All Forum Posts by: Mitch Messer

@John Turner, thank you for your response! Currency conversion dynamics can be a huge factor in foreign investment, one I had largely overlooked.

Yes, that exchange rate does takes a big bite, but that's possibly where owner financing could be beneficial. Some owner financed deals can be structured with very low down payments. While you might have to inject some funds for repairs, the long-term plan would be to quickly get the property producing positive cashflow. From then on, you're largely insulated from exchange rate drama (since you'll be servicing the debt, collecting rents, and paying expenses, all in US dollars), at least until you sell.

Also, while in theory you probably could structure an owner financing deal with a variable rate tied to the US/Canada exchange rate, you're probably better off keeping it simple and easy for a non-pro seller to understand.

Speaking of which, how does that work with conventional lenders to foreign nationals? Do you have to pay interest rates comparable to those of the country in which the property sits, or do you pay rates more like those of your home country? Or does that depend on where the lender is located?

@Isabelle W. thank you for your comments! I did not realize owner finance doesn't exist in France. I agree: you can't seek what you don't know exists.

Regarding your comments about fear, I see owner financing as representing a lower risk than many of the other options available to foreign investors. Rather than dealing with skilled and shrewd loan brokers, you're instead just working with a seller to solve a problem.

Sellers who are most receptive to a financing offer need to sell but can't, often because they lack sufficient funds to make necessary repairs or to engage an agent. In some cases they have little or no equity, and no desire to hold onto the property, but they do have great financing already in place. Or, perhaps they own the property free-and clear, but want a fast sale and don't need all their funds at closing.

Loan professionals are mostly in business to collect fees (interest, points, application fees, etc.), whether you make money on your deal or not; sellers like those above just want their problems fixed. They don't mind you getting what you want, as long as they get what they need. You can negotiate with sellers as equals, which is hardly ever the case with banks.

Yes, sadly, villains are out there, but I like your chances with sellers far better than with most lenders and banks.

I've seen very many posts here on BP from foreign nationals on how different (and often frustrating) the US banking system is, compared to their own. Non US citizens have meager institutional options when seeking to finance investment real estate here in the US.

Which leads me to wonder why more foreign investors don't actively seek out (or seek to create) deals financed by the seller. Is there some obstacle I'm not seeing?

Admittedly, these deals are far easier to structure when you're here on the ground in a US market, but they are far from scarce. (A quick search on "owner finance" in Atlanta Craigslist just yielded 645 matches.)

So, what am I missing? Can anyone offer some insight?

Hey @Dan MacDuffie, who's the seller? Is it a bank (e.g., REO) or agency (e.g., HUD), or just a regular person?

@Emiliano Gonzalez, now that is a smart proposal! If you were in local, I'd take you up on it in a heartbeat.

Surely Orlando has a REIA. I'll bet if you made that pitch at a REIA meeting, you'd get at least some takers. Have you tried that yet?

Otherwise, Atlanta is just a short six-hour commute away!

Good luck!

Hi @Anthony Johnson. Can you give us an example of a deal you've gotten under contract? Owner financing is a very broad topic. It will be much easier to advise if we can respond to an actual scenario.

Hey @Geoffrey Brown. My advice is don't sweat the business cards. Or the magnetic sign for your car or the fancy brochure, for that matter. All of that is an expensive distraction: If you're servicing a real market need, no one cares. Truly.

I think your plan makes perfect sense.

Focus your efforts on learning your market. Let's say you like wholesaling. Then, you need to learn where cash buyers are closing deals in your town. Find these cash buyers and then talk to them to find out what types of deals they are looking for. There's your buyers list.

Tell everyone you know you are looking for folks who are having trouble selling a home. You want all the ugly, thorny, unpleasant situations: the nasty divorce, the unpaid medical bills, the IRS tax liens, the relative who stopped paying rent, all of it. Talk to these people and figure out how you can get them what they want while getting what you want. Solving problems is a wholesaler's bread and butter.

Keep in mind that sometimes the best solution is to refer them to someone else. Maybe a good real estate agent, or bankruptcy attorney, or tax lawyer can help. Make these referrals wisely and some of these professionals will eventually become part of your success team and refer clients to you.

Wholesaling newbies want to give me their business card; True operators want to tell me about the last big problem they just solved and how beneficial it was for them, their seller, and their buyer. Which would you pay more attention to?

Hi @Michael Marcoux. Well, these aren't the worst terms I've ever seen, but they are pretty close! Not sure what a "private equity lender" does, but with these terms they should be operating out of Vinny's Pool Room & Strip Club ; )

A 30-year term, a staggering pre-payment penalty, a max rate of 12%, and a personal guarantee? Be still, my beating heart!

Seriously, how much money are we talking about, here? Unless it's more than $500K, you'd be better off talking to private lenders. These are just regular folks with cash on hand looking to get a decent return. They've got funds (often IRA money) and are looking for deals to get into that offer an attractive yield (10-15%). Those are your best money partners.

The real question is whether you can convince them you have the management experience to find the deal, close it, and then operate the property profitably enough (for long enough) to generate the returns they seek, all while making some money for yourself as well.

I know it may not seem like it, but if you find a great deal, there is plenty of reasonable and affordable money out there to get any deal done. Don't fall prey to predatory lenders!

Hi @James Morand. It really depends. If your goal is to own just one property at a time, then purchasing with cash is generally a better bet than a bank loan. (Unless that bank is offering a ridiculously low interest rate on the loan. Or unless inflation is rising. Or a bunch of other factors.)

Since you're here on BP, I'll assume that you aspire to own more than one property.

So, yes, cash is king. But, once you've sunk your $100K on a $100K property, you're done. Game over.

Bank loans allow leverage: Put down $20K cash, get a loan $80K, and then make payments on the debt out of your rental income. Repeat four more times, for a five-property portfolio from the same $100K initial investment.

Let me be clear: I am not advocating for you getting a bank loan. Other than for a primary residence, I think most new investors should avoid banks as much as possible. There are plenty of investment strategies (owner financing, subject-to, lease-option) that don't involve getting a bank loan. (They do involve serious training and study, though.)

I just wanted to make the point that there are legitimate reasons for getting a bank loan even if you have 100% of the cash needed to purchase.

@Brett St Clair Info is on its way to you now!