All Forum Posts by: Rivy S.

Thanks @Jayson Cain I'll PM you now!

@Yitzchok Carmen haha no this is actually a different one than I was talking about before

@David Macias I hear that but there are a few things I'd like to talk over with an experienced operator in that part of town. I've never done air bnb , I don't really know if this property would make a good one, I don't really know what the numbers would look like, I need to know what level to renovate to, etc. I'd gladly take a smaller profit for the first year or so in exchange for expertise and know how

I have a duplex in Indianaoplis (46205), and one side is going vacant.  I was thinking about turning it into a vacation rental.  I was wondering if anyone knows a good manager in the area (I am out of state) that I can speak to

@Marven Alceus A note is an asset that you own.  The asset in this case is debt that someone owes you.    So if you sell a house with owner finance, you are the lender and you own the note for that debt.  You can sell that debt/note if you desire.  A borrower does not own their debt, they owe it.

@Jay Hinrichs  From what I heard, foreclosures and evictions in TX aren't too bad.  I was thinking to have reserves of one year of payments for each property. Would you recommend more than that?

In terms of the bank calling the due on sale clause, I'm trying to make sure I have enough of a margin between my loan to the bank and the buyers loan to me so that even if I need to sell the note at a discount, I will still be able to repay the underlying loan.  If I had a performing note for 128k@10%, what do you think I could sell it for?

@Cindy Carriger I would've thought so also.  I think the problem is that I wasn't networking with the right people so I didn't get a ton of interest from owner finance buyers.  I'm trying to build up a network of ppl who can refer owner finance buyers, so that hopefully next time I'll be able to command a higher price. 

I've been focusing on wraps instead of rentals because I find that the margins here in the DFW area are really tough to cashflow for rentals (if you are conservative with reserves). Also property taxes go up so much all the time and you often can't raise rent enough to cover the difference.  So I've been focusing on wraps and I just finished my second one.  I didn't write about my first one because I wasn't really happy with how it went, but this second one was much better. 

Here are the numbers:

Purchase price: 82k

Renovations : 23k

Staging/landscaping (did it myself): 475

Holding costs: 1250

So at this point I'm all in for about 107k.  Fortunately/unfortunately the renovations process took waaay longer than expected (had some trouble with contractors), so I was able to get a cash out refi with six months seasoning.  The house appraised for 140, so I was able to get a108k loan, minus 5k for loan closing costs. 

My loan:

[email protected]% : Monthly PI payments = 547

Now I sold it via owner finance for 139k, 11k down, 10% interest.   Almost all of the 11k went towards closing costs, commissions, etc, but there was about 1700 left which lowered my invested capital to about 2500 

128@10%: Monthly PI payments to me = 1123

1123-547 = 576! 

The best part of this is that I don't have to worry about maintenance or capex or taxes or management or anything, because I'm just the bank

The worst part is, that in 30 years, I will not be the one who owns a free and clear property, my buyers will be.  But right now this strategy is preferable because it allows me to make much quicker progress towards to goal of quitting my day job. 

There are obviously risks with this approach, most notably: 1.The buyer stops making payments, and 2. The bank exercising the due on sale clause. 

I plan to stockpile the first year of payments so that if I have to foreclose (and I hope I never do), I will be able to make my payments on the underlying mortgage until I can get the property performing.

If the bank calls the due on sale clause I will either have to come up with the money to pay off the balance, or sell the note at a discount. 

Here are some before and after pics:

You said your offer was 17k over asking, cash. Why would a cash transaction impact a refi?

Bump...

I'm trying to figure out how to calculate the ROI/Coc on an owner finance. When calculating a CoC%, usually you just divide the profit by the capital investment. So if you invest $100k, and you are making $10k a year, that's a 10% CoC. BUT in that scenario, you've still got your capital intact. So after 15 years, you've made 150k, and if you sell the investment, you recover the original 100k.

With owner finance, at the end of the term, you've got none of your original capital left. So if you invest 100k, and are earning 10k/year, after 15 years you've earned 150k, but can recover NONE of your original investment( assuming a 15 year note). So your ROI has got to be different.

So how do you calculate the CoC for this scenario?