All Forum Posts by: Paul Choi

Howdy folks!

So a friend of mine, who is not into REI, has sent me a couple of off-market leads through his family/friends, which is great but I'm currently low on funds to close the deals. I'm in the middle of SFH rehab for a flip and cannot refi my other property because I will be 1031'ing it early next year.

First, is this a deal?

It's a SFH, 3/2, great condition, paid off with a tenant. The owner is an older couple who is a tired landlord and wants to sell it since they are into their senior years. It could sell as-is for around $270k. If I spend some money (light kitchen/bathroom remodel, laminate flooring, paint) ARV is around $290k-$300k, confirmed by my agent and myself. It's a not a high end home, probably mid level, nice blue-collar neighborhood. I negotiated her down to $230k cash but this took a few months so during that time, I already bought another house to flip and shifted funds around. The spread is much less than I'm used to working with but there is still room for around $20k-$30k profit after expenses and rehab. I know..not much but better than $0 :) I offered seller-financing with attractive terms but she just wants to cash out.

I have been racking my brain on how to finance this. She won't do selling-financing, tenant doesn't have the funds purchase, starting asking friends/family to see if they want to be passive investors but have not had any luck yet, I have a HML I work with but need ~$50k down and points eat into the profits on such a smaller spread. Traditional bank lenders - same thing, need downpay. I'm not going to househack because I already have a house and family.

Any ideas? She said she will just list the house on the MLS with an agent early next year if I don't take it. I can gamble and wait till I sell my flip but not sure if the timing is going to be right. Got another similar SFH off-market deal in the pipeline and would like to get financing ideas in place if that deal looks good.

Thanks!

 Hands down the best post on this thread!  I hope the original poster takes this advice to heart.  We're all trying to help each other here.

Business loans, lines of credit, etc all sound like ideas but if she wants a cash flowing property, all those multiple loan payments will kill any positive cash flow. Gotta put some own cash/skin in the game. If she invests in properties that need work,  then there is some sweat equity realized and value.

@David Boroughes

I agree, 1031 is not the path to riches. It's ONE of the strategies that could be implemented ALONG with others - BRRRR, house hack, etc. that can help go 2 steps forward towards building wealth. But not 10 steps forward...

Find some nice MFH properties that you like that cash flow with 20-30% down.  

If you do FHA house hack, then obviously, less down but cash flowing properties will be harder to find since your monthly payment is higher.

@Raeshelle C.

Not sure how much properties are in your area but with $10k, you're best bet it to house hack with a FHA like others have mentioned.

Another option is to find motivated sellers who will do seller-financing.  less money out of your pocket.

Honestly, you should try to save up some more money so that you have more options and can get in a good property/deal.  With more money, you have more leverage.

find deals first. buyers with cash will come to you if the deals are good.

In the good economy, there are less deals and lots of cash buyers.

In a bad economy, there are tons of deals, less cash buyers.

@Dave Mosher

Haven't ran the numbers but will it work with seller-financing/subject-to?  and charge her rent but make sure you're in the black, even marginally?  helps keep the fees (escrow, commission, etc) out.

@Jay Dekker

Simply put, to accumulate rental properties, you either need:

1. lots of money

2. time/effort to make improvements on the property to get forced appreciation.

To buy, do nothing and collect rent - it can be done but like you mentioned, it's gonna be slow.  Even 1031 exchanges will take time if you plan on not putting any more money into the next deal.  And that's betting that your property will appreciate so that you can acquire a bigger one for your next one.

If you have a long timeline, then you should be fine. If you want to be abit more aggressive with growth, do #2 above (BRRRR) or better yet, do #1 and #2 with OPM + yours :)

@Account Closed

Yes, the agent should be able to get you the reports