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I am working with a developer in purchasing builder close out units. The development is 180 units with 10 remaining. All 170 units were sold at market, I am receiving a 40% for taking down all ten.

Here is where it gets interesting. I obtained financing for the 4 units I am buying personally, however, my other two buyers are having trouble. The developer has offered to get creative in helping them take these units down with seller financing or any other creative solutions I can come up with.

The way we structured the deals initially was to contract at 80% of their market value and take out a 90% non-owner occupied mortgage. With our down stroke that would leave us with a 72% LTV property and 12% going back to our third party management company for reinvestment.

What I proposed was to have the developer quit claim us onto title and we could then do a 70-75% cash out refi. The developer has agreed and we have a lender who will allow no title seasoning on a cash out due to the LTV and our strength as buyers.

My question is: how do we get the developer their payoff? They own the property free and clear, if we cashed out our proceeds and the "payoff" or what boils down to the purchase price, the lenders won't do it. As I'm typing this I think the best strategy is to have them seller finance and we can cash out refi from the seller financing, if the lender will cash out refi from a quit claim, I would think they would allow the same terms under this scenario.

I'm thinking out loud here (or writing out loud, or something), thoughts, ideas, comments?

which end of the transaction?

No clients in Texas as of yet. I believe I stated in a previous post most of my client base has been local in Chicago, but my properties are nationwide. I am looking to branch out and have sought out the real estate forums as a networking tool. I know Texas has remained a fairly strong market while the country as a whole has been lagging, so it may be difficult to find discounted properties in your area (especially Austin). I have recently bought properties in Madison, WI (college town, great investment area at the first time homebuyer prices), Decatur, GA (nice pocket in the Atlanta metro area) and am looking at one in Miami (I know, Miami, but the rent is great and the equity position is phenomenal).

In your scenario, I think that is very wise. Unfortunately alot of the entry level investors lack the capital to rehab a property and leave the money in there while they are renting the property. With all of the flipping shows on cable today, that seems to be the investment people are after and today's market makes it very difficult.

It is otherwise known as an option. Say you establish a contract with the seller that gives you an allotted period of time to find a buyer. You contract it at X and sell it at Y. The difference between X and Y is your profit. What makes this simple is that the buyer you brought to the table establishes a contract with the title holder, so there are no seasoning issues.

I started out in residential mortgages a few years back. Some of my local developer contacts that brought me business started asking me if I had anyone who would be interested in buying properties at a steep discount. What you come across with alot of these developers is a situation where inventory is not moving as fast as they would like and they need to move onto the next project. This was the situation my developers were faced with. They also built with cash, which gave them the ability to unload a property at a discount and still make a profit. It got to a point where a bulk of my mortgage business were coming from these discounted sales.

This scenario piqued my interest. With the market slowing down at this time I knew there had to be other developers looking to do the same. Now, beyond residential mortgages, I also finance large commercial loans; which has lead to a nationwide network. When I decided to pursue the wholesale property route I simply asked around through my network. Since I entered this arena I have presented deals to investors that have lead to over 100 closings as well closing on multiple units myself.

As far as my investment strategy, I believe in practicing what I preach. I usually invest in the same opportunities I present to investors. My strategy changes as the market changes. My dad taught me at a young age that you make your money on the buy side, so why would I buy a multifamily building in a slow housing market? I'm not a flipper, not my taste, I am a buy and hold investor. I believe in buying under market and letting the market correct itself while someone else is paying my mortgage (renter). To me this is the safest and smartest method of investing. Alot of people are looking for the quick buck, which is out there, but I believe the big payoff is down the road.

I hope I didn't ramble on too much here...

I am the managing member of a real estate consulting group in Barrington, IL. My company specializes in aiding investors in their search for wholesale or bulk purchases nationwide.

We are not a real estate broker, our role in the transaction is to simply present properties to investors, which may come from our real estate broker contacts, or our developer contacts. It is important for an investor to do their own due diligence whenever they purchase a property, I cannot stress this enough.

I hope I can be a valuable resource to this forum, as well as learning along the way.

Thank you,

Shaun

I am also in the Chicago area and I am not sure this is the time to enter into single family rehabs. With the credit crunch from lenders and the amount of inventory in the area, your buyer pool has been lessened and the competition is great. I am an investor myself and also own a real estate consulting company based out of Barrington. There is always money to be made in real estate, no matter what market we are in, you just need to know what to look for.

There are good deals out there, they may not be in the Chicago area, which may be out of your comfort zone, but the deals are there. One thing we are focusing on is builder close outs, where they are out of the bank and we can bring a group in the buy the remaining inventory for as little as $.50 on the dollar. We typically do not look at properties that are not rented and the developer puts a management company in place to deal with the tenant. Buying a condo as an investment property requires little upkeep, as you have a home owner's association for upkeep on landscaping and the building.

I hope you find this somewhat helpful.

Shaun