What type financing do you use in your Investments, traditional or Creative?? If Creative what types?

Usually, financing for investment properties are commercial loans.

------------------
Susan Vanderburgh
Licensed Real Estate Agent (California)
super_property_gal@hotmail.com
http://www.reliancerealtygroup.com

Disclosure: I am not an attorney. Any advice given shall not be construed as legal advice. Information given is applicable to real estate transactions in California unless indicated otherwise. Information given with good faith and best knowledge as of the date it is given with facts to change without any penalty to the undersigned.

Sorry, but in creative real estate investments, conventional financing is almost NEVER used...and when it is, only for very short time frames, that is why it is called creative real estate investments.

The question was about how do other agents handle investment real estate financing... Not how we process clients purchases. As agents, most of us have, or should have, a more detailed understanding of investment real estate and alternate methods to accomplish it. Being in the business, we can better assess the risk and opportunities of different forms of investment financing to fit our own needs. Not talking about clients/ customers here but about our own investments in real estate.

While I am aware of several differences due to how different states handle real estate in such processes as foreclosure, many forms of investment financing exist but are not "working tools" of the average agent. But are used by agents that actually invest in real estate for themselves.

The point of this post is to have a forum on better investment finance methods in use by agents themselves... what works in their areas and what doesn't, and at what point the opportunities present themselves, what type properties they best have worked on.....

Again, not talking about traditional financing used with the majority of clients but use by other investor agents.

There are many options available to you. Some of the most popular are 80/20 No Money Down Mortgage loans. In this situation, you actually take out two loans, the first for 80% of the loan value and the second for the remaining 20%.

But, as I said, there are many options - and it all depends on your particular situation.

You'll probably feel more comfortable discussing this 'off forum' - feel free to contact me at :

[url = "http://www.sapphiremortgagelv.com"]Sapphire Mortgage[/url]


cbirkland@sapphiremortgagelv.com

702-898-8250 - phone




------------------
No Money Down Mortgages

Those are still the standards and not typical for investor properties... more like interest only loans, owner financed, subject 2 financing, Lease Option, Least Purchase, Hard Money Lenders, Investor Pool.

Looking for inputs from fellow investors / REALTORS® who use creative investment methods Not loans from banks.

That is one of the BIG questions that is placed to people all of the time.. As everyone else has mentioned, there are literally hundreds and I mean HUNDREDS of different ways, combinations, and types of financing... Some investors use cash, some use banks, some use creative methods, I have seen people use a combination of all of the above, etc. etc.

Please understand that there are an unlimited amount of ways to finance.. As long as you stay legal and don't run into any problems with the seller(s)... Then have fun and work some good deals..

Duane

Typically I will try to get my clients to go to the bank I use personally. It is a commercial loan from a local bank, they lend 80% of the appraised value (can be an as repaired appraisal too) this will usually cover the purchase price and give money for renovations.

That is still just every day retail investing... doesn't anyone do or even know about creative and wholesale investing???

Guess this is why so few agent actually invest in the area they are suspose to know best. Really strange......

I've done deals with LP, bond financing, interest only hard money, land trust, owner financing, another property as collateral, trades, and a lot of other ways, thousands of ways to buy a property.

But right now with rates so low, why bother? I can go get a 5% fixed rate mortgage, and cash out at closing for repairs or just to pocket the money. I close on one monday I will get a check back at closing for $21k, repairs will only cost about $9k, still will have a big monthly cash flow.

Right now I am getting some great deals in short sales (suprised what some banks will settle for) and some foreclosures, although those 2 really don't allow you to be creative.

Well I hate to say this but I think you are right Reality.... It seems that very few agents really know what creative means... I honestly can say that I have and will work with people who want to do creative financing... But I am a rarity in this field because I myself have used "unusual" financing methods in my own acquisition of properties... Trust me, like I mentioned above, there are hundreds if not thousands of different ways to finance a property creatively...

Duane
thepropertyguru@yahoo.com

yes... I know... of more than 800 real estate agents I know and work with frequently, only 4 know about creative real estate techniques and only 2 use them. All the rest just pay the bank to loan them funds. Problem is that most lenders start to balk when you have 5+ mortgage loans and no salary. To effectively use your capital you must work outside the box of traditional real estate and traditional financing. The whole intent of this string was to generate some discussions along those lines... hoping to expose more agents to new techniques and possible learn a few new jewels myself.. we all need to keep learning new things... even us old dogs.

Bottom line is, if you think going to the bank or sending your clients to a bank is investing with good COC returns... well you really need to review or take a finance course... why pay a bank to do what you can do with out them???? It really isn't hard or even difficult... 50% of my clients do not use banks for their RE investment, I do about 10% of the time but for specific reasons that are not always funds related.

Would like to hear from agents that are investors using non tridational financing.. Lets share and learn...

Hey Everybody...
It does seem that there is a lack of education about creative financing in these days of "low" interest... Wes, you mentioned the interest, well one thing that you have to keep in mind is that not everyone can use, qualify, or wants to use conventional financing... I know of some very successful business people that got crunched during 9-11 and lost everything.. They are now rebuilding themselves by using very creative methods... One example is owner financing where the owner finances the property with no money down, gets a monthly payment with a very good interest rate paid to him and for taking the risk of "being the bank" will receive one-half of the profits for a specific period of time...

Deals like that are the type that Reality had mentioned when the string was started...
Have a great day and good business..

Duane
thepropertyguru@yahoo.com

one of the more creative things i've had to do recently is when the seller doesn't want to hold a note, is create a seller held mortgage, and line up a purchaser for the note even before we close, basically what most mortgage companies do.

still takes the right property, and getting the note sold can be a pain.

I'm a new agent and am currently investigating creative financing options to start my own investment business. Is there any way this string can be ressurected?

I want to determine the best type of real estate to target (single family vs. multi family — pre-forclosure vs. distressed/rehab, etc.) and a way to purchase it with COC. I need the property to pay for itself from the get-go each month and would like some cash at the table (some to tuck away for repairs, etc., that might pop up and maybe enough additional to use toward my 2nd investment property).

Any words of wisdom?

KC

I don't know if this topic is being read anymore, but Seller Financing is a great way to invest in property. And selling the note the same day in a simultaneous close is the way to go. I have done this for several agent just trying to sell the properties they have listed as well as investors. I am not trying to sell my company or anything, but if anyone wants information on how to do this and wants to make sure they have a buyer for the note let me know.

Hey Everybody...
My apologies for being out of the loop for a couple of weeks.. My wife was in the hospital and that took me shall we say "out of the loop".. Anyway.. Let's see if we can get some more people bouncing around with the "creative financing" topic... It took quite a few posts, but thiings started to wake up shall we say..

Duane

Hello all, Newbie to this site.

That last deal I did was a commercial, main street rental. I bought it with no money down (Collateralized with raw land).

I have a 10 year lease and a 5 year note with 10 year Am.

I had $20K in stort term debt that put on the note and took out an additional $20K. I ended up with $27K at closing.

Even after debt service the property is netting me 13%

Hey everybody..

Wonderful to hear... Now let's keep this post going... If it gets too long, we can always start another one... There are finally people "coming out of the closet" about deals that they have done or have seen done...

Keep it going everybody... Great information...

Duane

Well, I actually went to a bank, borrowed based on the ARV and got enough money to purchase and repair. It had an interest only payment that cost me 1 pt. above prime. I renovated, repaired and sold the property in four months (woulda been less time if I had not had to fire the first contractor). The only drawback about this type of loan is that it is credit score driven. Consequently, my score dropped a bit with this new loan on the record, so now I have to wait until it bumps up -- if I want to deal with this same bank. I could use an affordable lender which has no docs and is not tied to credit scores.

I'd really like to know which conventional lenders you are using to walk away from the table with cash in hand at closing on acquisition of an investor property.

[This message has been edited by mrmunk (edited 09-27-2004).]

Hey, Realty Check.

I am very new at this stuff. I have yet to own one piece of property, but have some knowledge to do so and plan on doing so very soon, anyway:


I've studied lease-optioning and "flipping" alot (they suit my financial situation). This would be my approach on lease optioning as a first time RE guy...

1. Go to a bank and open a $6000.00 CD account

2. Borrow against the $6000.00 dollars (100% gaurantee on loan to loan officer). The note may be what, $250 for 24 months?

3. Purchase a mobile home on land for close to $6000.00 dollars (maybe less in some parts)

4. Lease option it to a qualified tenant with a 15% option payment($900.00) up front w/ $450.00 payments monthly + $100.00 for the option and a property buy out price of, oh, $9500.00. (Lease and option agreement will be seperate)

5. EMPHASIS: late lease payments or property damage will forfeit the option to buy property (stated in the option agreement)

6. Insure tenant understands that the maintenance is his/her baby. This is their home so they keep it up (I would do periodic inspections in case this does not hold)

7. Sit back with a glass of kool-aid and a P&J sandwich and collect $900.00 up front and $300.00 monthly income minus maintanence costs (which won't be all that serious with a rent-to-own property... "pride of ownership")

8. Buy another property (mobile home)

Does this sound practical?

Anything is possible... but some are improbable.

$6,000 mobile homes are not what I would normally consider a real estate investment. Seems your method has a lot of excess paperwork and what would be unrealistic expectations on potential option fees in my area. Think you may find yourself bogged down with a couple of mobile homes which are a rapidly depreciating asset.

Thanx, Realty Check.

Good stuff. This is why I would lease option a mobile home... emotions. I perceive that some folks just want to own something. I figure that if a person rents a mobile home, why not own it? The depreciation wouldn't hurt to bad IF I buy well below asking price. The area situation is a concern because I know in VA there are really no mobiles that sell for $6000.00 but rather $15,000.00. Also maintenance is a concern... but I'll talk to you in another thread (to pick your brain) about this stuff. I want to keep the integrity of the topic going. Thanx again.

Hello all,

Great thread. I'm an agent and I am interested in investing (next year), but would like to learn as much about creative financing as possible. I've been to some investment clubs, but didn't feel it was the best place to actually sit down and learn the ropes for a newbie.

Any suggestions on a good creative real estate financing course?? I have learned a lot here, but think reading about it and actually understanding the concepts, options and how to apply them properly is an entirely different ballgame.

Any good course offerings to learn the concepts/basics?

Thank you,

------------------
Robyn Hudson
Evergreen Realty
Orange County, CA

Lots of inexpensive books available in most book stores that give at least a good outline of how to use several of the methods. I always strongly recommend you review work by several authors as most have similar basic steps but they will vary in detail.

If you want to pop for the "big bucks"... (actually not big but at about $450.00 that is a bit more than books..) check out William Bronchick's "Alternative Real Estate Financing" its Vol 3 of his series and you don't have to buy them all, you can select what volumes you want.

It is one of the better I have read and it comes with a CD-Rom with many of the forms you can use as a base for your own forms. Bronchick is a real estate attorney and a Creative Real Estate Investor himself. You also get a video and usually some tapes but they are just of his live seminars and not very professionally produced or copied. Check around... I have seen "used" copies for sale at big discounts.

For much less you can get most of the same information but not as well layed out in less expensive books by Kennedy, Conti, and a bunch of other... just don't read one and think that is the ONLY way... Many methods (tools)are available.. select one or two that fit your present needs the best. Learn all you can from several sources and create your own process using the basic building blocks you will learn from your reading.

Key point is to outline a Business Plan... know where you want to end up and develop a plan to reach that point, always adding to your Tools available so you can more effectively handle many different type opportunities.

The other Key is to DO SOMETHING... don't just read about it and sit on the fence, always wishing you would do something.

As you get a deal or two completed, look at seminars that are directly related to your interest... check them out and if they are highly recommended by other investors and in a good location... Orlando for example... attend one and make it a learning / vacation that you can write off!!!

Realty,

Thanks for the tips! I will do just that. I'm interested in investing in some income properties, but as mentioned I'm interested in doing so without the "traditional" bank.

Thanks!



------------------
Robyn Hudson
Evergreen Realty
Orange County, CA

Sounds like your going in the same direction I started in. Sub-2 on low end properties with simple repairs and resale fast or with better than average rental income and lease option for 18 months or so. As a REALTOR® it is always nice to have a second, third and forth stream of income over and above your commissions.

If you do the Sub-2, and flip a couple you don't want to hold... consider similar properties using Short Sales. You will need cash but you may be really surprised at how little you can get by on... often about 60% and occasionally 40% or so of what the existing mortgage is if you select well and have the ability to do some of the more minor repairs. These are now what I like to buy and hold long term.... I really try to never hold a Sub-2 more than about 18 to 24 months... it makes life much simpler...

Income properties should be the goal of all real estate agents. And it is really great to have a group of people give you money each month so you can "play" with it!!!!

Funny thing is that real estate agents as a hold... don't invest in real estate.....other than their own home. I think I have an understanding on why that is, but it is too sad to think about....

Realty,

Before I was licensed, I was already considering investing and I spoke to many agents about investing. Mostly questions I had and wanting to make sure that all would be okay with my Broker beforehand. The usual response I received from a Realtor was "uh...humm..I don't know about that"..."I'm not sure"..."check with your broker"...etc, etc, etc.

I was amazed as well!!! Why would anyone with the means NOT invest since that's the arena where they work? Seems strange. I'm sure some people have other investments they make, but I have yet to find many Realtor/Investors at all. I did meet a couple at a recent Marshall Reddick seminar, but outside of that, very few.

I personally have no interest in pounding the streets 100% of the time, if there is a way to pound the street only 50% of the time and enjoy life the other 50% of the time! Although I can understand a bit of the fear that keeps many from investing. I'm quite fearful too, but the benefits quickly overpower my fears! I've never had the means or even a glimpse of the means to invest before now....now that I do, I'm all over it!

Yes, income property is the direction I'm heading, just waiting on a few transactions to complete to have the cash flow to pull it off. I know I may get away with not needing a lot, but would feel more secure about moving forward with at least some money banked. I've also purchased a book on short-sales, so that should be coming soon. I guess the trick would be finding those properties and those Sub-2's.

I also receive regular listings of all trustee sales and NOD on properties, but not exactly sure what I should be doing with that information. I heard that at trustee sales, that 80% of the time, the lender wins. So, that seems like a waste.

I guess for now, while I'm waiting for the money, I need to decide the best approach to purchasing these properties in my case. So, that's what I'm researching now.

Sorry to ramble, I'm just excited about the prospect and since my buyers seem to have all the time in the world to LOOK, instead of make a decision about buying, so I have plently of time to research and learn. Uggg!

I'll let you know how things move along, HOPEFULLY SOON!!!

------------------
Robyn Hudson
Evergreen Realty
Orange County, CA

With Trustee Sales, you make your offer to buy directly to the trustee as early as you can.... often it is best to buy not only the real estate, but all personal property associated with the real estate and often all the personal property included in the probated estate. The Trustee often just want out fast and a person who offer to take it all has a major advantage... the disadvantage it that these deals are often Cash for the same reason.

NOD's these are the true gold mines... contact the defaulted borrower and see if you can work a Sub-2. You can often pick up a property's deed just by asking for it. These are motivated sellers and are looking for a way out. These can also be the best opportunity for Short Sales....

I always go into NOD's / Les Pendens with the thought of Sub-2 but as often as not... I change my approach to Short Sale... which can provide a Win-Win-Win situation for the defaulted borrower, yourself and the bank.

Study a bit on these and use the information you already have at hand to do something...

Realty,

Thanks again. Perhaps that's where I'll start looking. At the Sub-2's and the shortsales. I know the basics of sub-2's since I've just gotten out of RE school, but will spend some time really learning how to apply these methods. Sounds like it could be a good way to get something going. As I mentioned, my title company sends me NOD lists daily (there are tons of them)...I just read them through them and say "humm, interesting" and that's about it. I'll start doing some reading about that so I can do something!

Again, thanks for all your help!



------------------
Robyn Hudson
Evergreen Realty
Orange County, CA

[This message has been edited by robyn0116 (edited 10-04-2004).]

This is how I started as a part-time real estate investor holding a full-time job not related to real estate.

I purchased my home last October with a lot of cash down. Not thinking of investing in real estate at that time.

Five months ago, I purchased my first rental property - a 1580 s.f. 3bed/2bath brick home built in 2000 at $98,900 from a bank foreclosure sale. I used a line of credit (at the interest rate of Prime+1) on my home.

After renting it out, I recently obtained a line of credit (at Prime - 0.25%) on the rental property (80% of the newly appraised value of $120,000).

I passed the State Real Estate Exam in July and hung my license with a broker.

Following are my near-future plans:

Tomorrow, I will to bid on a house listed at $119,000 in a guardianship sale (a 1900 s.f. 4 bed/2 bath brick home built in 1997). I plan to pay cash using proceeds from 2 lines of credit.
If I succeed in obtaining the property, I would rent it out for $1,200 and would like to get a third line of credit based on the newest property. I would like to continue the same pattern until I own 10 self-supporting rental homes.

Today, I have also decided to buy a brand new home at a builder's presale in a new subdivision for $163,000 (a 2100 s.f. 5 bed/3 bath brick home to be completed in May 2005). The comparable homes are sold at $189,000 in nearby areas. I only have to pay $1,000 earnest money for the time being and by May next year, I would like to sell it with a $10,000 profit. I am willing to hold it for at least 6 months if I need too.

My main method will be buying newer homes at foreclosure or other special sales using available line of credits, but from time to time I would buy new homes at good prices. I think the profit from buying and selling pre-sale new homes can provide capital for buying fixer-uppers.

Please feel free to comment my strategies and I'd like to learn from the pros.

I would very strongly recommend you review your asset protection options. You are stringing properties in a higher risk methodology and if you are maintaining all these assets under your name you are at high risk of losing everything with one single problem. It is often the case with chain HELO funded purchases.

You need.../ MUST... look as asset protections by use of LLC's and Land Trust and this must be done Prior to taking title for best protection. DO NOT move properties you have already taken title to... into a LLC or Land Trust that is un-compromised. Methods do exist for you to move them to strawman title then into a Land Trust but keep them totally separated from the "un" titles... or the corporate shield would be far to easily peaced.


In general you should not hold more than a couple of properties including you personal residence in your own name. Everything else should be in a Land Trust under an LLC. These are very inexpensive to form and operate. If your holding rental properties or doing creative real estate investments this asset protection is very critical... don't ignore it. You will be a target, with out regard as to how you operate your business.

Lot of people here mentioned some good financing techniques. Asset protection is a different subject...I think discussed in other forums.

Have you been to CREonline.com or Reiclub.com? These are resources for learning about how other investors run their businesses. Some of the methods are pretty risky, but you have to educate yourself beyond their articles or presented ideas. You may also join local real estate investment clubs to network with other professionals to see how they finance their deals. The more you're around other investors, the more you will learn about how people structure deals given their goals and the seller's situation.

This is my investment strategy:

Buy my first house with 10% down. Put as much money as you can and try to pay it off the quickest possible. If you can double your payment, you should pay off the house in 7 year with a 15 year mortgage.

Once your house is paid off, you should have plenty equity. Borrow the money against the equity and pay off the second house. With the second house, you have the option to buy it cash dwon, which will give you some considerable discount. And if you are have real estate license, you should knock down another 6% commision. You can turn around and sell it for 16% more in the market. Or you can buy it and have owner finance the property where you are the bank. Hopefully the buy will sell the house in 7 years (the typical american house cycle) where you will recover 80% of your capital. Third option, you can buy it and rent it out. If you do decide to keep, put all the extra money down to pay off the loan. Because if you are a good investor, the amortization is design so borrower pays interest in the bigining of the payments. Any principle paid by you is worth a lot of money than the money you have in hand. The second mortgage will be paid of in 4 year or so because you have the money you have been put in for the last 7 years from the 1st mortgage, plus the rent/mortgage payment you collect from the second property.

Do you think this stretegy is a sound investing? It's a slow way of making a lot of money so one must have the patience.....

Howard

It sounds like basic type financing. Your ideal way of buying most property is:

1. double digit cap rate
2. purchase for at least 20% below market value
3. can increase the value by 20% within 6 months
by changing the property.

Howard99... actually your plan is almost exactly what real estate investors never want to do on investment properties. On your own residence, it can be another thing but far better uses of your available capital are available and could be used to pay off your residence far quicker if that is what you want.

A personal residence is an investment is some aspects but not as much as income producing properties or quick sale properties. You can not write off things like repairs for your home but you can 100% for your income producing properties.

Your ROI on investment properties should be far greater than most personal residences, particularly when you buy them corectly... with the very minimal out of pocket cost to you and a fast market sale or flip.

Your ROI on a personal home will probably be in the lower double digits in 3 to 5 years, while on correctly acquired investment properties... it could well be in the triple digits or what we all shoot for... infinite ROI... when you have no out of pocket but have a gain, often very attractive gains that is infinite ROI.

The real goal in real estate investing is to acquire control or ownership of properties at below market value with minimal out of pocket expense, including any repairs and marketing cost and either a fast resale/ flip or conversion to cash flow or some combination such as Lease Option, CFD's, Owner finance with 3 to 5 year balloon and others....

The key to good terms and ROI in financing is OPM.... Other Peoples Money.

I am having trouble finding some one to lend on the ARV of a non owner occupied home. If you have a lender know someone to point me in the right direction let me know or contact me off list.

If your talking about a lender willing to offer you financing on After Repair Value... Before you do the repairs.... well in general it isn't going to happen with most conventional sources or Hard Money lenders unless your deep into your out of pocket expensed to the tune of 30% or so.

Most will only lend against the As-Is value.

For non-owner occupancy your going to normally still going to have to put a large down payment.

Your going to have to look as Subprime's and expect high interest rates or some co-investors who will set rates above average and want appreciation % on sale after the repairs are completed.

You may be better off looking at the non-traditional acquisition techniques, Sub-2 or CFD or Lease Option, Lease Purchase type activities and other.

If your going Owner Occupancy, You could try a FHA 203K rehab.

Well I read through and just decided to post what I have.

2 Lenders do 100% Non-Owner Purchases. The condition of the home does come into play and the loan amount minimum is 40k on both.

1 Lender does a 90/10 (seller Carry back) that means the seller writes a note to cover the other 10 and can make money on it. This particular lender does not go on a credit score totally. I have seen a 560 mid score get it. They also allow stated income. 30k minimum loan.

I have 1 loan in house you can do 1x at 95% with no Private Mortgage Insurance.

I have business arrangements with several Fannie Freddy conforming lenders that do Rehab loans. RBC offers this as well.

1) In a nutshell if an investor has no money down they can get a home on the 100% side. Probably best to refi after taking ownership due to the rate and the fact that appraised value is then used.

2) If they have money down but not enough to rehab the home afterwards then a rehab loan is great.

3) If they have the money for both than conforming is the best route.
Options 2 and 3 require pretty decent credit and assets. Fannie Freddy loans generally do not have a minimum loan size.

Purchase price normally determines appraised value on a purchase even if the house appraises for more. So after someone takes ownership then appraised value is used on the refinance.


Hope all this helps. I have several investors that come to me after dealing with another lender and just are floored by what I can do.

Hi,

Very good topic started. Here is my plan.

Step 1. Find a buyer with at least 5% down AND bad credit. The buyer(s) would have to be willing to improve their credit and must be willing to join one of the credit repair places.

Step 2. I have them pick a house that is presently Listed on the MLS. I buy the house for them or find an investor that would buy it. If I were to buy a home, I would purchase it at least 5% under FMV. In addtion, the plan is to purchase in an area that has historically been growing (price wise) at 5% per year. I would use investor loan, 10% down, interest only with a balloon payment in 2-5 years.

Step 3. Sign a lease with option to buy agreements with the byers and taking 5% option consideration as a non-refundable option. The purchaes price will be set at 5-10% above TODAY's market value. The good thing is that a buyer may back out within 5 days and get all of their money back (and so can I).

Step. 4. Provided the buyer does not back out, collect monthly spread and then a 5%-15% profit at closing in a year or two...


I think the above is still risky, but I'm minimizing it by:

1. Buying a home that my buyer WANTS, instead of having them take one of the homes they don't mind living it.

2. 5% non-refundable option consideration incase things go wrong.


3. The only snag is that I'm buying so close to the FMV, I'm counting on appreciation. I think it is much wiser to buy low instead.

Thanks,
Vlad

1 other note for investors. If you use a lease option to buy the majority of lenders use the purchase price per the contract as the appraised value.

If they do a land contract then appraised value is used and the loan is processed as a refinance rather than a purchase.

The advantage is that you could get someone with badgered credit financed more quickly if the appraised value is much higher. You could include the debt that they otherwise would have had to pay off if they did a purchase within the loan and if there is enough equity it would just be a cash out refinance.

Hope this helps somebody.

The bad news about land contracts, however, is that you would have to foreclose a non-paying buyer, which takes a lot longer than eviction (at least in my sate - IL)

Yes you are right. That is typical to land contracts. It is not so much state specific it is more about how the contract is written. It is a bigger risk due to the censequences of non-payment. You should always have a real estate attorney prepare these so the language makes the risk much less on the seller. After all it is a huge favor to someone with bad credit. The standard office supply fill in the blanks form is very risky.

Everyone talks about how you wont really need that much money to invest with. Well, how much you talking? (lets say for a typical sub-2 or turnover home.

Where do you get the money for what you DO have to put down/repair?

Credit cards? Borrow against your house? (i heard this was not good for asset protection) Borrow against a CD? Borrow against another property? Sell the property before you buy it?

smlerdotcom... last night I did one Sub-2 and my out of pocket was 0$

On Wed I did one and my out of pocket was $500.00 and it was placed under contract for full payoff later that afternoon with me receiving a fee and commission in a double close set for this next friday.

I turned down a 0$ Sub-2 this AM... it was a mobile home and I hate them.....

Answer to your question is: It depends on the motivation of the seller and the potential of the deal and what your investment criteria is and how good your ability is in locating motivated buyers.

The lower the equity the owner has in the property.. the lower any potential out of pocket investment is for you.

Where to get the repair money.

Well, its best if you at least have that available.... but if not develop a team that would be willing to perform the work with very minimal funds from you... Cost of Materials.. with labor payoff at a marginally higher rate at sale. I often do this with upper scale properties and allow the work to be scheduled as fill in with the repairmen.

Getting a HELO is a possibility but it will place both properties at risk if you have a problem... domino effect. Credit Cards are a possibility but also a dual risk due to interest rate and overall impact on you credit. You can borrow against a CD or insurance policy and it will not effect your credit... your just using what you already have.

Technically you can't sell before you buy but if you have contractual control of the property, an option contract that can be assigned, a contract to purchase that can be assigned or the deed... you can enter into a contract to sell.. but you need to make sure it is contingent on your closing the initial sale or assignment being accepted... lots of ways to fix this problem but just don't go in blind.

Also... if your not a licensed active real estate agent you will need to be sure you are a principle in all steps of the deal and not as an agent... or it could be interpreted your acting without license.

Ok Realty Check. I hope this post is along the lines you are looking for. I did not read but 20 posts. (not enough time now but will)

I have an investor whom buys foreclosed homes and does 1 of 2 things. Rehab loan or down payment.

(He also does a home improvement company hence if there is quite a bit of work to be done he does not do rehab loans because he saves by doing the work himself rather than having the lender take out 150-200% of their estimates varies and depends on the lender)

Once they purchase they refinance and pull all equity up to 80% and places it into an investment fund. Half goes to a money market account (Liquid) and the other half to retirement. He rehabs the home and utilizes something called section 8 housing.

Scenario. Mortgage payment is 500 and section 8 is a low income housing service provided by the city. On his current homes section 8 pays 700-1000 per home and it is direct deposit on the same day or close to every month.

The Equity he pulls out is half liquid therefore he has plenty of liquid assets in the event a rehab loan is not the best option.

The section 8 housing provides a steady stream of income each month. The liquid assets help at tax time as well because he shows it to the IRS as profit.

Then.... towards his retirement years he has money set aside for that purpose and still has the 20% equity (plus appreciation) in which he can liquidate or maintain. (If he liquidates I hate to see the capital gains!!)

Does this at full force and has not been stopped.

In many cases if the property has not been owned a full year Fannie Mae DU response may say to use the lease agreement in lieu of a 1040 and schedule C since 1 full year of ownership has not occurred. Therefore an even higher profit on paper for potentially 23 months.


On a side note section 8 tends to be a bad renter and the owner in most not all cases may have to pay the repairs. There are codes you have to meet and you have to maintain the home per their codes.


Or

You could try and Land Contract or Rent but the payments from section 8 are direct deposit. You can bank on them being there. With these 2 options it is hit and miss.

Thought I would share. Hope it is a response you were looking for. If not let me know and I will just delete.

The post is fine.. leave it..

The intent of the string was/ is to get agents thinking "outside the box" of only having traditional financing methods.

As agents gain knowledge on alternatives available, they can make more sales. If their is a will to buy or sale... their is almost always a way.... problem is the many/ most don't know them.

String Length isn't a problem... it just keeps everything easier to find than searching dozens of short strings for those who want to see different opinions on the topic.

There is a lender by us that does "investor" loans.

They will loan the money for the house and however much they want for repair money.

The repair money is cash.

Who would give such a loan? not many. Thats why they have private investors who buy them.

Whats the cache? Unless your a big hitter and do a lot of work with them closing is 30-45 days.

7.5k-9.5k closing costs.

15+% rate.

Mortgage, repair money, and closing costs have to stay under 60% appraised value.