All Forum Posts by: Brian Larson

In the past year or so I have been increasingly interested in leveraging discounted notes to diversify my portfolio. I prefer 1st position notes but certainly understand how others like and do well with 2nds.

Initially the concept was very foreign and I often thought 'wait, so I am buying someone elses debt and playing the role of the bank?" Well, yeah, and now I am super comfortable with this notion.

The point of this post is not how I eventually became OK with the concept but rather a realization I had after many discussions with friends, family and colleagues and a recent event (more on that in a second)

What I noticed is that the most confused were people under 40 and in urban areas (I live in Los Angeles area). This concept was very foreign.

When I explained notes to people above 50 and/or in rural areas the concept of Private Financing/Seller Carry was crystal clear.

Then, 2 weekends ago, I was cleaning out my grandfathers house as he recently passed. I came across a box of old papers and went through them to make sure his SSN was not on anything. What I found was that the past 3 houses he sold (he moved his primary property as he migrated further west with his job) were all seller carry situations and he would by the next place with cash.

My grandpa (who passed in Jan at age 99) was not a real estate person at all, this was just the obvious way to sell property. He had been selling property this way his entire life and likely never thought a thing about it. I then realized why older and/or more rural people are used to this. It happens all the time and was the norm for farms and rural land for many years.

I am sure this point has been made somewhere before and probably in a book but it just dawned on me...this was the norm for hundreds of years before commercial banks were able to merge and grow and own 'everything' in the country

Anyways, nothing earth shattering here but thought I would pass along. When explaining notes to my wife just recently I was able to talk about my grandpas transactions and it seemed to immediately convert her thought from 'this is abstract' to 'ok, I get it, this has been done forever, forget the banks :)'

That sounds great. We have a lot of connections in the area and as long as they don't all retire we could do some interesting things. The best RE agent in Sedona is family friend so if you do end up heading that way just let us know. Great guy and will do the dirty work to find what you need.

Good luck in ILlinois. I will be coming out for the Raider game in October.

hey @Jerry K.

I feel like we are rural N. AZ cousins at this point :)

Changing the layout just would not bring the return. Any $ put back into this do not have an ROI over 100% so this is a cut your losses, swallow your pride and move on. All good, I just want it gone. We have had an offer and much more interest since the last price drop but I didn't like the offer (length and $ were not reasonable)

As far as inventory, I cannot say right now because we are not looking. I need to get out from under this Rebel Rock and then I think we have a solid plan on how to acquire properties. I will share more details once I know what is working. @Kyle Larson has been laying some interesting ground work and test out there with direct mail but we have a different approach that should fire up as soon as this is under contract and past inspection contingency...

we will know more soon and I will try to log our work more diligently...real journals.

In fact, my wife is going to stop teaching for a year and I am going to put her to work helping Kyle with the flips so maybe she can be the daily journal blogger :)

thanks Jerry, good luck to you.

hey @Jerry K. thanks for checking in. My statement around interesting offers may have been misleading and sound like I got offered a bag of golf balls and gerbil food but in actuality it was just some seller carry offers that were interesting.

I had one person offer to pay me above asking and have me carry @5% for 30 years with 1% down. So we are talking about a down payment of $900 and I am stuck with a note that will likely go from performing to non to reperforming several times over the next 30 years. I could just image dealing with this in my 60's...

I had an offer for $0 down, seller carry. stuff like that.

What I learned about the area is that your buyer in that low end home ($75k) range is really looking for more of a manufactured home and that price. this house was not a gem by any means but it was cleaned up nicely, had some great space and an open layout. People acted like at the price we had it, it should have granite. I think once we hit the $74.9k mark we had more attention and I really like the buyers that offered first (even though there was another looking ot offer for more later...supposedly).

all in all, I would likely do a Rimrock flip again IF @Kyle Larson was willing to do it. It is a good drive outside of both Sedona and Cottonwood so its not appealing for laborers or Kyle...ha.

loved the experience, loved the profit and the timeline was not bad. Rural flips are not a quick sale, that's for sure.

I personally like the FIBI meetings but those are the only ones I have been to. I have been to FIBI Long Beach, FIBI South Bay and meant to get up to FIBI Pasadena but have not yet. meetup.com has all the details.

I have met some great people and heard great topics at each.

thanks
brian

FIBI South Bay is great place to start. There are no pitches or gimmicks. They meet monthly in MB and there are other chapters in Pasadena, Long Beach, OC, etc...

I have met several great people networking and learned tons from the speakers.

that reminds me, its been a few months...

FIBI South Bay

I won't be there Tuesday but maybe we will meet at the next one

 I thought this thread was light on Brian's so I decided to hop in :)

You can absolutely make an offer without the financing completely worked out. With that said, I almost always send a prequal letter and proof of funds along with copy of my earnest money. These are not requirements to make an offer, I just find it best practice it shows the seller that I am serious.

As for using an inspection to 'weasel' out of the deal (contingencies often called weasel clauses) may not be unethical, but I do not like it. You are wasting peoples time and energy (including yours). Instead of using inspection contingency to get out of it, why not use a finance contingency? This is quite standard in a purchase and I always include it. Basically it says, if I cannot get the loan, I get out of the deal and get my EM back.

Again, if you don't have the financing lined up then its tough to recommend going forward.

Lastly, I think you are asking "would a cash offer be wrong?" and implying that you would offer cash, then figure out financing (hard money, friend, relative, lottery winnings) before closing. Technically that is not a cash purchase and most sellers will ask for proof of funds on cash purchase to verify you are serious. Every cash purchase I have done, I have sent a copy of my bank statement with a recent date and the cash needed in place.

I hate to be a downer but wanted to address some of your thoughts. If the deal is there and the math truly plays someone on here will be interested to help out. Heck, shoot me a DM and I will look it over and possibly invest.

Good luck!

b

update on this property. I will keep it short

I will not make money on this flip. No way to do so. Just like our other flip, we are learning a TON. I will likely eat a few thousand $ on this but I am going to chalk it up to learning experience.

The reasons this is taking so long to sell? Well, we think the following factors are causing delays:

• no carport/garage - we knew this would limit us before we got into it
• funky layout - its a nice house and was redone well but the layout is a bit odd due to a very large room from the converted garage

Those 2 things by themselves would likely not be showstoppers BUT coupled together...its been brutal. On the market since December, multiple price cuts....nothing.

I will update once I sell and the overall damage is recorded. Luckily its not that bad but of course you can't do many flips that are negative...ha

so this was not the best journal post ever...lots of huge gaps! Sorry about that.

First, there were some new windows put in. Most of the work was done by various handymen, nothing by myself outside of some cleaning, replace a door knob, etc.

So, with that, this is now closed and we did fairly well. Here are the details:

• See full details above for purchase price, date, rehab etc
• This area is very remote and thus had very low foot traffic (known going in)
• It is a stick built house BUT it looks like a mobile and no matter how much we advertised as such, we always got feedback that it looks like a trailer (BUT ITS NOT! :)
• Sold in March
• $70k purchase price
• $3k in concessions
• Buyer wanted to do a seller carry. I obliged
• 50% down, 5 year fully amortized

So the net of it is this. We did well. Definitely profit there BUT I will not see it immediately. I felt this was still worth taking on the note as the payments will catch up to the rest of my 'money in' by the end of the year. Now I have a nice income stream for the next 5 years. Not bad!

Overall this was a hit and I am very happy we did it. With that said, we learned a ton about the area, perceived value and the type of buyer at that price point. We fielded some very interesting offers :)

Again, J. Scott's book was hugely influential for @Kyle Larson to be able to estimate accurately. I would have never carried a note (or knew what that was) without this forum/podcast

Hi Jerry,

I have been a bit quiet recently, my apologies. Not much of a journal.

This property is still for sale and we have had to make some price adjustments... still nothing. We will likely take a negligible gain by dropping price and getting it unloaded. Write it off as a learning experience :)

The other property is under contract. I will write up the details as soon as we close next week. I just don't want to jinx anything as this has been a bit slow as well. :)

Nothing in queue as of now. We are going to get the marketing machine going as soon as we close on Rimrock property. Hopefully have some leads by the time we sell this property.

Thanks!

b