OfflineDean or anyone else.....
Hey everyone, my name is Ben and in just one week I have found two great houses by FSBO, in the nicest neighborhood in my area at great deals. Both are very motivated sellers and really really want to get out of their houses. I could buy both of these houses and have positive cash flow but I was wondering what avenue of financing I should take. Dean, I know you watch these boards and your a finance wizard - any ideas on what I should do? The following is the email I sent to CBR....
CBR,
I know what you mean, there are two houses that I would love to buy - and I have only been at this for over a week. Question is how did you do your financing? I have never owned a home and have good credit so on one home I can buy with 102% financing. This home I could get for $235k at about 30k below market value and rent it for about $1900 a month - its a SFR. The other home was offered to me way below market value with no down payment and owner financing. This house is probably $100,000 below market value and is essentially a tri-plex but a beautiful old home with a need of a few touch ups, but could rent at about $1700, or $2300 without me living in it. The only question is - can I buy the one house with no money down, then use the equity out of it to pay 10% down on another property - the only financing I could get with investment property is 7% and 10% down. I would have to cover the equity finance from this house with the rent net from the next one. Then take the equity out of that house, and so on and so on. I would definately have to get mortgages that were "unseasoned". How did you do your financing? Also, how have you been finding REO houses at such good deals? Most of the REO lenders in my area have sent their houses to realtors and its hard to find good deals. Thanks man, your a great inspiration.......
Ben
Ben, you mentioned that the sellers really want to get out of the houses. Why? Do they need cash out when they leave? Is there any equity in the houses? I think the first question to find out when you go look at a house is what is it that the sellers want and really need (I do not mean to ask them first thing, but after you have talked awhile and have some repore with them). This will lead you to your financing answer. Such as: Will they entertain you assuming their loan, will they let you lease with an option to buy at a later date and sublet/rent to others while you are leasing? If they have equity, do they need it all now? Would they carry a second for the equity with no or a small down, can the down be spread over 12 or 24 months. It really goes on and on.
Bill
Bill,
The first lady is in poor health and wants to move back to Florida, she wants out really bad and owns the house outright, free and clear. She offered me owner financing with no money down and would finance me with 6.5%. The second lady is divorcing and is wanting to move back to Asheville so she can be with her kids. She offered me an offer of $235,000 that sh eturned down several months ago - I got this info from a realtor. I have not asked them about the lease - sub-letting option. The owner finance deal is a good deal. I can get one with owner finacing with no money down, and the second no money down beacuse its my first home.
They are both very good deals. I would either re-assign the properties or find a Lease Option Buyer to make some profit from these deals.
Ben,
Although these sound like great deals I need you to slow up a minute and evaluate each deal based on what your exit strategies are. IF you review other posts on this site you will see advice to get comps from three different sources (tax records, realtor's, internet sites) to determine the value of each property. Do this as well for rent rates (look for signs in area and call on them, go to rentometer.com and put in the address to check rents, call a management co) if you intend to rent or lease them out. Look at your options for each property and see if hold and sell later makes sense or wholesale them off today. Don't forget to check on taxes, insurance, lawsuits, liens, etc (talk to a title co). I would look at each property from several angles. If you are going to wholesale check the paper for I BUY HOUSES ads and call and discuss what areas they are looking for, what they might pay (do not give them an address or area until you have the property under contract), check your local REI club for rehabbers, run a ghost add and see what you get for renters or handymen.
At the same time do not get cold feet, remember there is a deal of a life time everyday.
Bill
That was very good and very sound advice. Ben please take it and in the mean time know that you do not have to feel rushed. Take your time and make sure that this is for you.
Anita
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