All Forum Posts by: Mitch Freed

I mainly deal with SFR but I've got an opportunity to go after a 52 unit motel located 8 miles from a fair sized city right off a very busy freeway.

I'm curious if anybody might have some advice to offer regarding rules of thumb when it comes to operating expenses vs operating income, per unit cost etc...

The advertised vacancy is 60%...which might not exactly be accurate...we are currently researching.

The weekly rate is $150. Monthly rate is $500

The owner claims that 70% of the occupants are on weekly rates.

Owners are selling because they need some cash, don't want to be in this type of business anymore, and cannot control the current manager who is most likely skimming and thus reporting the high vacancy (we are assuming this for now)

Sales price could be somewhere between 400-500k...seller will carry a note at a rate somewhere between 4-5%. They are looking for a down payment somewhere between 50-100k.

I currently do not have data on their operating expenses but am working on obtaining...was hoping that somebody who owns something similar might be able to offer some advice on how they analyzed their deal, and how their experience has been owning and operating so far.

Thanks!

Regarding recording an option...someone earlier asked the question and got a response to the effect of "seasoning only starts when the deed is recorded"

That isn't entirely true.

It depends on how you present the case to the underwriter. I have successfully cut down on seasoning from 90 to 45 days in one case, completely eliminated the seasoning period in another, and in one case they didn't recognize the date I recorded the option and started the seasoning period with the date I formally took title.

So if you are going to go the option route...always file and when you get your end buyer...make sure their lender knows up front what is happening...like I say, if argued correctly you can get the underwriter to use the option recording date to start the seasoning period.

That is correct...and the wording in the approval letters isn't set in stone...if correctly negotiated one can get the bank to remove that anti-flip wording and thus close a normal A-B-C transaction.

Purchase money should be non-recourse...take a look at the original promissory notes. There might not be a deficiency clause in them.

The money was lent against the house...not the balance of the checking account.

However, if either of the loans is a HELOC or re-fi used for reasons other than the original purchase...then there may be a deficiency clause in which case they will pursue the homeowner after the short sale is completed.

And as far as the hardship goes...if the borrower decides not to pay the mortgage...of course the bank will look at a short sale even if the borrower has money...is the outcome any different if the property goes to foreclosure?

Haha but attorneys are so risk adverse...all we will get is fear of crossing the street tomorrow morning.

Hi Shane,

First step is to make contact with the homeowner in pre-foreclosure. Are these leads coming to you from a source that has a foot in the door...or are they just addresses and mortgage balances?

Let's look over the BK for now just to simplify.

You will need a purchase contract, letter of authorization, and proof of funds letter for starters. The letter of authorization is what gives you the authority to speak to the lender on behalf of the borrower.

What you want is to make contact with the foreclosing lender, fax in the auth letter and find out what sort of short sale package they require to you put together, if any.

Once you get the package submitted, your next step is to get the bank to order an interior BPO (Broker Price Opinion.) This is where an agent, hired by the bank, meets you at the house and valuates if for the bank. You want this value to come in as low as possible...so meet them at the house and point out everything that could possibly de-value the property. There are a lot of strategies here.

Once that value gets back to the bank...they will compare it to your offer, along with comparable sales that the BPO agent also submits...they will accept, reject, counter.

This is an overview.

The listing agent could very well be representing the investor.

The type of agreement the investor may have with the seller is an "Option" to purchase.

Now the option technically bars the seller from selling to anybody but the investor...so if this is the case...the investor can only enter into a contract with you "Subject To" them exercising their option. This would have to be disclosed to you.

The investor also could have gotten title via quit claim deed...and then they would show as the owner of record. This would show up on a chain of title.

Hmmm..interesting chain of events. Can you find out who is selling the property?

One short sale strategy is an investor gets a house under contract...starts negotiations...then lists the house with an agent.

In this scenario, the owner of record is not the person you, the end buyer, are buying the house from.

So check and see who the owner of record is and match that name against the seller listed in the offer paperwork you initially filled out.

Also, I checked with a title agent friend of mine who closes a lot of short sales. An approval letter just like that came across her desk...she called the negotiator and got the 30 day wording removed. If they had a legal claim they wouldn't have removed the wording.