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All Forum Posts by: Robert Walden

Robert Walden has started 11 posts and replied 33 times.

Post: How to purchase a property that's listed for auction?

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

Thanks for your replies, Bob and Chad!

To answer Chad's question, its a private auction held by the estate (or family) of a deceased elderly woman. My intent was to try and contact the executor (or family) of the deceased about a possible rehab partnership. But, I don't know how  auction contracts are written. Would the auctioneer feel cheated if I tried to stop the auction? And, how much could/should I offer to buy them out of their anticipated profit from the sale of this house at auction? (I don't want to create any ill will among auctioneers in this market, especially since this is he largest auction firm in the area. I may wan't or need to deal with them again in the future.)

- Robert

Post: How to purchase a property that's listed for auction?

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

In this seller's market, I see a great number of distressed properties going for auction rather than a straight sale. I suspect people will likely bid them up higher than they're worth, especially considering repairs needed and subsequent ARV. And, my guess is that real estate agents are encouraging owners to extract as much profit as they can from their houses in poor condition, which boosts their auction fees as well.

Is it possible to purchase a property prior to the auction, if its already been listed with an auctioneer? And if so, would I approach the auctioneer or the owner with an offer? I don't want to completely cut the auctioneer out of the deal, or incur any unnecessary fees for the owner for breach of contract with the auctioneer. I planned to make a non-traditional offer of a partnership agreement between the owner, the auctioneer and myself, which has the potential to make even more money for everyone than the auction. 

Is this possible? If so, please explain how best I should proceed.

Thanks!
    :-)

Post: Rental Property Calculator

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

I'm new to BP, and using these calculators for the first time. I'm trying to compare the profitability of using Fix & Flip, Fix & Hold, or BRRRR approaches on a deal I've just negotiated. Even though I checked the box beside "I will be rehabbing this property", and entered both the ARV and the estimated repair costs, the Loan Amount and Total Cash Needed as shown in the Report don't seem to reflect these costs!?! It seems to show a good cash flow and a modest CoC. But, the loan amount is incorrect/low (see Report link, below). Am I doing something wrong here?

Thanks for your help!

https://www.biggerpockets.com/...


Post: Hard Money Broker Fees

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

I've done a couple of deals years ago, and was planning to start a real estate business full-time this Spring. But, I lost my job due to the pandemic and have used up my down payment savings on living expenses. I have a fix-and-flip deal lined up (or possibly fix-and-hold.... undecided). And now, I need 100% financing, which I understand is hard to get.

I don't have private lenders on my team yet. So, I'm attempting to use a hard money loan for the first time. I found a loan broker on Bigger Pockets who assures me he can find a suitable lender, including gap funding to cover the cost of the down payment. Sounds good so far, right? However, he asked for my repair list! I sent my notes (minus the property address). But now I'm thinking, maybe I shouldn't have!?! He's also asking for an up-front $500. "application fee" which he says will be applied toward the loan.

Are these requests standard? Nobody ever asked for my building plans on previous flips. Plus, that's a big chunk of change to pay up-front with no guarantee he's going to get me the loan!!! My Spidey sense is on high alert! Am I just being paranoid?

Post: Private and Hard Money Lender Payments

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

One last question...... in a deal with a private money lender/partner, do you still pay them points and interest, as well as split the profits on the back end? Nobody has actually explained the differences in how all these various funding schemes are executed.

[Hint-Hint: the nuts and bolts of financing deals might be an excellent webinar topic for Brandon Turner and Bigger Pockets!]

Post: Is this a good deal? Feels like I'm missing something!

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

I originally posted this deal in the BRRRR forum as a potential Lease Purchase deal. But, I was advised that it made more sense as a fix and flip. So, I reworked the numbers, and am posting it in this forum instead. [Note: I used to invest 25 years ago with mixed success, and am just now returning to real estate investing, now that I'm retired.] This will be my sixth deal. A couple made money. Two of them were complete rehabs. But, a couple were alligators too. And I'll admit, I'm a little gun shy now.

The Fix & flip Calculator shows me still in the black on this deal. And, BRRRR members advised me that the deal "may have legs" (under the right circumstances). The Seller even dropped the price an additional $5.k over the weekend, which makes it a potentially even sweeter deal! I seem to still be in the black. But, the numbers only leave $1,000. unaccounted for as contingency. And if anything unexpected happens, I'll have an alligator on my hands! (All though, I built an additional $8,000. into the budget for rehab "luxuries" and/or emergencies.... like if I have to replace the furnace, the water heater or the A/C evaporator after the water gets pumped out of the basement). So technically, I have $9.k for contingency, which is 18% of the total budget.

Yet for some reason, these calculations seem like there's only a thin margin for success, as outlined in this Bigger Pockets Fix & Flip Report (see link, below)!?! Are mortgage origination fees included/estimated? Are there any other "hidden" fees I've missed? Or, am I being paranoid? Will someone please take a look and confirm whether or not I've estimated this deal correctly, and that I haven't missed something important. Is this a good deal? Should I pull the trigger???

Thanks!
    :-)

https://www.biggerpockets.com/...

Post: Private and Hard Money Lender Payments

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

Awesome explanation Jeff! Clear and concise. I can negotiate terms now with a much better understanding of what I'm doing, and what the lender is talking about.

Thanks!
   :-)

Post: Private and Hard Money Lender Payments

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

Years ago, I did several successful fix-and-flips. But, I financed the deals using my own bank account, credit cards and family loans. I never used private lenders or hard money sources. Now that I'm retired, and venturing back into real estate investing, I plan to use OPM to finance my deals. I have a fix-and-flip under contract, and am shopping for investors. However, I'm unfamiliar with either private or hard money loans. I'm not sure what I'm doing, and don't want to make a bad deal. I've been reading about these two financing methods on Bigger Pockets and elsewhere. But, the articles use a lot of terminology, without much practical ABCs and step-by-steps for how to select and structure the loan. I still have a few important questions before I settle on a funding source. Hopefully, somebody can help me figure this out so that I make the best decision.

Thanks for your help!
          :-)

Questions:

1.  What is the repayment schedule in a 100% financing deal? When are payments made to the lender, and how much?

2.  What does "interest only" mean? Does that mean you only pay the interest, and no points? Does it mean you pay the interest monthly (throughout the reno as part of your holding costs)? Can you pay it in a lump sum along with the principal at the resale, or the re-fi cash-out?

3.  I've read that some lenders allow you to roll the points into the principal. But, you'll pay interest on the points, which decreases your profit. I get that many lenders want some of the investor's skin in the game. But, if the goal is to use OPM, why would you want to put any of your own money in a deal if you can find a 100% finance lender? How do you weigh whether its better to accept fewer points (and how many fewer) for a 65-75% loan, vs. probably paying more points and higher interest for a 100% loan?

4.  How do you determine the cost of a loan over time, and how it affects profitability?

Post: [Calc Review] Please help me understand this report

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

Okay, so I'm taking the advice of those who think I should do this deal as a Fix & Flip rather than a BRRRR. I've re-worked the numbers. And, it seems that I'm still in the black, all though only by about a $1,000. margin (plus an $8,000. contingency, which will probably be used up when/if I have to replace the furnace, the water heater, and/or the A/C evaporator once the water is pumped out of the basement). The owner volunteered to drop the price another $5.k to accommodate the repair/replacement of these mechanicals. But, if anything else goes South, I've got an alligator on my hands! For some reason, the calculations (as listed on this Bigger Pockets calculator) seem thin!?! Am I just being paranoid, or is this a good deal?

https://www.biggerpockets.com/...

Post: [Calc Review] Please help me understand this report

Robert Walden
Pro Member
Posted
  • Flipper/Rehabber
  • Toledo, OH
  • Posts 33
  • Votes 13

All good points, Jaysen! My only rebuttal is that this is a blue collar town, and a lot of people here have been hurting financially for a long time. First, there was the loss of good-paying factory jobs which had been the mainstay of our economy for nearly a century. Then, there was the foreclosure crisis and the loss of numerous first-time home buyers' properties. And now, there's the Coronavirus. Ohio was the first state to shut down; thousands of people loosing their jobs, including self. Many people who still have a job (and glad of it) have had to take a pay cut and/or reduced hours. They're still able to pay the rent ($750-$850. on average, even for a dump), and possibly a car note and food, but not much else. It seems to me that home ownership at a reasonable price-point might be a great way to help families rebound financially and rebuild the community, while making some good money doing it.

I had no problem finding modest-income home buyers with no down payment 25 years ago who jumped at the chance to possibly build their down payment through rents. And, if they can't pull it together after 24 to 36 months, that's on them; they loose their purchase option. But, maybe this isn't the best time to do that on this particular house, in this particular market and neighborhood, or at this point in restarting my real estate career. I'll give your advice some serious consideration, Jaysen, and weigh the pros and cons. Thanks for your time and input!    :-)