Posted by Jim on August 16, 2007 at 06:15:43:
I think you are correct for the most part. Sub2 would require capital for reinstatement. Conventional financing will too now with 10% down if you want a rate that you could hope to cash flow at…
Dont forget seller financing or wrap around mortgages in situations where your seller is not in default.
Find, Fix, Flip, and FLOP! - I’m melting… - Posted by Michael Morrongiello
Posted by Michael Morrongiello on August 13, 2007 at 15:44:38:
A day of reckoning…
Many Find, Fix, Flip investors (the “we buy” crowd) are in for a rude awakening this week as they find that the prospective buyers for their fixed up homes no longer can readily obtain financing to purchase their unsold properties except under the most favorable of circumstances.
This will be a bitter pill that many of them will have to swallow.
More and more lenders will be shutting their doors as loan volume wanes and their bloated staffs salaries must still be paid.
Many so called “liar loans” or stated income loans will be come a thing of the past as borrowers will be forced to do something that for the last several years became foreign- and that is rather unique; THEY WILL HAVE TO DEMONSTRATE THEIR ABILITY TO REPAY THE DEBT THEY TAKE ON…
With the securitization marketplace in a liquidity crisis, lenders are virtually shutting down the spigot of “easy money” that was readily available just a few short weeks ago. The simple reason; the securities being generated with these non conforming loan pools are being rated as “JUNK” - and as always there are fewer takers for junk at any price.
Thus, if loans cannot be securitized (or better said, the securities cannot be sold as easily as before) - the rate of return to attract investors for such “junk” must become more attractive or go up. This will filter down throughout the loan industry and also affect seller carry back notes as well.
What do you think is going to do to the already fragile housing market and prices…? Answer- expect further SIGNIFICANT declines.
If you now must sell- and your prospective buyers can no longer easily obtain financing - what to do…?
Well for starters - its is my belief this market will get worse before it gets any better. The return to where is was is an non event that will not happen in the forseeable future. So if you really need to sell you may wish to take a loss today and lick your wounds. Some may have to come out of pocket to pay off some of their existing debt throwing back some of the profits they earned over the last several years.
Lease - don’t sell - get tennants in place and collect rent to offset your debt service and other expenses and wait out the storm.
If you must sell in order to definancing existing debt or stop negative cash flow - consider selling and owner financing the sale by stepping in and becoming your own “sub prime” lender.
Do what you can to sell and make a deal work. Get as MUCH down as you can, and finance at the highest interest rate you can make work between you and your buyers. Learn to utilized a “wrap around” type financing device which will allow you to collect payments from your debtor and continue to make payments to your lender on the underlying debt.
Just a few options to ponder… while that asprin takes its affect.
Best to your success;
Michael Morrongiello
Author of the following home Study courses;
Unity of Real Estate & “Paper”
&
Paper into Cash- the Convertible Currency - How to create marketable Real Estate Notes
Re: Find, Fix, Flip, and FLOP! - I’m melting… - Posted by Humberto
Posted by Humberto on October 08, 2007 at 08:39:25:
thanks for the tips on fix and flop.
Forget the Cheese, Just Get Me Out of the Trap - Posted by Tom Henderson
Posted by Tom Henderson on August 18, 2007 at 09:07:03:
Mike,
I agree the “market” is going to get worse before it starts to stablize. Your entire post is full of wisdom, but I am going to address only one point. LICK YOUR WOUNDS or take your loss and move on.
There is an axiom in investing that states the goal is to maximize profits or minimize losses. I like to call minimizing losses as “FORGET THE CHEESE,GET ME OUT OF THE TRAP”. Many rehabbers whose exit strategy was to sell to subprime borrowrs are starting to realize the rules have changed. They are further dismayed when they discover that note buyers are not going to be the subsitute for subprime lenders.
All problems look better when they are “in your rear view mirror”. The further away you get, the smaller the problem becomes.
If as a rehabber, you have to sell your note with just enough money to payoff your hard money loan, my advice is to do it NOW and move on. And as you so aptly suggested, GET AS MUCH DOWN as you can. DEMAND more money down, or be prepared to take back seconds, take personal property, or sell partials, or do anything to get rid of your property, including taking a loss. (Been there, done that)
Circumstances are changing daily, not only in the real estate industry, but the entire economy. Knowing your options, and taking the best one, even though you might not like it, is what makes investors successful.
Tom Henderson
H&P Capital Investments LLC
Re: Find, Fix, Flip, and FLOP! - I’m melting… - Posted by Jim Culler
Posted by Jim Culler on August 15, 2007 at 15:56:18:
Lease purchase is a great option for an exit strategy if you dont have to cash out right now.
We are still closing stated income loans on a regular basis. The only difference is people actually need to put money down in order to qualify now. Thats not to say that 100% stated is not available for Owner Occupied property anymore. It just comes at an expensive rate.
Re: Find, Fix, Flip, and FLOP! - I’m melting… - Posted by Peter
Posted by Peter on August 15, 2007 at 20:58:58:
Hello Jim…Lease Purchase sounds like a good exit strategy, as you mentioned if you don’t have to cash out.
If one is limited with capital I can only think of
the following ways to exit with L/P with limited capital. Seems like b and d would require less capital nd risk. Any thoughts? Thanks.
a. take over Sub2
b. L/O from owner (sandwhich lease)
c. buy with conventional financing
d. use credit partner to purchase property