All Forum Posts by: Scott MacDonald

Originally posted by @Manolo D.:

Scott MacDonald So I didn’t read the whole
post, I stopped when you said you using a portfolio lender AND lower cash offer, vs the 270k cash. Why do you think you have a chance when there is cash offer that could close within a week or less vs you? Say you offer 300k close in 3 weeks and the other 270 close in 3 days. Don’t you think it’s a no brainer?

Thats a fair point but the seller has had this cash offer and not accepted it so that tells me there is a reason he hasn't. Maybe he didn't like the terms but for what ever reason he has not accepted it and when I mentioned I would be using a portfolio loan he said that was absolutely fine. Don't you think if the cash offer was good enough for what he wanted he would have just accepted the offer? I need to find what it will take to make this deal more attractive to him then this cash offer. 

Hi All,

I have engaged with the seller of a local seller looking to offload his property but there is a few complications with the purchase and would appreciate some feedback.

The seller presently has some tenants in there and the City is unhappy with the current conditions. The city has placed two orders on the property and are levying fines of $1,000 each (so $2,000 total per week). The orders regard to the fact there is no heating (the HVAC looks very dated), There is no working water heater and water damage from holes in the roof which has caused some wood rot and mould. The seller has not addressed these issues and presently has $60,000 in fines from the city.

I have viewed the property and I have estimated the repair costs to be around $125,000 as it needs a new roof, foundation work, windows and doors throughout, ceilings replaced, kitchen, bathrooms etc etc. but the ARV based on an identical property 5 doors down selling a few months ago I estimate to be around $575,000.

I spoke with the owner and they presently have a cash offer of $270k minus the fine balance at closing. I would be using a portfolio loan as the property would not be eligible for traditional finance so I would need to offer a little more to make the deal worthwhile for the seller compared to the cash offer.

My concerns are surrounding the fines from the city. I have read the orders and see they are attached to the building and will transfer with ownership but I have read that often if a new owner rectifies the issues and brings the property up to standard then these fines can often be dismissed. Now I completely understand I cannot count on this so my offer will take into consideration the fines that need to be paid and if they are dismissed then thats an extra bonus.

So I guess my questions are:

1. If I purchase the property and evict the tenants will the building be considered vacant and will this stop the fines while I complete the renovations. My concern is that it may take a few months to complete renovations and at $2,000 per week in fines it soon adds up.

2. I've never used a portfolio loan before and wondered am I able to factor in renovations costs with this or do I need a separate construction loan. If neither of these are available then I would need to look at hard money.

3. Has anyone any experience of getting fines dismissed from the city? OR at least reduced?

When I spoke with the seller he advised to take a look at the property and please make him an offer to get rid of this "headache" so that was music to my ears. Ive just never purchased a property which is on the City's radar for issues before. Any help/advice/feedback would be greatly appreciated.

Thanks,

Scott 

Thanks for the replies. up until recently I have always just used what ever lender was the cheapest/best rate but I’m now looking at refinancing a few properties so i wanted to use a local bank and start to build a relationship so that I could gain access to portfolio lending. They seem to be slightly higher interest rate (about 0.5% more) than the big banks like Wells’s a Fargo but I’m hoping it’s worth it in the long run to build that relationship. 

Thanks for clarifying!

Hi All, I’m presently looking at a multi family property (17 units) where the seller is offering seller finance at 25% down, 8% interest on a 10 year note. I believe I can negotiate the deposit and interest rate down as the property has been listed for a few months. Alternatively I have started building a relationship with a local bank who offer portfolio lending at 20% down, 5.25% interest, 20 year amortization with an initial 5 year fixed period. The numbers suggest a portfolio loan might be the right way to go but am I missing anything obvious of why I should consider the seller finance? Thanks Scott

I’ll be there! I’m actually planning on closing on an investment property that day so I’ll be in a good mood!

Originally posted by @Jeff McKee:

As a new Austin area investor I would like to join the next Buda_South Austin meet up.   Looking forward to meeting y'all at the next meet up.

Jeff McKee

Great Jeff, Eric does a great job of running these meet ups so I look forward to meeting with you at the next meeting.

Originally posted by @Taylor Nunn:

Originally posted by @Kyle Ransom:

If I was young again and started over I would invest in real estate to build cash flow first instead on the fix and flip rat race. I would focus more on acquiring more income properties like apartments and self storage maybe AirBnB properties as well. 

Is there a perticular reason for this? From my limited knowledge, ive felt that fix and flip would be a great way to earn some cash to then pursue rentals. 

 My experience speaking with flippers is that they make a lot of money in the short term and live a comfortable life but when it comes to retirement they sold all their properties so have no passive income. The vibe I get is that they typically wish they had kept a few along the way for the purposes of an income.

If I was to start again I would have started sooner and I would have got an FHA and house hacked. Me and my wife found out “forever home” before I really got into the idea of REI. So because we had our primary residence we can no longer get an FHA which made starting out a whole lot tougher. A nice quadplex on an FHA would have been a perfect start.

Hi All,

I just wanted to follow up on last night and thank everyone for coming. It was a good turnout and I think there was a lot of productive conversation. I hope everyone took home some new information from last night.

I just wanted to share some of the links I discussed last night. The openly available data I mentioned is available at https://www.listsource.com/homepage/index.htm where you can constrain the data to what you want and then buy that data from them. Again the issue with this is that same data is available to everyone. I have started working with @Jerry Holt who does real data mining and will generate one off lists for customers based on the criteria you want. As I mentioned it is more expensive but of a much higher quality so I would highly recommend reaching out to him if you are interested in pursuing that avenue.

Secondly that is a marketing company that some our our members have used at https://openlettermarketing.com who will take care of your entire mailing campaign. The only requirement is there is a min of 200 mails required because they use the automated posting (USPS required 200 mails per project for bulk discounting).

Final suggestion from me on those struggling with MLS deals is not to always submit your lowest price on your first offer. In my (limited) experience I have found that going in with a more reasonable offer, having it accepted and negotiating down has worked for me. I submit my offers with a $100 option fee so after I get the property surveyed and inspected I will negotiate down from there also, worst case I lose $100 if it all falls apart. The seller is more likely to work with you because in their head they have an accepted contract and their house is "sold" in their opinion so they have probably been looking at their new house or dreaming of the money hitting their account. So they really don't want to lose that. I have never paid my initial accepted offer price at a closing and have always negotiated money off my initial offer. Another trick that I found that has worked well for me is paying a higher asking price and having a sellers credit towards my closing costs as this works great for 2 reasons. 1. The seller looks at the sale price and it seems closer to what they wanted and secondly I bring less money to the table by effectively rolling my closing costs into the mortgage payment. I have managed to get credits for 5k and 3k on my last two purchases without any resistance from the seller.

Anyway as I mentioned last night I know Eric would like to have a topic at events going forward so if anyone feels they would like to stand up and talk on a subject they have some knowledge on please reach out to Eric. I hope to see you guys at next months event and good luck getting some deals.