look forward to making more connections.  

Best Regards,

Mike Taddy