All Forum Posts by: Mitch Messer

Hi @Kate Lee. Last I checked, you could get a Google Voice number with an area code chosen from anywhere across the U.S., for FREE! 

Quote from @Rafael Pinho:

Hi YungChien, have you found out about tax implications for non-residents? I'm on the same road as you are, trying to figure out where to start, and while everything seems to be quite straightforward I got a bit stuck on the tax matters. How to work around FIRPTA with LLCs and so on. Would be great to connect! 

 @Rafael Pinho I found this summary of FIRPTA (and some mitigation strategies) to be helpful: https://fascpaconsultants.com/how-to-avoid-firpta-for-foreig...

Not an endorsement: I have no connection to this company.

Quote from @Stefanie Garner:

Following this. How do non-US investors sign settlement papers when traditionally the buyer and notary needs to be present? 

Non-US investor clients typically create a US-based investment entity, often a limited liability company (LLC). The entity can, through power-of-attorney, authorize a third party to sign closing documents. (We strongly recommend having an attorney serve this role.)

Alternatively, I believe you can also get documents notarized outside the States at a US embassy.

Quote from @Barry Ruby:

@Mitch Messer

I believe that Cash on cash measures return on equity

ROI is the return on investment which measures total cash flow and sales on total capital investment

I don't deny that cash-on-cash return (COCR) is not the only metric worth considering for rental property.

That said, COCR is defined as cash flow divided by all-in-cash-investment [https://www.investopedia.com/terms/c/cashoncashreturn.asp].

That's very different from return-on-investment (ROI).

Per above citation: "ROI calculates the total return, including the debt burden, on an investment. Cash-on-cash return, on the other hand, only measures the return on the actual cash invested, providing a more accurate analysis of the investment's performance."

@Jared Fisher I know this sounds trite, but it's also true: You should focus on the deal, and let the deal dictate the financing.

I guarantee that if you find a truly high-quality deal, getting it financed will not be a problem.

(If you find a great one in Georgia, Texas, Oklahoma, South Carolina, or Nevada, you're welcome to contact me to prove me wrong! 😁)

Quote from @Vijay Kumar B.:

Thank you @Conner Olsen for your reply. 

Yes, I am planning to negotiate with them to cover all of my closing costs. Researching on what additional incentives I can ask for. 

What do you mean by "Underwrite a slightly lower market rate just in case.". Sorry, I am new with the terminology. 

@Vijay Kumar B. "Underwriting" is when you run your financial analysis on a deal to confirm that it actually makes money.

I'm assuming you intend to hold this property to produce cash flow, so THREE key questions are:

1. How much cash flow will this investment produce annually?

2. How much of your cash will you have to invest (to purchase, close, and renovate the property) in order to get that annual cash flow?

3. How does the ratio of cash flow to total upfront cash (AKA cash-on-cash return) compare to other investments you might consider?

If you know these three numbers, then you can begin to determine if it's "a good time to buy a investment property in Hutto area."

Otherwise, you'll just be wishing and hoping, not investing!

Quote from @Xueling Xu:

Dear investors,

I just signed up BiggerPockets today. I was searching seller financing in San Antonio, TX. I am in real estate, buy and rent out since 2020. beginning level. I am planning to sell one townhouse. and want to do it seller financing in Nov. 2023.  I watched the forums had one post asking the same question but it was like 5 years ago.

currently, with the good credit like 740 above, the 30 yrs loan is 6.75%. I am thinking of asking 10% of interest. maybe no balloon payment?

 can be 25 or 30 years loan. with 10% down at least. I also thinking the buyer should have minimum credit score above 580.

Can SA investors give me some steps, and paper works,  escrow accounts, etc. recommendations? I did talk to some real estate attorney and their price for seller would from $650-1000. is it reasonable price?

any advice, suggestions...

Appreciated your help and advice!

Xueling Xu

If you're planning to sell to an owner-occupant, I'd recommend you engage a licensed San Antonio mortgage loan originator (MLO) who has closed seller financed transactions. (You may actually be required to use an MLO to be compliant with Dodd-Frank regulations. Be sure to check with a knowledgeable advisor.) 

If you're selling to an investor, you should run the rental analysis financials using your proposed down payment and monthly to see if those terms even allow an investor to earn a reasonable cash flow and cash-on-cash return.

Sometimes, even with seller financing, it's not a good deal.

@Jason Burnside I agree with @Charles Carillo that none of these properties are going to cash flow well (if at all!) with these terms.

So, fix the terms...

Unless the seller is specifically asking for 8%, there's no way I'd start that high. Think more like 3-4%.

Look at it this way: If the seller were to take ALL their equity at closing, they'd have to reinvest their money somewhere. Where would they get 8%? The stock market? Bitcoin? CDs are paying 5.5% at peak and averaging under 2%.

I'd bet the seller doesn't even care about interest rates: They want a hassle-free specific dollar amount that they can depend on, month after month.

And, it's probably not a lot!

Start with what the seller actually needs and you'll craft a great deal for him and for you!

Hi @Jill McCann!

We've done these (lease/purchase) deals for two decades. My best advice is to FIRST run these folks by a mortgage broker of your choice to see if they are in fact serious candidates to purchase any time soon.

If they are NOT, you can stop right there.

If they ARE, have your loan officer draft up a specific plan of action for them to follow to get approved. For example, "no more 30-day lates and no new credit accounts."

Now you have a way to grade their progress toward purchasing your house.

When/if they become ready to qualify, remember to bring them back to the broker who helped you!   

Hi @Katrina Dividina!

Without more context, it's impossible to know whether the owner financing terms are reasonable or "ridiculous." 

And, even if you could find an appraiser to do an evaluation, it's not clear how that would help you.

As you state, the motel has been shut down for nearly three years, so there's no current financial data.

But even if you had recent numbers, you're planning to operate it as a sober living facility, which I suspect is a very different business model.

You need to find a comparable facility in or near your local market and develop your own customized financial analysis model based upon this particular property.

Then, given your business objectives (cash flow and cash-on-cash return, I assume), you'll need to back into what purchase terms you'll need to achieve those objectives.

Only then will you be able to determine whether these seller financing terms will work.

As far as documentation to get started, a letter of intent (LOI) is commonly used but you might move straight to a purchase and sale agreement, particularly if no agent is involved.

Whichever path you choose, just be certain to give yourself plenty of time to thoroughly perform your due-diligence. Vacant properties with previous code violations can be extremely tricky!