All Forum Posts by: Scott McWilliams

Get a separate account. It will be so much easier to show the status of the security deposit if that ever comes into question. Also it makes tracking expenses for tax filing so much easier. Get a debit card for the account.

I have a single-family property that hasn't appreciated much in the time that I have owned it, but through my value-add activities I have driven the rents up considerably. I split the property and now it is a 3/2 and a 1/1. Rents have gone from $800 to $1700 in a couple of years. Unfortunately the neighborhood isn't great (not bad, just very mixed) so it hasn't appreciated more than about $5000. So I can't do a cash-out refi to recoup equity.

I found an investor that would buy it at much more than retail value because the rents are so high. Typically in this neighborhood a 4/2 (which is what this property was before I did my value-add) rents for $800-900. Mine is basically doubling the income so the investor sees the value and is willing to pay for it, but they want to do a seller-financing deal. I have a mortgage on the property and don't have the funds to pay it off, so I would have to sell "subject to" in order to get the price that they have offered. 

I know that "subject to" is typically used for distressed sellers. I am not distressed, I would be using this to get a great price for the property. Am I a fool for considering this? Anything I should be looking out for? Any chance I would end up with a mortgage to pay and no property to back it up?

@Wayne Brooks I agree. That's why I am asking for help to determine if there are any creative offer strategies that could get my offer price up but my all in cost stay the same.

It sounds like I need to determine the terms and current status of his loan and see how desperate he is to get out of the situation.

Great questions. This project would be a rehab-to-hold as a rental property. I have some experience but not to this extent. I am a project manager in my W-2 job so I'm confident in my project management skills but also knowledgeable enough to know residential rehab is a different world and I can't rest on my laurels. I came up with my own rehab estimate and had a trusted contractor do the same. We both were very close to the $60k number I mentioned. 

I guess I just need to figure out what he owes on the loan. 

I found a great 4/2 duplex opportunity in a neighborhood that is converting. I need some help coming up with creative offers that would help the seller get out of a sticky situation. First of all, the seller is the listing Realtor. The seller bought the duplex over a year ago after a fire. He has remedied all of the fire damage and replaced the entire roof including trusses. Essentially is is a blank slate inside. The only things that have been completed are the roof/truss, furnace and ductwork, electrical w/ passed inspection and exterior painting. All floors, sheetrock, electrical finish work, insulation, entire kitchen including cabinets, both entire bathrooms, 2 condensers, painting, etc... need to be completed. Basically I would have a new house in a 1940-1950 era neighborhood. There are many other tear-down and rebuilds happening. 

The seller has listed the property at my interpretation of ARV based on duplex comps ($160k) but claims an ARV based on single-family comps ($250k+). He has a construction loan of $123k but I don't know how much he has actually drawn on the loan for the work so far. I would also assume he has a down payment tied up as well. After running the numbers I would need to purchase at $60k knowing I will need to put another $60k into the property. Cost of money as well as a BRRRR exit strategy would get me very close to the current asking price and my interpretation of ARV. I have also asked two Realtors in the area and they independently came up with $161k and $163k as the ARV so I am pretty secure about that.

So my question is, how can I get creative with my offer so that the seller won't just blow me off? I have a feeling his construction loan is about to foreclose as he has already dropped the price $10k in the first 10 days. I can be open book and show him my numbers, but I think that will just drive him away. Is there something that I could do to assume his construction loan and get him out of his sticky situation? Any other ideas?

@Bosko Mijatovic I agree partially with Sen. A family member can be a great or terrible partner. You need to determine why his FICO is so low and ask yourself if the root of that issue makes him a good partner. If so, I would work on improving your buying position before making the purchase. Get with a loan broker that is willing to help him improve his FICO score. Help him develop an action plan to get it to the mid 70's in 18-24 months. By that time the market in SoCal will correct and you can buy at a much better price point and you may be able to buy 2-3 properties at that point. Better credit, lower interest rate, better price point. Sounds like a win to me.

I like Joe's idea. Or you can open an account at the tenant's bank and let the tenant transfer the funds into your account. You can then transfer it to your main account. Makes it easy on the tenant and yourself.