All Forum Posts by: Timothy Daniels

@TJ H. Sell for the price that makes sense to you. Write anything you want into the contract (salvage, etc.) Developed areas generally have requirements for storm water drainage. You can call the municipality to find out what those are. If you get a premium on the sale you may be able to buy something else and offer your current tenants first opportunity.

@Mohammad Haidarasl

You could certainly put together a syndication of like-minded investors and pool your resources.  If you can buy wholesales with syndication cash and sell for more cash it is no different than buying with bank cash and selling for more cash, except that you don't have to pay interest to secure the cash.  If the other investors get a good return, they will stick with you and you can do this all day long.  

It's a bit more difficult with "buy and hold" rental property  because you don't get the capital back immediately, but you can set a goal of building a reserve account from the proceeds of each wholesale that you will then use to buy rental properties, you can do it.  It will take some time on the front end, but each time you buy a debt-free (or 0% interest) home you will see the process gain speed. The other option is to partner with like-minded (but wealthier) investors on cash-flow homes.  If you can act as minority partner, finding deals that return a great rate to the equity partner, you can begin to accumulate a decent income from rental property even though you have put no money down.  The investor is happy because he/she is getting 12% or so on their cash--it's a win/win and no interest exchanges hands.

@Sherman Ragland @Calus Glispie Thanks for your thorough answer, Sherman, but I think it misses on an ethical point: "Earnest money" says, "I am in earnest about wanting to buy this property at these terms." So we aren't really trying to "make sure you (never) lose" your earnest money.  Instead, we are putting this out, with proper contingencies (inspection, appraisal, financing, etc.) to give confidence to the seller that you intend to buy at your stated terms, barring any unexpected hurdles covered by your contingencies--which can ethically be negotiated should they arise.  "Weasel clauses" are by their nature unethical--legal, yes, but unethical, because they demonstrate that you never were in earnest about purchasing on the terms you offered.  I would never agree to one as a seller, nor would I counsel any client to accept one.  A savvy seller should only agree to objective and time-limited contingencies. And buyers should only make offers in earnest.

@Calus Glispie In many states you don't have a legal contract without exchange of value, earnest money being that which the buyer puts up.  If you are going to close, it's not lost money, it is just applied to the purchase price.  So I would "man-up" and offer the owner something that shows I am a serious buyer and avoid losing the deal.

@David Smit WA State law prohibits use of security for anything but damage (i.e. can't use it for unpaid rent). So I treat the deposit as a separate issue...if they have damaged anything I will keep those funds.  If not, I return it.  No loss, as I never considered it my money to begin with.

The amount you offer the tenant must be compelling/incentivizing. I have always found the lawyer to cost more, and be less time-effective. And my desire to remove the tenant from the property is usually greater than my desire to save some money.

@Hai Loc I completely agree with what you say except one point: I would not make cash for keys a last resort. This is my most effective tool un my tool bag. I tell my tenant that they will be leaving, that I am absolutely committed to removing them from the property--whether it takes more or less time. If they leave by a fixed date I will pay them cash = 2 months rent. Sounds like a lot but if they aren't gone by that date you will spend far more in lost revenue than you will in incentive money for them to leave. Sometimes the market is such that the offer is not compelling, but when you write that check to the lawyer you will realize you could have saved money and time.

Hi Rob,

My wife and I (home base WA) just bought two condos in New Port Richey (near Tampa) and sold one within 24 hours.  The second we remodeled and will now sell owner-financed at an internal rate of return of 23%.

I'd be happy to talk further if you want to know more.

Tim

They are ALL as boring as heck! Just pick the one with the lowest price and a reasonable set of reviews and muscle your way through it.

Hi Kendall, I just noticed how old this post is, but BP ran it across my screen so I'll add my 2 cents worth. 

Our local lender, and even Wells Fargo, has given us substantial loans based on the determination that our purchases are a business. They look at how long you've been at it, how many you own (i.e. legitimate business or a hobby), and a base of $1.25 net income for every $1 of debt service. Add a slick and well-thought-out business plan and personal DTI becomes a non-issue. They want to know the performance of the property. You may have to educate an appraiser re: income potential. The income method of appraisal, separate from DTI, is typically only considered on a commercial loan. Many such loans can be amortized over 20 or even 25 years, but have a 5 or 10 year call. Nothing to be afraid of -- if the property performs at or above the originally calculated rate, the bank usually rewrites the note, or you find another to pick it up.

@Michael Underhill

I wish I had such an easy strategy. When looking for a vacation rental property, I start with location. A house on the water commands a higher nightly rate. In town (for us) is also more lucrative. 

How many will it sleep? More people means rougher use but usually a fuller calendar.  I determine an actual rental income potental, back out costs (call utility company for actual, consider taxes, furnishing at a 5-7 year depreciation, linens, etc. at 2-year, call management companies to see what they charge in your area).  When that's done, divide the net income by your desired cap rate and you end up with a maximum value (30,000 net ÷ .08 cap = 375,000; 15,000 net ÷ .12 cap = 125,000).

Does this make sense?