All Forum Posts by: Ram Gonzales

 Normally, as @Jaycee Greene suggests, you make a management fee plus a split of cashflow with investors (oversimplified explanation). In this case however, since I'm raising debt, my profit comes from the deals. I'm essentially creating my own bank from which to borrow capital.

Absolutely. Best practice is to keep one or two payments in reserve from the buyers down payment for such instances.

Yes, that's the plan and I have bankers lined up to invest through the CDFI but, per the guidelines, I need a track record as a fund first to qualify (the bankers also want to be second round or later). My plan is to raise and deploy the first fund and then use that to qualify as a CDFI. I mostly work in low to moderate income areas anyway so it checks all those other boxes.

I would use the funds to buy at deep discounts (60-70% LTV) and then wrap with seller financing. Buyers would put 10% down. This is what I do currently but it's a process of purchase, rehab, wait 4-6 months, refi, then wrap and sell (and risk DOS clauses). A fund would streamline and scale things significantly.

I continue making the underlying mortgage payment myself (autopay) and get reimbursed from the borrowers payment. I use a loan servicer who processes the borrowers payment and then sends to me. If they stop paying, I foreclose, but still keep making my payment to the underlying lender. I get made whole by the down payment from the next buyer. 

I've done a lot of wraps and subtos and highly prefer the seller-finance strategy for a lot of reasons, including offering the opportunity of homeownership to those otherwise rejected by traditional banks. I want to create a fund that will allow me to purchase distressed homes, fix them up, and sell with owner financing (possibly including a 5 year balloon so as to be able to recapitalize periodically and give investors a shorter horizon). I've had a long career in community development and have a lot of bank contacts that would likely be interested in investing, but I'd need to prove the concept first with an initial fund (there are also a lot of other community development tools that could be leveraged to maximize and scale this). Here's my question. If I create a debt fund that offers 9% interest on first lien notes with a 5-7 year payout, would that be attractive to high net worth investors? My target for the first fund would be $5-10 million and I have a few HNW investors in my network but certainly not enough. Anyone have experience putting these kinds of opportunities in front of investors?

Also see if monthly gap might be lower as a mid- or short-term rental. AirDNA or FurnishedFinder.

Do a wrap. Include balloon payment after 5 years. Get a big downpayment so that the buyer doesn't end up in the same situation 5 years from now. I'm in San Antonio. I've done lots of subtos and wraps. I've also been in a similar situation in the past and solved it with a wrap. Either way, run your proposed solution through an attorney. Happy to chat more if it would help. 

What are the numbers? Value of land? Is there debt on the property or are you doing all cash?

Yes, always do a POA. Also, get all personal info (DOB, SSN) from the seller in case needed when talking to lenders, lienholders, etc. Finally, always get the credentials to access the mortgage account online and change the email notifications to your address. Bottom line, make it so that you never need the seller again after the transaction is closed.