All Forum Posts by: Ryan Dressel

While I have not tried yellow letters in those areas, I'd be skeptical about the success rate just based on the type of homeowners who live there.  Relative to surrounding areas, there are substantially fewer distressed owners, landlords, elderly couples, etc. who are motivated to sell.  There are some very small areas of Paoli near the train tracks, that would be your best bet.  Elsewhere along the mainline you are looking at wealthy families who are taking advantage of the excellent schools.  

If you pursue this area with yellow letters, please post about your experience!

Best,

Ryan

Hi Shameka, 

How did your situation work out?  I am just commenting based on what I've learned from other sources, but the main idea behind using seller financing is to get inside the head of the seller, to use their information to tailor a deal that works for you and the seller.  In order for it to work for you, the monthly rental income (assuming you will rent it out) you will receive must exceed the monthly payments you need to make to the seller.  In order for it to work for the seller, simply feel them out via friendly discussion about their life goals/plan/situation.

Examples of seller situations:  

-  The seller may need to pay off a large medical bill (make your monthly payments equal to the bill)

- The seller may be retiring (suggest that your monthly payments would be better than a lump sum that earns a low interest rate sitting in the bank... and also reduced capital gains tax).

- The seller may want to buy some "toys" ie. new car, vacation, etc.  If they don't need the rest of the lump sum, it will just sit idle compared to the offer you make that provides them monthly income.

etc. etc.

I am interested in pursuing this strategy, and have read about making the seller 3 different offers based on varying down payments, selling price, length of payback period, and monthly payments.

Example on a house that the seller believes is valued at $100k

- Offer 1:  $100k sales price, $10,000 down payment,  make a monthly payment to the seller of $750 per month, for 10 years (this is the remaining $90k owed to the seller).

- Offer 2:  $113k sales price, $5,000 down payment, make a monthly payment to the seller of $750 per month, for 12 years (remaining $108k owed to seller).

- Offer 3:  $90k sales price, $15,000 down payment, make a monthly payment to the seller of $625 per month, for 10 years (remaining $75k owed to seller).

Notice how the 3 different offers meet different needs of the potential seller.  Offer 1 gives the seller a medium amount down, along with steady payments for 10 years.  Offer 2 gives the seller a higher sales price and longer payment stream, but you only have to put $5k down.  Offer 3 gives the seller a big down payment, while you are able to make a smaller payment to the seller.

The key is simply finding out how much you can receive in rent (minus maintenance expenses), and work out a way to get a monthly payment that cash flows every month, while giving the seller what he/she wants!

Great article, I've been researching this topic extensively and glad to have found this post!

Is it fair to say that this strategy is a great way to capture excellent cash flow spreads for rentals vs traditional purchase methods? 

Would anyone be able to post an example of an instsllment agreement or 2 resulting in a successful rental?

Thanks!

Ryan

Regarding SEPTA, there are plans to extend the Norristown High Speed line into KoP in the next 5-10 years.

http://www.philly.com/philly/blogs/in-transit/3702...

There are also planned improvements to the capacity in Conshy;

http://6abc.com/traffic/penndot-septa-plan-to-redu...

There have been some back of the napkin ideas about extending rail service out to Phoenixville, but nothing concrete yet.

Outside of SEPTA - other improvements include the on-going widening of 202 out to West Chester, and the $45 million Lafayette St extension project in Norristown which will connect Norristown to 276 in an attempt to re-vitalize the town.  This project is the closest to completion (2017).  I tend to agree with the prior comments about holding rentals near infrastructure access.  Let me know if you have any questions about any of the towns!

Hi @Steve Karpinski and welcome!  When looking at potential deals in Delco, be sure to factor in the border of the school district and the taxes.  There are quite a few threads on both of these subjects if you search for 'Havertown' 'Drexel Hill' etc.  There are numerous colleges in the area so I think you'll be able to find something!  Let me know if you have any questions about any areas.  GL!

thanks for the updates, keep em comin!

Abdul Azeez If you have a large book of properties including creative financing situations, then i think it makes sense to utilize the cpa/attorney. Traditional financing should be pretty straight forward.

Is there a reason for your accounting and legal fees totaling $1,000 / year? If you take that out, the numbers should work a little bit better.  Also I'd check out Zillow's data center if you can't find any comparisons in the area.  They compile sale data for every zip code in the country (not the wonky Zestimate).  Should give you a median price/sq ft to go off of.  

http://www.zillow.com/research/data/

Awesome project! How much was the leveling?  Were there specifics to the property that drove up that quote, or kept it lower than other leveling jobs?  ie) Sq footage, the fact that its on piers, drainage, etc.

Given the debt you have outside of the deal, it sounds like you couldn't afford to put enough $ down to get traditional funding- as others have previously mentioned. Banks probably looked at your liquidity / solvency situation and decided it was too risky to lend. Perhaps you tried to scale up too big pre-maturely? I would sell it and use the gains to clear up your other debt, and use the remainder to get much better loan terms on your next deal. Thanks for sharing your experience and GL!