All Forum Posts by: Pete Johnson

Hello, I own a duplex in Michigan and I am considering a land contract. I have a 100k mortgage on it, was selling for 140k with $17500 down, 6.25% over 5 years. Is this a good idea? the potential buyer keeps referring to a wrap deal and I don't even know what that is all about. Is there anyone that can give me some guidance on this? ...........greatly appreciated.

Pete - There are a whole host of reasons why this is a bad idea. Don't do it.

1) If you have a mortgage on the property, then there is likely a "due on sale" clause in the mortgage. That means that if you sell your interest in the property (which you are doing when you sign the land contract) then your bank can call the note due immediately. If you make payments on the note it's unlikely the bank will ever know you sold it, but it's still a risk.
2) Usually buyers who ask for a land contract don't have money and can't get conventional financing. It's likely you have a financially crappy buyer. Always a bad way to start.
3) What if something bad happens at the property (which is still in your name since a land contract doesn't transfer title until the contract has been paid in full)? You will likely be roped into that.
4) What if your buyer doesn't take good care of the property? It's still yours until you're paid in full.
5) The process for taking back a property from a land contract vendee who doesn't pay is more akin to a foreclosure than an eviction (i.e. it'll be a pain in the butt).
6) Your mortgage company is making sure you keep insurance on the property. What happens if you need to make a claim for something that isn't covered by your policy since you're not the one living there? What if intentional damage is done or the like? That's likely excluded and you'd be screwed.

I could go on. Don't do it.

The market is white hot. Just list it and get paid. I'm a lawyer and a realtor near Ann Arbor (this isn't legal advice though...just helping a fellow investor).

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Ann Arbor, Michigan

Thanks!

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Quote from @Devin Peterson:

Quote from @Pete Johnson:

Quote from @Devin Peterson:

Quote from @Pete Johnson:

I was checking to see if anyone has any experience with DSCR loans as a tool for multi-family properties(4plex on down). I would love to hear your experience and how it worked out.

Hey Pete lots of experience with DSCR programs and other creative specialty investment products. Send me a PM

Thanks Devin, I am not quite ready yet, just trying to get my ducks in a row. Is down payment normal 20% down or higher?

20% is a standard down payment for 1-4 units. Correct.

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Quote from @Devin Peterson:

Quote from @Pete Johnson:

I was checking to see if anyone has any experience with DSCR loans as a tool for multi-family properties(4plex on down). I would love to hear your experience and how it worked out.

Hey Pete lots of experience with DSCR programs and other creative specialty investment products. Send me a PM

Thanks Devin, I am not quite ready yet, just trying to get my ducks in a row. Is down payment normal 20% down or higher?

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Quote from @Eliott Elias:

It is a very straightforward loan, very easy process. If your property meets all the requirements, you will get the loan.

Thank you Elliott, is one of the criteria is that it has to cash flow over a certain amount of the mortgage and expenses?

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Ann Arbor, Michigan

I was checking to see if anyone has any experience with DSCR loans as a tool for multi-family properties(4plex on down). I would love to hear your experience and how it worked out.

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Hello Salvatore,

I am 57 years old, I live in Michigan and currently own a duplex and I am co owner of a 4plex. they both are in the same neighborhood, they both could use work, they both cashflow, the other owner of the 4plex wants out and would sell to me cheap. I have owned them for a long time and I am stuck as I want to leverage them to buy something bigger, as I feel I need to focus on cash flow (my goal is to replace my 60k a year job that I drive an hour to). I need a direction to start. I have read books on all the strategies and I just don't know what direction to go. I could turn the duplex back to a SFH and sell, thought about BRRR both of them if I could. Can you help me decide on a strategy(s) that you would feel would help me reach my goal? I feel trapped at my age. Thanking you in advance

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All Forum Posts by: Pete Johnson

Pete Johnson has started 3 posts and replied 12 times.

Post: Land Contract Advice

Post: Land Contract Advice

Post: Land Contract Advice

Post: DSCR Loan Experience

Post: DSCR Loan Experience

Post: DSCR Loan Experience

Post: DSCR Loan Experience

Post: Land Contract Advice

Post: DSCR Loan Experience

Post: So you want to become a real estate investor?