All Forum Posts by: Lou Castillo

I agree with Jason - this is not a get-rich-program. This is a business. And if you treat it as one and do the things you need to do, it will reward you very handsomely. Remember that the cornerstone of any business is its marketing. Develop a solid marketing campaign and be consistent in your marketing.

Also, don't be so jaded by the quick riches programs that you don't get the proper education. You'll jump start your business and avoid a lot of costly mistakes by getting the proper education. Do your research and select someone that knows what they're talking about and cares about their students.

This is why I am such an advocate of title insurance and why I am so opposed to the "kitchen table closings".

My attorney told me of a case where a home owner who wanted to sell his dilapidated property switched the house numbers with a rehabbed house next door to which he had access. He showed the RE investor the rehabbed house, but the address on the paper referred to his badly kept house. When the deal was done, the investor had no title insurance and could not prove a case for fraud since all of the documents matched to the house that was actually sold including the investors' own Purchase and sales Agreement.

Some of these thieves are smarter than the rest of us!

Sorry about the $184k ARV. I was originally working off the $190k price you had quoted, but then I realized that was the list price of the subject house. I went back and changed my figures but missed the $184K. It should have read $218k.

To answer your question of where you went wrong: the formula you were using was supposed to be:

Max Offer = (ARV * 70%) - Rehab
The 30% discount off of the ARV was to cover BSH costs and your profit. I just prefer to know where all of my numbers are coming from.

Good luck

You took the ARV * 70% there was no reason to do that. Your ARV should be the price that will be marketale when you are ready to sell the house. For instance, if the market right is that houses are seling for $225,000 and the prices are dropping at 7% per year, but you'll have the house on the market in 3 months, then you'll want to subtract only about 2-3% from the value -so your ARV would be $184,000 from which you'll subtract expenses.

ARV $218k
Rehab $ 30k
BSH $ 27k (15% of ARV)
Profit $ 30k

Max Offer $131k

Your $120k offer would be a good price for the house - I might even start neg. lower.

Be sure that the ARV of $225k is the current market price that will sell!

Lou

I agree with all that has been said before - there's no incentive for a bank to call the loan due. You definitely need to have a good Disclosure that tells the seller what is going on and advises them to seek competent counsel. Ihave them sign that twice: once when we go under contract and again at the closing and I have the closing agent notarize their signature then.

I just read that Vegas has had a lot of fraudulent deals going on which has caused the value to be artificially inflated. Be sure of your actual ARV today and be sure to look at the terms of the loan to make sure the payments are not about to escalate out of control.

Here's the formula that I have used for years and that I teach to all of my students:

ARV - Rehab - Buy/Sell/Hold Costs - Profit = Maximum Profitable Offer

The MPO is the deal breaker price. Never exceed the MPO. Start your negotiating well below that number and set a goal not to reach it.

You should list out all of your BSH costs and get a true number, but when you're at a property that can be cumbersome. That number generally ranges from 12-20% of the ARV. Based on how you typically finance properties, whether you use an agent or not, if it is typical to pay closing costs for your buyer, you can determine your average BSH and use that % in your formula.

Yes - there are some as cheap as $69 - $89 a month and then up from there. I'll PM you with a couple.

The problem with an answering machine is that your motivated sellers are looking for an excuse to hang up. when a live person doesn't answer, they're relieved and don't leave a message.

If you can't answer the phone, then you should use an answering service. You can give them a script of the questions you need answered, and they will e-mail you the responses. It makes your job much easier.

Be careful buying a list. Sometimes they just no good. They're old. The people on it are not real buyers. They don't know you and won't respond. I rather see you drive traffic to an internet site and capture their contact info.

There are 2 ways to handle this - each with pros and cons. The 1st is to explain to the Seller at closing that instwead of you making the payments, your money partner will make them. Be sure to have everyone sign a Disclosure that they know what is going on as far as the ST and who is making payments and that you are out. The advantage is that this is clean and easy and you're done with the transaction. The con is that there is still no guarantee that the buyer will make the payments, and the Seller might still dreag you back into it (that's why it's good to have the Disclosure).

The other way is to place a mortgage for $1 on the property with the stips that the mortgage can not be paid off until the 1st mortgage is paid; any default on the 1st is a default on the 2nd; and the 1st and 2nd must be paid in full by some pre-determined date. The advantage is that if the Buyer doesn't make timely payments, you can foreclose, get the house back, and sell it again. Also, the Seller is never negatively impacted and your reputation remains sterling.

The disadvantage is that you would have to make the payments on the 1st until the foreclosure was complete.

The key to a ST deal is to have a good Disclosure signed by the Seller - and keeping the loan current.

Hope that helps.