All Forum Posts by: Derrick Strope

Brian, thanks for the response.  No, I am with you on the 50% rule which is why I mentioned it was close.  The numbers can still be tweaked and nothing is in stone at the moment, I was just looking to see if the overall process I outlined made sense from an execution standpoint.  I guess I should not have added does this seem like good deal at the end of that outline because my offer prices have not been validated yet by the seller.

If you don't mind, can you expand a little more on this creative financing idea?  

@Juan Maldonado 

I attempted to send a colleague request and a little message regarding your response but the server was timing out and it did not seem to go through.  Just going to post this right here to see if I am following correctly.

If the 5 properties come in at 150k each we will start with a retail value of 750k.  Assuming that I offer the owner the opportunity to avoid commissions, vacancy, improvement costs, etc and offer 125 for each property and he accepts, we then have the following scenario.

• ARV: 750,000
• My Cost: 625,000

From here I would pull a mortgage for 80% of My Cost, which would be 500k.  Because of the fact that I am only financing 80% of the value, I will not be required to put a down payment towards this loan.

For the remaining 125k, the owner would carry a interest only note for 5 years with a balloon due at the end of term.  

So essentially my payments would be the following

• Bank: 2,684/mo (500k @ 5% for 30 years)
• Seller: 520.83/mo (Interest only for 5 years)

Considering the current rents and max occupancy, I would have the following scenario.

• Incoming: 6,000/mo (Rent Payments)
• Outgoing: 3,204/mo (Mortgages)

Sometime before the balloon expires, I can sell one or two of the properties to cover the balloon paymet (or refinance, or many other options).

This is fairly close to the 50% 'rule'. Assuming I am interpreting this all correctly, does this seem like a good deal?  When all is said and done, I would only need to find a way to come up with the closing costs - which should be under 25k.

Thanks for proofing!

@Shawn Jacobs welcome!

I spent a few years in GR, lived downtown at the Plaza Towers and worked in Holland, MI JCI.  I miss the heck out of that place, was a great time.  Welcome to BP!

@Jeremy Pace @Juan Maldonado

Thank you both very much for your thoughts.  I am going to have to do a little research on these options to fully wrap my head around the process and how I can present this to him as a win-win situation.

Thanks!!

One thing I missed was that these are all currently occupied @ ~1200/month rent and owned 100% free and clear.

I had a caller come in via some mailers I sent out the other week and this guy has a fair amount of properties, 20+ I believe he said.  We had a plesant conversation discussing a huge number of things including that this gentlemans kids are not interested in taking care of his rentals, which was one of the reasons he contacted me as he is 72 years old.

I am focusing on 5 of his properties that are in a very similar in size (3bd/2b), built in the late 90s, similar lot size and even the same subdivision.  In the last 90 days, I am showing that the median sales prices for similar homes matching sq feet, lot size, bed/bath and year built at 159,000.

He started off telling me that the reason he was interested in going this route is that he can avoid paying commisions and all the normal fees associated with traditional sales (vacancies, improvements, etc) and wanted to roll the cash into a tax free bond.  Not sure if that is possible but that isn't the question here.  He very much seemed against taxes/commissions even if that means he accepts a lower offer.

He also mentioned that he has thought about carrying a note, I would assume for a short period of time (approx 1-5 years).

I would be very interested in working this into a buy and hold deal for myself, my only problem is I don't have much cash to swing around yet.  Knowing the above information, how would you approach this potential deal?

If there are any details I failed to mention that would be useful, just tag me and I will update.

Thanks in advance for the help!

 Good to know, thanks!  I had only heard that in Washington State you must have "and/or Assigns" included as the buyer in order to assign a contract, at least that is how it was presented to me.

@Krystle Little also you do not HAVE to register your business name to begin with. If you do contracts you can just use your name on the contract in the short term. Even with an LLC you will still be liable if you are the single owner of an LLC (from what I have read).

@Krystle Little

I would focus on getting these together first.

• Business name 
• A contact number (google voice works)
• An email address 

Once you have those, check out fiverr.com.  They have people there who will design logos for your business for 5 bucks.  Then you will have everything you need to make a business card.

You can also register your LLC with the state for little cost. I paid 19$ in Washington State just to get a UBI number and all that stuff. Later you can complete the rest as it comes to you.

A website is definitely good but can take some time depending on your experience with that stuff.  Not an immediate need.

@Devin Morgan I wouldn't wait until you feel ready.  I think if you want to be successful you should just act, a book can only tell you so much.  Getting out there and learning on the fly is the best way in my opinion.  You might lose some deals early on as you get more familiar with negotiating and working with homeowners but that is what makes you grow.

Of course, if you are putting a lot of money on the line - triple check your numbers and even post them up here to get advice.  Regardless, it's best to just start trying.

A favorite quote of mine: "You miss a hundred percent of the shots you don't take"  - Wayne Gretzkey.