All Forum Posts by: Sean Daugherty

I have a potential deal with someone looking to get out of their rental. Wonder what you guys think.

The house is a SF with 3 beds, 1 bath. The previous tenant was a hoarder, so the owner has completely replaced the carpeting, painted, and replaced the roof. She is asking $57,900 for the home, but told me she will accept $50,000. Here is the deal I purposed to her:

I would offer $50,000 for the house. In order to finance, I can receive $40,000 in a margin loan at 9.75% on my current investment portfolio. To make up the other $10,000, I asked if she would be willing to defer the remaining $10,000 until I sold the home or refinanced. I'm willing to put a 5 or 10 year deadline on it to ensure she would receive her money. 

I realize 9.75% is a very high rate. My financial advisor said if I can secure a lower interest rate in writing, he should be able to match it, but no guarantees. My plan would be to use the margin loan for short-term financing until I could secure a HELOC on the property at a lower interest rate. I would use the HELOC to pay off the margin loan and pay the $10,000 to the seller.

I have not made an investment yet. I've been planning on using the BRRR strategy to invest in properties. However, I think this could be a potentially good deal with someone else already doing the rehab and still willing to take a loss. This "creative financing" is definitely something I've read in investing books, but I don't know if it's something that would actually work in real life. Thoughts from the pros?

@Jim Kennedy I've been told more than once about making my money at the beginning, before I even make the deal. I'm trying to analyze deals and solidify my understanding of the numbers so I can speak intelligently to banks and/or investors. My biggest fear is borrowing money from a friend or family member and not being able to return their money with interest, so I want to be sure I know going in that I'll be able to do so. Appreciate the insight. 

@Matt Lowery I am interested in investing in areas around Akron (Kent, Brimfield, Mogadore, Cuyahoga Falls, Stow, Tallmadge, Ellet). I'm not as knowledgeable about Akron neighborhoods and not sure I'm ready to take on some of the challenges. I'd appreciate any connections I can make. 

@Jim Kennedy Great insight. Man, I'm so glad I turned to BP. I'm thinking I should just take whatever I can get with a HELOC and make it work. I hadn't planned on it to fully fund a deal, but rather to help with a down payment and/or rehab costs. But would a bank consider a HELOC used for a down payment as another loan and potentially deny a mortgage? We had a lender say that when my in-laws loaned us money toward a down payment on our home, so we ended up solely using a private mortgage because of it.

@Matt Lowery Thanks for your perspective. I truly want some to work with me not for me. I can only imagine how many people contact you on a regular basis hoping to get rich quick. I know it's going to take me many properties and many years to reach the level of wealth I strive for, so I do not want to give the impression that I think I'm going to be a millionaire with one property. I will get a few more ducks lined up so that when I contact the agent again he will see me as a serious investor. Thanks again Matt. 

@Shawn Ackerman Thanks for the motivation and the compliment on the name. I'm ready to go get it like you wouldn't believe. I'm trying to get as many ducks in a row as I can, but I know I'm going to have to just jump in at some point. I've already set my deadline for the spring to get my first deal done. I'd like to have one in place before that though. I know once I start I'll be hooked. 

@Edward B., I understand very little is black and white in REI. That is one of the things that draws me to it, there's more than one way to go about it. I appreciate the honest insight. My biggest reasons for an LLC would be peace of mind and professionalism. But you brought up several points that I will have to research and think about more before making a decision. It seems I do not have to have this in place when I first start though anyway, so I have some time to decide if it's right for me.

@Account Closed Currently I've just been looking for properties on Trulia, Zillow and Realtor.com. I've driven by several places I'd like contact the owner about (looks sort of neglected and definitely the shabbiest house on the block), but I don't know the best way of going about it. That's where I was hoping to utilize an agent or a potential mentor. 

As for financing I have a family member who has mentioned in the past he and some of his business partners would be interested in investing in real estate. They don't have the time, but they have the money. I plan to analyze some deals and use the deal analysis tool on BP to present some sheets to him. I plan to go this route because I don't feel I have an adequate amount saved up for a down payment. 

Would analyzing deals for a potential mentor (wholesaling to a lesser degree, I suppose) be a plausible in-road? 

@Marcus Narvaez

I think you have a valid point about the agent. I was hoping he could at least help me get started with some online listings with the parameters I'm looking at. But I see why he wouldn't see me as a serious investor right now. 

Maybe I used the wrong terminology or didn't clarify, but the investor I was speaking about invests in real estate himself. I was turning to him more for guidance and education than financing. I'm hoping to start with some friends and family to invest. But would it be beneficial to get pre-approval from a bank to show the agent, even if I don't plan to use it to fund a deal? Or would that damage a potential relationship with the bank?

@Edward B. Sorry I didn't know how to tag in my responses. I'll be sure to use it from now on. Thanks for the heads up. 

@Thomas S. Wouldn't creating an LLC protect my personal assets beyond insurance? My wife is overly concerned about losing everything we own if I invest in real estate. When I mentioned creating an LLC she seemed to be more receptive to the idea. Besides minimizing my personal liabilities, aren't there tax benefits that would justify any additional expenses? Are there other LLC expenses besides initial filing costs I'm unaware of?

I can't thank you guys enough for your help. I don't know why I was so hesitant to make posts when I first signed up for BP this summer.