All Forum Posts by: Kevin Romines

With a shortage of inventory you will have to then use techniques that have you buying closer to retail value. You can look at lease option assignments. You can look at being the sandwhich on a contract that you flip (although I would stay away from owner occupants with any contract). I have a purchase contract that gives me 60-90 days to find an end buyer (lease option buyer) and I wont close the deal until I find that buyer or if I dont find the buyer I wont close then either. I do fully spell that out up front as well, so the sellers know what to expect, I dont like anyone to have surprises.

I also work with an investor that will pay cash for the home once a buyer who cant get a bank loan gets approved with them. The investor will do up to a 6 year lease option for the end buyer. The end buyer must have 8% down and be able to make the monthly lease payment, and be at least 1 day out of any bankrupcty, foreclosure, shortsale. I find houses that I put under contract, then work to find my lease option buyer, then get them approved with my investor, and then the investor negotiates with me on the home, we close, they pay cash, I make my spread, and on down the road I go.

I havent closed any of these deals just yet, but just started with these guys. They are very large, tied into hedge funds, and because I was mortgage Banker for 18 years, I can process the deal for them which is required by anyone that works with them. I get paid the spread on the home as well as a fee from the investor. I am going to get my loan officers license back over the next couple of months, but not required because this is not a loan.  

Hey Hattie

We all do things in this business that we learn from. I generally agree with these guys comments, however, you are where you are, so lets solve the problem. You can get a POF from a transactional funder, but in order to do so you must have your end buyer in place and they will want specific details of the transaction and your end buyer. The lender will not allow you to wholesale, so you will need to take title and do a double escrow using the transactional funders money, then selling to your end buyer all on the same day.

I havent done this, however I have read that some guys will write the offer in an entity's name and just sell the stock of the entity to the person who is buying from you. In doing this, the lender doesnt know that you have actually wholesaled the deal because the entity (LLC, or S-Corp) is still closing on the deal. You just accomplished this by selling the entity that holds a purchase contract as an asset or a right to complete the purchase.

Great question.

Liability insurance on your home just covers liability primarily arising from the home, but it also covers other areas as well. An umbrella policy will cover multiple things, such as secondary coverage on your personal liabliity, secondary coverage on your auto's, as well as multiple homes, both primary and rental, business pursuits, recreational vehicles, farms and equipment, vacant land. So the umbrella policy is a much more broad type of coverage.

If the additional million is only .45 a month, I would add that as well as getting the umbrella policy, and adding all the areas of coverage that make sense. I would also update or add addition homes, cars, business pursuits to the policy as you need them in the future.

The 1st rule in business is to learn how to make money, the 2nd rule is to learn how to keep it. Thats where insurance can help.

By the way, @ Sean Yaworsky, post was a great tip.

Did you know you can buy a 4 plex as owner occupied with an FHA loan and only pay 3.5% down payment plus closing costs. Keep in mind you can negotiate the closing costs with the seller as well, and best of all you can get owner occupied rates of between 4.25 - 5% on the deal. Oh and if you need rehab money you can go with an FHA 203K loan which allows you to buy and rehab the property all with one loan and still only 3.5% down of the purchase plus rehab costs. Its a great way to build a rental portfolio. You can do it as much as once a year (you have to be owner occupied for 1 year per deal). I know investors that started this way, and have built a large rental portfolio. I used to do the loans for them to do it.

Well it may sound crazy, but I only spend 1.00 per property, I generally buy move in ready properties, so no money out of pocket there. What I do is find someone willing to carry on contract, I then negotiate and get a reasonable down payment, reasonable monthly payment, and at least a small discount from market value. I tell the seller up front that I'm an investor and so I wont close on the real estate contract until I find my end buyer / tenant buyer. Then we sign the purchase agreement. That gives me equitable interest so I can start marketing to find my end buyer. Once I find my end buyer I do a lease and option, notice I seperated those words, you need two different contracts, one a standard lease the other is an option. There reasons to do it this way, research will help you understand that. Then I make sure the option fee is more than my down payment, I try to get 5000 more, 3000 of which I put in reserves and 2000 in my pocket, then I try to get between 100-250 monthly spread on the payment, I also try to get between 5000 - 15000 in back end spread, or the difference in what I owe the seller at balloon time and the difference in what the lease and option buyer owes me. I generally make between 12-32K over 3 years, and I rinse and repeat. If I have a buyer that cant complete the deal for one reason or another, I can get them out and get a new buyer (I may have to negotiate a longer balloon period with the seller) but I get a new option fee and start over. Its better than renting as I get nice money up front. I dont actually come out of pocket for my own down payment, that comes from the option fee. If I cant sell it for whatever reason, I'm out 1.00 and my time, but I can usually pin point the issue and adjust to make it work. I get the typical landlord write offs on my taxes, so all in all not a bad way to go.

Well you are talking about 3 different animals, so any one of them can be a good choice for you, or a bad one, it all depends. As far as buying a primary in a year or so, here are some things to think about? The lender will want you to have 6 months reserves on every rental you have, this could cut into the money you have for down and closing on your primary. You generally must show rental income on your tax return at least 1 year, some lenders 2 years, and they will do an average of that part of your income. If you have declining income, that could be an issue to you getting approved. I would definatley recommend communicating with a few key loan officers to get their company guidlines on the deal before you make a move?

All that said, Im doing close to same thing as you, however I use different techniques to avoid the debt, and yet still get the gain from holding the properties. I dont hold my properties for much more than 3 years in most cases. I do both selling on contract (thats tougher and more involved these days, thanks Dodd / Frank, but still do-able) as well as Lease and Options. Notice I seperated those two words out, never do an all in one Lease Option. I typically make between 12-32K per property over a 3 year period, and I'm always looking for properties. So I really dont get the upside from appreciation, but I get fairly consistent and repeatable results.

If you have the cash reserves I would do a light rehab / rental, you should be able to find great deals in that arena, and get appreciation, but I wouldnt be putting anything in thats real costly. I would follow most landlords leads and put in materials that will stand up over time.

My two cents!!!

It seems as though the major issues have been covered here. The only other comment I would have for you on your decision to move it to an LLC versus holding it in your name is that if you ever wanted to refinance the home down the road, most residential lenders wont do it, as they consider it commercial at that point.

They may be will to do it if you change the titling back to your personal name, if not, its considered a commercial loan at that point. Commercial loans are much more unique in their terms than a residential loan, and not to your advantage.

I am buying on a contract and then turning and lease optioning the property out. I tell the seller verbally and in my purchase contract, that I'm not closing on the deal until I find my lease option tenant. I write a 60 day option period in my purchase contract. My down payment, reserves and small profit comes from the non-refundable option fee. Basically negotiate a smaller down to the seller than you will get on your option fee. I try to get 5000 more than my down to the seller. 3000 or so goes into a reserve account, 2000 is profit. I generally try to get 100-250 a month payment spread over my payment to the seller. I generally get 5000 to 15000 more on the back end when tenant buys, as I have paid down the balance a little and their balance doesn't go down except for the option fee they paid. I only do these on single family houses. But I have bought the last 4 houses for no more than 1 dollar out of my pocket.......... Now where else can an investor get rental property for 1.00 down? 

If you can't sell the house, your out your 1.00 and time, although with careful scrutiny of the numbers, you should be able to close on the deal........... I'm closing 2 more this week.

There are 2 ways to do this. One is to get the seller to agree to allow you to put a lien position or mortgage against the property for the difference in what you have it sold for and what you owe the seller. They may or may not go for this???? The other way is to sell the property at 190K and turn around and sell the seller the rights to your contract for your fee. Basically you will assign the purchase contract that you sold it on to the seller for an assignment fee. You will then place a lien against the property for the amount of the assignment and get paid off in escrow when the end buyer closes.

This will also solve the lenders chain of title issue, because most all lenders require that the seller be on title to be able to sell the property, your not on title, howeve the original seller is, therefore a reverse assignment may be perfect. The only lender I know that doesnt have a seasoning of title requirement is USDA, check to see if the property address is eligible for their financing, if not go the other routes.

Just my two cents!

I was a mortgage loan officer for 18 years until I went into the insurance industry 3 years ago. I have recently left the insurance industry to pursue my love of buying and selling real estate full time.

I have been working to find a lender that is offering services to the seller financer for the MLO underwriting piece so the seller is in compliance with Dodd/ Frank. I have found close to nothing out there, so I considered getting licensed as an MLO again, and maybe even opening a mortgage company again (owned one for 10 years), just to facilitate the compliance piece for the seller financers.

My preferrences are to work for a company, so I can focus my attention in the area's I want to work the most versus a lot of my time taken up with the administration and compliance parts of the business.

Does anyone know of lenders offering this much needed service? If not, I may take it on soon, as I'm in talks with one company, but looking for all options, so if you can help point me in the right direction, that would be great.