All Forum Posts by: Spencer Cornelia

@Asya Evans there are numerous ways seller financing can be applied to a transaction.  What is the exact scenario you were looking at?

If you need a contract drafted up, I would recommend paying an investor who has done numerous to share their resources and knowledge with you as it will be significantly cheaper than going the lawyer route.  My first seller financed deal cost me $9,500 in lawyer fees on a $260k purchase.  Won't be making that mistake again.

If you actually close the transaction and take title, then you will pay title fees just as if you were buying through a lender.

Estimated cost is 2% of purchase price for title fees and closing costs.

@Tariq Hakeem "engineer that commutes an hour daily to go to work".  Time to start thinking like an engineer.  How can you maximize this time for efficient output?

You should be listening to real estate podcasts in every minute of your commute.  Let's break this down:

In the next month, there will be ~20 working days.  In 20 working days, you will have roughly 40 one hour commutes.  In those commutes, you will have the opportunity to listen to 40 one-hour podcasts.

In one year, you can have ~2,000 hours of knowledge transferred from your radio into your ears.  If this seems like a long time, then remember that real estate investing is a LONG TERM game.  For reference - I spent 12-16 months learning before buying my first deal.  Because of the education and networking I gained throughout those 12-16 months, I was able to move quickly when opportunities began presenting themselves.

A couple of podcasts to listen to:

Sean Terry's Flip 2 Freedom Podcast (more focused on wholesaling and finding off market deals)

Bigger Pockets main podcast (more general and numerous strategies presented)

Real Estate Disruptors podcast (wholesaling focused)

@Josiah Sia Having a HELOC of $140k is gold if your all-in cost for purchase and rehab is comfortably under $140k. The downside is that you will have a large monthly payment to cover the interest on the HELOC so you'll need to make sure that your primary income source is comfortably higher than your normal monthly living expenses plus the HELOC payment. The upside is that your spread is going to be pretty large since you won't have to account for points and origination fees that HML charge. Your monthly interest rate will also be much lower than a HML would charge.

I personally think you don't really learn this game by buying a turn-key investment.  The only lessons you can really learn are how to manage a property manager, if that.  Some of these turn-keys even provide the PM for you.  So are you looking to make a little cash?  Or are you looking to grow?

Even if you buy a great turn key property in a cash flow market, that $50k will net you like $4,500 in your first year.  To me, that's way too low of a return on all of your reserves.

I personally think all beginners should start with a small rehab project. You have enough to get a hard money loan. Network with wholesalers. You mentioned that you have interest in BRRR so I know you're interested in the rehab side of this game. What better way than to start a rehab project tomorrow.

@Jared Cheney I'm up in Cincinnati now visiting my first two flips which are 2,000 miles away from where I live.  My first one is going to be listed on the market tomorrow and all my friends/family love the video I posted on Facebook of the property and are really happy for me to make a little profit.

But here's what they didn't see...

Me basically going bankrupt.

My first flip was a large rehab project and the work was done poorly.  I found out at the end when the photographer and my agent showed up to take pictures only to tell me that we were months away from being complete and that a lot of the work needed to be re-done.  The last two months have consisted of me eating a poverty diet, not having fun because I can't afford to go anywhere, sleepless nights, having to ponder selling my car just to make loan payments, and seeing about $25k of profit go out the window.

So what would I have done differently...

1.  I would have relied on a couple people I trust to go visit the property to ensure the work was being done well.  And I need to have a tighter leash on contractors.

2.  Not used really expensive hard money.  I should have shopped for loans.

3.  Not take on multiple flips until I had A LOT of cash reserves

One thing I did right...

I bought deals with a lot of spread.

@Gary Crawford and @Account Closed are experts with STR in Big Bear. Hopefully they can chime in..

@Kelly P. The house I am currently 'house hacking' is on a lease purchase.  I met with the owner and we agreed upon a purchase price and a one year balloon.  I would take over the property on a lease beginning March 1, 2019 and I would have a balloon payment on March 1, 2020.  During the 12 months I am on a 'lease', the owner keeps title and all of the utilities in his name.  I send him payment every month on the 1st.  By taking over the property, I handle all repairs and maintenance and receive all of the income generated.

A lease purchase is not a transfer of the loan and the bank does not know about it.  Nor do they need to.  There is not a transfer of title.  A transfer of title only happens when you officially buy the property.

The reason why I say to propose a balloon payment of your balance in 10 years is because you mentioned that you were looking for 0% down.  So theoretically you'll be close to 20% equity (assuming value of property stays the same) by year 10 and you'll be able to officially purchase the property using traditional lending.

"What type of legal doc do I need to protect my interest and investment?"

A lease purchase agreement for the example I provided.  Worst case, you find one online or through a local resource and have a lawyer review it.

@Jacob K. I know all the rage is small multi family, but have you considered house hacking a 4+ bed single family by getting roommates?

I know this strategy isn't for everyone, but the numbers work far greater than any duplex for either of the following scenarios...

a) Buy a live-in rehab project where you can occupy the house while fixing it up. I imagine you have a job and have monthly net income. You can use all of your net income towards the rehab. When finished, furnish the rooms and rent each room for $500 a month plus $50 for utilities. The numbers should pencil out for a BRRR if you purchased correctly.

b) Buy a rehab project using hard money and refinance with you as the buyer.  Your equity will be whatever the spread is.  Since you'll be the one purchasing and there will be no agent fees, your spread should be pretty large (~20%).  Furnish the rooms and rent for $500 a month and $50 for utilities.

I'm not saying this is best for you.  I just wanted to present an option C.  I personally wouldn't want to be putting down 5% on retail prices at the moment. 

@Kelly P. I went through a period where I was trying to figure out how I can grab properties with no money down.  It's a good thought exercise but I can't imagine getting a lender to approve of a scenario where a borrower is leveraged 100%.

"You're only limited by your creativity" - a quote that has stuck with me for a long time.

Based on the text in your post, it sounds like the seller has not received any kind of offer from you yet.  So we're starting from scratch.

I personally think you should present 3 offers.  The terms of the offers are completely up to you.

You mentioned that you have access to cash, HELOC, and have a solid w2 income. So I think you're in good position to present many offers to them and show that you're a qualified borrower in the event they provide seller financing.

You can still present a seller financing offer.  You will just prolong the need for a traditional lender to enter the picture.  If you like the deal at retail price, why not offer something like $5k down so they know you're serious and you take over the payments with a balloon in 10 years?  

First, I think you need to have a conversation with the owner figuring out if seller financing will even make sense to them.  If some big expense came up and they need 100% of their equity, then the mental gymnastics you're playing now don't matter since they won't be open to seller financing.  But if they're cool with getting their payout at a later date, then why not offer to take over the property and give them a balloon in 5-10 years for an agreed upon price.

@Ben Haridim I have two flips in progress in Cincinnati.  I anticipate exiting 2-4 next year as I want to use more cash and focus on rehabbing multi families.  Las Vegas is too competitive in the flip market.

This is clearly hyperbole.  But I'll bite.

Personally, I think you should sell your primary residence.  Tell your family that you are ready to live the big baller life, take the $450k cash, and buy a $1mm mega mansion because you deserve it.

Build a barrier wall outside your home that sits between the house and the newly constructed moat, which has been fully stocked with alligators.

Prepare for the revolution.