All Forum Posts by: Ned Carey

@Hunter Gibson  wrote:
         "If I can get a deal to cash flow on long term rent with no money out of pocket in a great area I will buy that deal every day regardless if I am underwater"

Because you are young, asking the question you are, and that you don't mention specific rental experience in your profile,  I am guessing you are new at holding rentals. 

If you have a property that has net positive cash flow you are probably not under water. But in today's market, with prices at very high levels, it is hard to cash flow at 100% financing. Ther are a LOT of hidden expenses that go into holding rentals that many new investors don't recognise. Management fees, lease up costs, turnover costs vacancy rates, repairs, licenses,  non paying tenants etc. are all examples of these. 

What you say is good and true in theory, However when you run actual numbers many good sounding strategies don't work. I don't say these things to discourage you. I say them so that you can be better prepared to deal with reality. Good luck. 

@Hunter Gibson This will likely be hard to find. aIthough is more likely to happen with a smaller local bank who basses their loans more on the relationship with the borrower. Large national lenders are not likely to do this. 

Banks want you to have "Skin in the game" in other words they want you to have your own money at risk.

That said just because you can do a deal with 100% financing does not mean it is a good deal. A bad deal with 100% financing is still a bad deal. I think this is what @Joe S.  and @Jason Wray were trying to say. 

@Eddie Miretsky the problem is, thngs that make it easier to invest like online auctions make it easier for everyone. So competition goes up. When competition goes up profits go down. 

I hae done very well in tax sale over the years. Early I bought liens on things that got overlooked like boarded up houses, or things with very high lines. As competition heated up more buyers were willing to buy the odball stuff and large liens. I still did OK because I bid on so many proerties I got my fair share of liens. Now This year even though I bid on most of the liens available I got fewer liens because others were willing to bid more. I suspect the volume and profits I do over the next few years will continue to drop. That is what hapens in a hot market with lots of competition. 

From a market cycle perspective this is probably not the best time to be getting into real estate in any form. However there are always good deals to be found. You just have to look harder. 

Specifically for tax liens ai would bid low on lots of liens and hope to catch a few that fall between the cracks. 

One way is to get a Hard Money loan, after you get two or three properties you can then bundle them together to get blanket loan.

As already said low amount loans are hard to get and often take getting creative. 

Key things to agree to 

The interest rate

amortizing or interest only loan

Length of loan

Length of amortization (does not have to be the same as length of loan if there is a balloon payment)

When are payments due; monthly, quarterly, annually at the end of the loan etc.

Are there any upfront points to be paid and other misc terms like late fees.

Then have an attoney create a Note and a Mortgage (or deed of trust depensing on the state)

@Maria Putnam my focus has been tax sale for 20 years. I have found tax slae overages not to be worth the trouble. The is a lot of competion in the space from professionals who focus on recovering lost assets. 

I live in MD which is a very liberal state and it is frowned upon as being predatory. Some state limit the fee you can collect and may limit who can collect - only attorneys for eample. The process of finding the people and motivating them is harder than you might expect. 

I don't mean to discourage you but be aware it is not near as easy as you may have heard. I would definitely look into the laws of your state to make sure you aren't running afoul of the law. In MD you cn go to jaoil for doing mortgage foreclosure overages

@Mia Gregory I cant speak specifically to Missouri law. Tax sales vary tremendously by state. 

However in general if you complete a tax lien foreclosure you wipe out any other liens and ownership interest against the property. I'm sure you heard how you can buy houses "for pennies on the dollar" just pay the taxes and the house can be yours. the reality is while that is possible the competition dosesn't allow it to happen. Tax sale auctions can be very competitive and there is risk involved.

Nationally it is said that about 95% of the property owners will redeem and you only get the interest. But the 5% that go to foreclosure are often homes in very poor condition or sometimes worthless strips of vacant land. 

I never understand why people say you need to do a title searh first. If you foreclose the attorney will do a title search and serve all parties that have an interest. Tax sale cleans up the title by removing all the clouds and junk attached. 

Now knowing that the owner is dead or some other factor like the property is boarded up, may increase your chance of getting the property. But you never know, the estate or heirs will have to be served and they may redeem. 

I suggest you spend some time to learn the rules in your state/county. Often the county website will have good information about heir tax sales and the process. 

I have done well with tax sale investing but like I said in the beginning the laws vary tremendously. You need to know how the laws in your state. good luck

@Kyle Weinapple the interest rate is irrelavant. Keeping a bad deal because it has a low interest rate is just silly. 

You need to run the numbers at least two ways. What happens if I sell as is now vs what happens if I put the needed work in. if you put the work in would you sell it or keep it as a rental. That is another consideration. You might have t choose the least bad choice. Please don't do what many do, which is trying to avoid losing money by selling now only to have a bigger loss later. You can't just HOPE it will work out - you have to run the numbers.

You have to make sure your numbers are realistic. You said this was a "money pit". Have you had cost over runs? is your estimate of needed work realistic?

Good luck.

@John ONeill ther is no "Template."  Each deal and your particular situation at the time will determine what is the best financing route. As the financial markets change new financing products come and old products sometimes go away. 

It is good to network with various lenders and investors to learn what kinds of terms are currently being offered. 

@Yaakov Gordon while it is certainly legally possible it is highly only unlikley and DSCR lender woudl do this. BUT even if they would do it in theory, it is unlikely that the numbers would work.

Typically a DSCR loan would be at 80% LTV. They are also typicaly $100k minimum. So your current loan plus $100k is going to be 80% of a very big numnber, You are likely to be in a price range that won't cash flow well enough to get the DSCR loan.