All Forum Posts by: Zach Mitchell

Rueben, Howard gave the best response for the type of deal they were trying to structure but I still don't know that I fully understand the question. The guys sending this proposal out are some sort of investment company or developer (called the sponsor), who are looking to purchase the property with little money out of their pockets. They are probably trying to source senior debt at 75% LTV and source the remaining 25% from a private equity partner. Then they own a $20,000,000 building with not a lot of money out of pocket.

I asked my original question because there are also equity brokers out there who play middle man and make a big fee from bringing the two parties together. I watched an equity broker make $500,000 from one introduction. 

The post is a little confusing. Was this mentor buying the property on his own and trying to source the equity on his own or was he just sourcing the equity for a client who was buying the property?

I didn't read all of the other posts so my apologies if this was said already but building large amounts of debt is the only way to make it big in the real estate game. I know of apartment developers who have $500+ million in debt on their properties. They are millionaires themselves and the debt is all secured by the assets so worst case scenario, the bank gets the asset. 

If you step back and look at your situation on a macro level, $8 million is very small and as long as your properties were purchased properly you shouldn't be concerned about having debt. Look at any big name in real estate and they are probably carrying more debt than everyone on bigger pockets combined will ever dream to have their whole life. Like Donald Trump, the guy is probably carrying like $5 billion in debt. 

There is a reason the property is selling at $140k if the comps support a $200-$250k value. If not, you better get that under contract immediately.

To answer your question though, I'm pretty sure the LTV will be based off the lower of the appraised value or the contract price. Without getting into too much detail, you are essentially setting the value of the triplex with the purchase itself (in the lenders eyes).

This is called wholesaling. If the deal is good enough you can get it under contract for little to nothing down and then go out and find a buyer who you can assign the contract to for an assignment fee. Look up wholesaling, there are thousands of posts. 

This happens all the time in my area. I get emails from probably 5 or 6 "wholesalers" with the same deal. Most of the time it's a property straight off the MLS that is advertised at about $2,000 below list price. I've had these "deals" come across that are still active on the MLS! They seem to share all of their deals with each other and whoever brings the buyer gets half of the assignment fee.

@Mark K. You are definitely doing the right thing trying to learn the basics before you jump in, like most beginners do. However, I would not spend they money on those courses unless you plan on pursuing a license. You can find the same information in a lot of different places online. The first thing that came to mind was YouTube and a quick search of Appraisal Practices and Procedures brought up a full course. Here's a link to the first session.

https://www.youtube.com/watch?v=WKBI4NXtAFU

Look for courses on the sales comparison approach after you watch these. They will dive deeper into the process of how to pick the right comps, making adjustments, etc. 

Moving into your investing career just keep in mind that knowing all of this will be very helpful but when you actually do your first deal you could get an appraiser who has a different idea on the right comps to use and could still come up with a completely different value. Appraising is completely subjective and almost every appraiser will come up with a different value than the next (within reason). Good luck.  

I started as a commercial appraiser right out of college, never did residential. After four years of that and then two with an apartment developer I am now working as a full time investor. My background in appraising has definitely helped me along the way and it also gives my investors more confidence in my judgement and analysis of a deal. With that said, unless you will be doing it as a job for a couple years then I see no reason to get your license. I was one step from my Certified General appraisers license and I let it go because I didn't see a need for ever having the license moving forward in my career. Also, you have to keep in mind that you are held to different standards as an appraiser. If you were to mention in conversation to your neighbor that his house is probably worth $X amount you have now given a verbal valuation and are required by USPAP to have a work file on that valuation. That's just an example of how you need to be careful of what you say when you are a licensed appraiser, it could potentially get you into some sticky situations if you were to also do wholesaling and other similar investments. It really just depends on what you want to do with your career. I plan on moving into commercial investments in the near future and my appraising background will definitely help me out there.

@Scott Trench I agree that this rule is in place for first time buyers but only as a personal residence. You said you bought as a first time "investor". Pretty sure the idea is to keep investors out of the game? Maybe that's just my opinion on the rule. Also, this is not a HomePath property and I'm pretty sure the pool of first time homebuyers over $500k in my area is extremely limited. 

With that said, I never had intentions of actually moving forward with the deal during the first look period knowing that I would be violating the agreement. I was just wondering if anyone has had experience with this before and if they were never able to occupy the property what the outcome was. If I make an offer before the 15 days are up it will be with full intention to occupy for the 1 year required. 

I don't think it was mentioned that this is not a Fannie Mae property, it's another large national bank.

@Pat Martin No integrity? You know nothing about me and are making defamatory comments based on a question I asked? I appreciate your pointless post. Keep your useless comments to yourself.