All Forum Posts by: Phil M.

What would be a typical amount of earnest money?

Should it be based on the asking price?

I hear of people making earnest money deposits of $500.00-10,000.00, so what should I base my earnest money amount on?

Okay, so the contingency is just a clause in the contract giving me an 'out' if I need it, and also giving me the ability to make many offers at the same time.

Some more questions would be:

- When do I give earnest money to the bank im making the offer to?

- Would I submit an offer to the listing agent after I walk through the home, but before my inspection and appraisal?

New York City is also a tight market, especially in Staten Island which is mostly suburban, so we'll see how well things turn out in the case of offers.

If the banks counter with something like 197k from 200k than I would just move to the next house on my offer list because that home would simply not be profitable for me. I'm just looking for one place that will accept my offer, because I already know my offering price will be profitable.

I'll check out a buyer agent immediatley. Does anyone know of any on BP in the NYC area or any websites that have listings of them?

How can I even make offers on more than one house without the possibility of being forced under contract?

What are my options for a financial contingency? Our private lender was our only option for getting funds, so what can I do?

When it comes to my offers, I know what the value is for me. I've come to the 70-80% of asking price because most of the homes I've looked at arn't really a deal without a price drop. If I could get them down 10-30%, then it might be worth it for me. If a place is asking $200k, and I think it would be profitable at $180k, and I offer 80% ($160k), hopefully I would get countered 90% or the price that I deem profitable. I know what would create a cash flow, and what would be good to create value by fixing it up and flipping it at the retail value.

Also, many of the homes I've looked at have been on the market for more than 2 months. So I figure they're ether do for a price drop, or the bank would be more likely to take an offer to get it off their books.

In my case, I really don't have a financial contingency at all because thats our only option. We have little of our own funds, can only show low incomes and reserves and won't be approved for a loan.

I'll look into a buyer agent in my area. I could see that we will probably need one to help us not get swindled by the listing agent/seller.

I've been told to submit offers on a bunch of homes. What if multiple banks accept my offer? Could I just say "whoops, my financing flaked out"?

My partner and I spent all of our saturday searching local REO properties in our area. All together we looked at 28 of them mostly semi-attached, single-family or 2 family homes. Now, we got out of the car, checked them out, saw if they had curb appeal, looked if they had any cosmetic problems that we could spot out early, peaked through the windows to see if the interiors were beat up and basically determined if we would want to go any further with them. All in all, we figure probably could get a deal if we could make offers on them.

So, that being said, how exactly does the offer procedure go about? My partner is going to call all the listing agents Monday, and schedule walk-throughs for next weekend. After that, I assume we would make our offers. I've read on other threads that you would only make the offer to the listing agent, and that it should be in contract form. Others have said it should be a cover letter that you give to the agent. I would prefer it to be more of a letter instead of a contract because we will be making several offers, and don't want to be contractually obligated to do anything before we see which figure out which property will be most ideal for us (even if we get accepted on multiple properties).

So whats the best way? I would assume I'd include the following
- Make an offer 70-80% of asking price
- We have ability to close within 30 days
- Paying cash (we will not be using conventional loan)

Should it be notorized?
Should we offer to make a deposit or offer earnest money?
Also, many people say that we should include a pre-approval letter, but since we are using a private loan from a private lender, what should we provide as proof of funds?

So a PSA would be the only form needed to submit a written offer? I assume I submit this to the REO's listing agent?

any thoughts on what to present to my private lender?

thats funny, because my friend had a tenant that did exactly that.

anyone have any negative experiences with section 8 tenants in new york city or in the tristate area?

Feel free to give any positive experiences or comments you have as well!

Thanks

Okay, as for financing we've decided to stay away from hard money because it would be extremely risky for us. Instead, my partner luckily has a good amount of contacts and found a few private investors in the area and one of them (who has experience purchasing real estate directly from home owners and builders, not from a bank as we plan on doing in this case) has offered to sit down with us next week. This is going to be interesting, but unfortunetly we're probably getting ahead of ourselves because we don't have a solid framework for our plan. Also, this weekend we drove around and checked out about 20 foreclosed properties, and we've found a few that we believe to be profitable (however there are drawbacks).

First off, I need some advice on the financing situation. I went into the private lending forum, and theres a lot of talk about how to find a private invester, but little about what exactly should be negotiated in a deal with one. We've found the private invester (if all goes well), so what next? My partner said we could borrow a down payment and money for rehab, but I felt we would still need a conventional mortgage after that and would still get denied. Another idea was to ask him to lend us the full price of the home plus rehab, but in which case we felt he would just own the home and wouldn't need us. So we really don't know what the best way would be to utilize the private money. I understand that he would not be doing this for free, and would want to set terms so that he could make a profit, and benefit from what we have to offer.
But, as for financing with private money, we simply don't know how to go about it. We don't know how much money to ask for, and how it would benefit him (whether we would pay him principal and interest monthly or he takes a chunk of the profits when the home is sold, or both).

Now, to the easier part, the homes we looked at. We looked at a nice looking, clean exterior, semi-detached 3/2.5 home (built 1991) with 1280sqft for $127,000 ($99.22 per square foot) (asking price was just reduced $5,000). Its considered a 'mother/daughter' home, which means its 2/1.5 upstairs and 1 bedroom in the basement, which I believe is rentable. Not sure if its legally rentable as a two family, and its listed as a single family. The interior is semi-complete, it needs flooring, the stairs need refinishing, kitchens and bathrooms are in OK shape, needs new eletrical fixtures and a few other things. Its been on the market for 3 and a half months, and its owned by Bank of America.

If it can be rented as a two family, the upstairs should get atleast $1200 and the basement should get $700 (conservatively, probably could get more compared to craigslist and the local paper for that area). So, $1900 rent monthly. 50% rule states that my expenses will be $950 a month. A no money down 30 year mortgage (no money down) for $127,000 at 7% interest comes to $844.93 a month. That leaves $105.07 positive cash flow a month. So the numbers seem to fit. However, there is a con. The neighborhood isn't terrible, but the home is directly across the street from public housing. We passed by late tonight (12:30am) just to see how it looked at night, and there were some shady characters hanging around the parking lot of the development directly across the street. Steel bars on the basement windows were also noted. My partner made a good point that this home might be a good candidate for section 8, if we would want to go that route. Selling the home in the end to turn a profit would probably be more difficult because of this.

All in all, does this sound like a possible deal?
Does the public housing across the street scream STOP? Are we more, or less likely to get problem tenants using section 8 (I hear pros and cons about it).

Do you think we could get the bank down a couple of grand; say maybe 10-$15,000?

With that low of cash flow, is it worth it?

The value of the house seems low, so if we could rent it for a few years with a small cash flow in return and eventually sell at ARV along with a rise in the market in a few years, is it possible to turn a strong profit?

And, also, what should I do with our possible private money investor? If he feels this is a good deal, how should the financing work? I've need been in a situation like this and really don't know where to start.

Thanks for reading...