All Forum Posts by: Patrick Goswitz

Has anyone had any experience with a Rental Rehabilitation Program when purchasing an investment property? It seems like a pretty good deal but also seems like it could be a big headache when dealing with the city. I can get up to 30k/ unit for a multi family home in renovations but must rent to low income for 10 years.

"The City of Knoxville's Rental Rehabilitation Program provides owners of substandard residential rental property with financial and technical rehabilitation assistance. In return for the City's rehabilitation assistance, participants agree to certain long term (5-20 years) rent and occupancy restrictions which provide for the continued availability of the housing to lower income families at an affordable rent. The Program utilizes forgivable loans called "Deferred Payment Loans," which require no monthly payments to subsidize the required costs of rehabilitation. Total funding is limited to 80 percent of cost of required rehabilitation or a maximum of $30,000 per unit."

1 Vote

When it comes to flipping, my biggest weakness is dealing with the contractors. I have no problem finding deals or financing them but I feel like I am getting screwed with contractors and a lot of it is my fault. Are there any contractors on here who would be willing to speak on the phone or zoom? I would be willing to pay a consulting fee.

Right now, I am doing a flip where the cost of material is 25k but the labor is 47k. This just doesn't add up to me. Any other advice would be greatly appreciated.

0 Votes

@Kristine Ann ok cool.

2 Votes

@Kristine Ann I guess it depends what state you're in. Here in TN, according to the 2 attorneys I have spoken too, it would not take anywhere close to 2 years.

0 Votes

Quote from @Nicholas L.:

@Patrick Goswitz

I still think we don't have a lot of information on this situation.

How many rentals do you own? Do you have a plan for the proceeds? Why do you seem to feel so comfortable with the buyer, but are then asking the community what to do? If there is no balloon you're entering into a 30-year relationship with someone. Is that really something you

I have bought several deals on seller finance, and usually the sellers are folks looking to exit RE investing, and who don't need the proceeds for anything, and so want to replicate the rental payments they're accustomed to. I doubt that's your situation. But again, all we know is what you posted.

I should've been more clear on my question. Do the numbers make sense? Is this a good return on my money. After reading what others have said in another group, I should add a 5 year balloon.

0 Votes

Quote from @Kristine Ann:

Quote from @Patrick Goswitz:

Quote from @Nathan M kiefer:

Who would want to do this deal that has 100k, no one with a brain in there head.

Hahaha he has his reasons. Not my problem haha. He wants the house badly and he wants to keep his monthly payments below $1,400 which I am able to do for him.

It is your problem, though. If you are the lender and he is taking a loan with you, he is your problem. He won't be able to refinance in 3-5 if the house isn't worth it.

If he doesn't make the payments though I would be able to take the house back. Not that I wish that upon him.

0 Votes

@Mike Grudzien I guess I should rephrase the question. Does it make sense financially for me to do the deal? I am not worried about his finances. I have already investigated that.

0 Votes

Quote from @Benjamin Aaker:

I'm happy you are at least asking the question. As a seller, financing can make you a lot more money, but gives you risk. You also need to be discussing the terms of your contract. You really need to have a term on your loan that is less than 30 years. You can use 30 year amortization, but most seller financing is a way for a buyer to get more time to find better financing.

What you are giving up is basically an option for the buyer to get a better deal sometime down the road. That's a huge thing you are giving up (and maybe worth the additional price of 315k over 260k to you). Most seller financing has a 2-5 year term in my experience, though it can be whatever you agree upon. You should have something in the promissory note about a prepayment penalty.

Still, there must be some other issue going on here. This buyer should be able to get a better deal from a bank. The only thing I'm coming up with is that he doesn't have the creditworthiness to get a bank loan. Or the place is not livable right now, in which case he can't get an FHA loan, but that doesn't matter, because he has 100k to put down. His inability to get bank financing is a red flag to me.

ROI - I don't mind your use of AI, just use it as a supplemental tool to your other tools. More importantly, you can't rely on ROI when going out that long. That monthly 1.3k payment will be worth a third of that in today's dollars when you get 30 years down the road. That's another HUGE reason to have a shorter term. Every year, you are giving this guy more money in the current deal.

Finally, since you will be acting like a bank, then you also need to vet this guy - credit checks and references and background checks.

I know the reason he is not going to the bank. I have ran credit checks/ background checks and we have a very close mutual friend. I agree with you about how he needs to get refinanced in 3-5 years so I can cash out.

0 Votes

Quote from @Carini Rochester:

Crunch your own numbers with the equations that mean something to you. That way you'll have information that is meaningful to you so you can judge for yourself if it a good deal for you. Don't ChatGPT it. My impression is that this is a good deal for the seller, a bad deal for the buyer.

I agree. I crunched my numbers as well, If he puts down a 100k, I now have 135k technically tied up. If he is making monthly payments of ($1,394.49x12)/135k= 12.39% cap rate. That is how I look at it. Which kind goes with @Randy Rodenhouse IRR number

0 Votes

Quote from @Randy Rodenhouse:

Please do not use GPT chat for something like this. You need to get a proper calculator and learn how to use it.

With that being said, I did a quick calculation and your return on capital invested will be around 12% (IRR). Now this number will change if the person pays off early, etc. This also assumes as you get the $100k down (which you will probably not get on a $300k house) and the person pays the loan consistently. Typically seeing around 10% down is more reasonable, which would be around $30,000 which would give you a return of around 7.25% on capital invested.

If you sell houses with owner financing, you need to shorten the term to maybe 10-20 years. This will help your returns a little.

I would like to shorten the term as well but that will raise his monthly payments which he is wanting to keep below $1,400. I have the option as well to adjust the interest rate up in 5 years but not down.

0 Votes

All Forum Posts by: Patrick Goswitz

Patrick Goswitz has started 9 posts and replied 31 times.

Post: Rental Rehabilitation Program

Post: Contractor Consulting For Rehabs

Post: good or bad deal?

Post: good or bad deal?

Post: Owner Finance Deal. Good or Bad?

Post: good or bad deal?

Post: Owner Finance Deal. Good or Bad?

Post: good or bad deal?

Post: good or bad deal?

Post: good or bad deal?