All Forum Posts by: Spencer Cornelia

@Dominic Licerio "and had to terminate the contract."

Did the seller have the ability to terminate the contract?  Was there a clause in the contract stating they could break the contract with you in order to sell it in the future?

If they have a medical emergency, wouldn't it make sense to go ahead and sell the property to you now since you're qualified and I'm assuming you made a fair offer (given that they accepted it)?

This smells really fishy and I'm with @David Pere on this one.  If there isn't a clause in the contract giving them an opportunity to terminate the contract, I think you have every legal right to demand being able to purchase it with the terms being set by the signed contract or they will be hearing from a lawyer.

@Matt Huss I see you mentioned college rental in your post.

I have a house hack here in Vegas that is a 7 bed / 5 bath cash cow.  I live in it and rent the other 6 rooms for a total of $3,600 gross.  Now that I have 6 months experience running this property, I have the house in order.

I don't rent to only college students, I focus on young professionals and anyone willing to live with 6 other people.

How this applies to you...

There are a lot more headaches for sure, and you will need to be able to manage people really well if you pursue the rent-by-the-room strategy.  You will need to instill a set of rules from day one and have a system in place to ensure that the rules are followed every single day.

The benefit is that the cash flow is insane.  Furnish the rooms with low cost furniture that looks nice (queen frame, mattress, dresser, nightstand) and charge everyone equal utilities (I recommend $50 a month).  Furnished rooms in a nice house should at a minimum get $450 plus $50 utilities.  In a semi-decent area, you should be in the $550 plus $50 utilities range.  In a nice area with a house you may have rehabbed, you should be in the $600-$700 range.

In a 5 bed house, the cash flow could hit upwards of $3,500 a month. Here in Vegas there are many SFH that are priced at $320k and below and have 5 beds so this strategy even exists in one of the handful of hottest markets in America.

But buyer beware.  This strategy is management intensive when you first begin.  IMO the cash flow makes it worth it.

As for quadplex or apartments....

start networking with people locally.  I'm sure there are at least 5 quality meetups in Tampa.  Talk to people locally about what they're seeing with small to medium multi families.

Balloon payment: the date at which the full loan balance becomes due.

In easier terms, when you reach your balloon payment date, you owe the entire loan balance.  Let's say with this deal you owe $150k when you first take over the property.  After one year of making payments to the current owner, you owe $144,678.  When the balloon payment date is reached, you will owe the full $144,678 to the owner.  The idea is that you will have time to secure funding, so that when the balloon payment date is reached, you will be able to pay off the previous loan with your new loan.

The main premise behind offering a balloon payment date is to let the owner know that they will be getting their owed amount by some specific date.  If someone is going to offer seller financing, they typically want to have a set date where they will receive the owed amount.

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

Offer 12 month balloon is what I would recommend.  Or maybe offer a 18 month balloon to give you enough time to purchase in your name.

@Eric Whitelaw step 1: Add your city, state to your profile so people on here can reach out to you and connect in your area

step 2: go on meetup.com and look for every real estate related meetup in your city

step 3: attend every real estate meetup and networking event you can

step 4: find people on BP who live in your city or near it or even claim to invest in your city

step 5: set regular meetups with people you network with.  simple monthly coffee meetups with a small group.

This is the quickest way to learn the game.  Learn from those around you.  Trust me, it is 100x more valuable than attending any weekend seminar.  You can "learn the game of investing" by reading 100's of books and become like many BP newbies and never do a deal or only do 1-2.  Or you can immerse yourself with people around you doing deals and learn from them.  I guarantee they will help you succeed and push you to do the best you can in this game.  And best of all, their help is free.

Save the money and then apply it to an investment property when you get advised from your new network.  The learning experience from your first deal will trump any other time spent learning the game.

@Thushara Gunasinghe do you even know if your lender will allow this?

Using a HELOC as a down payment can only work if you have a super low DTI currently. What you're proposing is to be 100% leveraged on an investment property after a decade run of appreciation. I wonder what could go wrong. I would strongly advise against even considering this. HELOC's are meant to be utilized and then paid back ASAP via refinancing or selling.

As for the second option, I think it's a great strategy to use a HELOC to purchase an investment property as cash, at a discount of course, and then refinance into a mortgage that pays off the HELOC.  But you better make sure that you have the refi lined up before you put any motion into the purchase.

I respect that you are looking for ways to utilize debt to grab more properties.  I had the same mindset a few months back.  But your risk goes through the roof with this strategy and it's hard to gauge the actual risk when you're buying these deals.  What you don't realize is you're one or two small black swans away from losing everything.  Yes, everything.

@Anthony Drew I invest in Cincinnati and live out west (Las Vegas).  Cincinnati is a hidden gem of a market and one that I believe still has a plentiful amount of opportunities.  You say that you're looking for C class multi families.  What price range are you looking for?  2-4 units?  Or something much larger?

If you're truly looking for passive income, long distance real estate may not be the best option as you're always going to be running a business.  Having a good property manager can certainly reduce the amount of work to nearly zero.  But you need to establish a team before achieving a truly passive income state.

Keep Cincinnati quiet as I don't want LA investors knowing about it!! 

@Nicole Dechow I recently took over a house using a Lease Purchase agreement.  I don't have title nor was there a closing (yet) so no worry about the Due on Sale Clause.

This sounds like what you'd want to have setup for your situation. I'd recommend offering a lease purchase where you make payments to the owner each month. Start negotiations by saying you'll only pay his PITI (and cover any expenses that arise).

Have in the Lease Purchase Agreement that he will receive a balloon payment within 2 years or whatever time frame you want to put in the contract.  He will receive his money when you sell the property or purchase it in your name.

All you will need is to send him his monthly PITI payment using whatever method you'd like (cash, check, Venmo, etc.).  Use cash or credit card to fund the rehab.  Then sell when rehab is complete or purchase in your name using a traditional lender.

I tried to get @Casey Powers to list one of my properties for 1% to no luck.  Could have saved me like $5k.  Darn.

Agents will always be needed.  I listen to too many coworkers talk about buying and selling houses and I know they absolutely need an agent to help them with the transaction.  Agents provide a lot of value to the first time home buyers.

For investors, they're seen as a necessary evil.  We take on all the risk, dealing with tenants, dealing with repairs, paying bills, etc and they just enter in the picture at the last minute.  They make 3% of OUR PROFIT!  Which is why we all go and get our license and keep the money.  And then end up as a statistic in Casey's post haha.

I would recommend including every way to contact you.  If he doesn't have email, what happens if you only provide yours?  You miss out on the gold you just stumbled upon.

As for formatting, I don't think there's any thing you really need to know.  If they are distressed, do you really think they will not call you because of formatting?  Haha.  They will probably be thankful you even reached out.

In all seriousness, just state your name and that you happened to drive by their property.  You are interested in purchasing it from them.  Write that they can call or text you if that's easiest on them or they can email if that's easier.