Tim,
There is nothing wrong with buying low and selling high. Who is taking the beating here? If a homeowner is behind on payments and can’t get a loan, where else can they turn? They can either file Bankruptcy, which doesnt always stop the foreclosure or they can work with an investor. You have to remember that equity is nothing but a pipe dream. When you rehab you are creating equity. Did you steal the previous owners house and fix it up only to profit? No you didnt, you helped them get rid of something they couldnt deal with themselves. Someone is going to make the money here and if you feel guilty about that, then this business may not be for you…
How many folks go to prison for these deals? - Posted by Tim Slape
Posted by Tim Slape on February 14, 2004 at 24:45:59:
Is a lot of this stuff borderline - at best? I’ve been building, buying, renovating and selling houses since 1977 and have yet to see a deal that paid me money at closing (when I was the buyer) AND let me retain a clear conscience. I’ll be the first one to admit that I’m not the sharpest note on the scale, but I AM committed to honesty and christian values. Tell me with absolute sincerety that this is clean business and not “just bidness.” If I have to skin old widows and dupe dummys out of their life savings in order to work these systems I believe I’ll pass.
1st one was from another investor who wanted to get out of the home. sold it to me at $250,000 apprasied at 350,000. Got a loan for that. He then disburesed fund into my corporate bank account. I used about $25,000 for fix up and closing cost.
2nd: There is another investor who buy’s discounted properties from builders. these are brand new homes. The spread is any where from 70,000 - 85,000. He takes 10,000. Closing cost 6,000, 10%down & NO FIX UP.
I clear around $45,000. The funds are disbursed into an investors business account the he disburses the funds to the other investors businesss accounts. Never a personal accounts.
Again these are borrowed fund so they end up getting paid back at some point. The way I look at it is the you realize your money at the front rather then the back end(when selling the proerty)
I will be the second one to admit that I’m not the sharpest note on the scale also but I do know that yes you can walk away with lots of cash at closing when indeed you are the buyer without ripping anyone off. It is simply cashing out some equity from the property in the form of a mortgage.
I’m grateful for the reply, but I’m having trouble understanding it. Who is the “he” that is disbursing funds here and there? Let me try: In scenario 1, you got a loan for full LTV of $350K and the seller then gave you back $100,000? I’m no Prosecuting Attorney, but I’m pretty sure that’s a felony.
In scenario 2, what role do you have in it? Why are there seemingly so many people involved in it? Where are you finding builders who are wholesaling new houses right and left? This doesn’t make much sense. Nevertheless, thank you for the reply.
To clarify? this is borrowed money that you pay back to the bank, on a monthly basis, and you are hoping that you get at least 1-2 months payments in equity cash in your bank account to give you time to either sell, or rent it out, and renovate it if you have to? Am I catching on? The only unconfortable thing to me would be spending any of the “borrowed money” on anything but the property or paying any intrest on it that is higher than what I could turn around with it in another investment besides the property. When I bought my home on my VA loan benefit with zero money down. The state of KY has a first time home buyer benefit to pay the first 2% that is required as long as your house is under 140,000. I got a few hundred back in closing because of the overestimated closing costs. But I understand that this is money that could have been left out of my mortage financing that I eventually have to pay back, is it basically the same thing? I guess the troubling part to me is, when I get cash back at closing, does the bank have to know that it is to renovate the property or to make the first few months mortgage payments?
Builders have to start making payments once the house is built. This includes taxes, insurance and the note. We buy 4-5 at a time for a discounted price turn and sell to investors who then L/O them out.
By law a buyer is not able to get cash back at closing but a corportion can which can be owned by the investor.
4 years ago before the big upswing in the real estate market I bought several properties from the VA. As an investor they required me to put down only 5% and they would set up the financing at great terms. Nevertheless here is an Example: One property was worth $100,000 in move-in condition. The only thing it was not in move-in condition. The VA was asking $70,000, I offered $76,000 and won the bid. I knew I had to put a few thousand into it to get it into move-in condition. My down payment was under $4,000 and $4,000 for fix-up. Ok, say $8,000 total went into this deal in which I borrowed from another property I owned. So far I know I am making at least $20,000 off this deal. My options were:
(A) After I close and fix it up I can sell for a quick $20,000 profit.
(B) Refinance for a new first mortgage at 95% loan to value which = $95,000 therefore keeping the property, pay back the money I borrowed for fix-up and down payment and after all that I can put $15,000 in my pocket and still own the property. OR do nothing but:
(C) Rent it out for $1,100.00 per month.
This is what I did: Since my total payments were $700.00 per mo. which included principal, interest, taxes and insurance, I decided to rent it and put $400.00 after expenses in my pocket each and every month.
Now when you think of it I made money out of thin air and it keeps coming in automatcally every month like(auto pilot) Had I took money out of my savings and lose that big fat 2%APR the banks gives me and use that for the down payment and fix-up my APR would have been 60%.
$400 per mo x 12= $4,800
Investment $8,000
4800 divided by 8000 =60 percent (not bad)
Ok, 4 years later, still renting but for $1,450/mo and the property is now worth $200,000. I have several just like the one I described.
Today my options are greater. Should I refinance?
continue to rent? or sell, retire and live somewhere tropical
Retire? Nay! Too young.
I refinanced for a lower rate for 15 years. Continue to collect rents, enjoy the tax breaks and will start thinking about retirement maybe in about 5 years.
I’m only 47. Real estate is the only way out of the rat race unless you have a rich uncle or hit the lottery.
But you cannot rely on those things. You need to do it yourself. Just Do It!
Re: English isn’t your first language then? - Posted by roger tx
Posted by roger tx on February 15, 2004 at 22:51:41:
my goof/////your still blowing smoke, i know 13 techniques by C.S. and more by other authors of whom i have purchased programs.
you can buy C.S. program on e-bay, I think,vidio titled,How to get cash at closing(when you buy real estate).
Re: How many folks go to prison for these deals? - Posted by Tim Slape
Posted by Tim Slape on February 14, 2004 at 22:40:48:
Tony, you’re reiterating what I originally stated, sorta. I’ve bought a number of distressed properties at significant discounts, but in every case I had to put down a little, once only $500 but always something and I’ve NEVER got back money at the closing of a purchase. I get my money at the closing of the sale, like God meant for it to be ;-p
Look, I’m wiiiiide open to pocketing money at a (purchase) closing, but not if it involves skinning a poor widow. I’m hoping to provoke someone to explain to me in simple terms how to go about buying a property with no money, and in fact getting a pocket full of money for the effort without driving a single nail or dipping a brush in paint and withoug ripping someone off. That’s the part I don’t get… But I’m with you on “the only way out.” I’m 46 and it’s time to move. I’ve made some good money with single family houses, but just don’t have the nerve to go full time on it.
Forgive me, but what is it w/you and “skinning poor widows”???
You seem to have done well the way you’re working (or have worked) your business - that’s fine and dandy, but there’s no need in twisting things around. People may call it what they will - I too am not involving myself in a “take from someone and not have them benefit as well” program. Being honest is the only way that I want to do business, but sometimes, I think these strings of messages get way off the main point after about 10 or 12 postings to who knows what was the original message…
Tim,
A simple example of money at closing is to identify and make an offer on a property which is UNDER VALUED. Once the agreement is signed contingent on you getting the loan, you…get a loan; A loan for a few dollars more than the selling price. This is perfectly doable when you appraise the property and it shows it’s worth more than you are offering. The bank won’t argue the appraised value of the house. At closing the seller gets his money and you get the house plus the extra cash. It’s like refinancing on the front end (initial purchase) based on the equity in the property. If you refinance after you purchase to tap the equity you have to pay points and closing costs again. It’s not brain surgery.
So now a question to you…Where in the bible does God say one is suppose to only receive property at closing and not cash also?
TM, thanks for the reply. So this is the typical scenario when someone talks about “cash at closing?” And lenders routinely go for this? What kind of lenders - banks, or non-traditional sources (hard money, etc.)? I hope my ignorance of such matters isn’t annoying; every property I’ve owned I got the same way - negotiated a price then went to the bank for that price. If this “cash at closing” thing is de riguer, I sure have done it wrong considering I bought the last three houses for around 50% of market value and then restored them out of my pocket, or on credit cards, etc. Do traditional lenders make loans based on the ARV (is that right - After Repair Value)?
Bible? ;-p I don’t think the Holy Scriptures take a stand on such specific matters…
First of all, if all you do is pick them up when they are beaten up, then yes you may have to come out with cash at closing. You are basically buying and selling real estate, looking to create equity or get instant equtiy from your purchase.
The only way to create equity elsewhere and never use a paint brush is to devise a system that creates cash from other areas. I will say however, that all of them take work, just like rehabbing does. A good investor will be doing 2-4 deals a month. The profits could be the same or more from doing a rehab. No money down eh? Yeah, take over financing or use someone elses money. Either way you are going to pay for it in the long run. I personally think there can be a lot of money in REHAB, but I just dont have the desire to do that. I focus on nice neighborhoods and nice properties…Little fix up except carpet and paint…
I have never scammed anyone yet and I am also a Christian.
The way I rehab, it’s a bit of a longer term commitment. I suppose if I didn’t live in them it would go faster… I was trying to dilute capital gains. But at best you won’t turn a rehab around in less than two or three months unless it needs the most superficial of repairs, and then it’s unlikely to be on the market cheap. Like you, I’ve focussed on the three Ls of real estate in the past. I think I’m ready to look for some volume now, though and may have to lower my standards.
But I’m still fuzzy on this. If properties in marketable condition are being purchased for significantly below market value, the owner is taking a beating - how else can it be? I’m just not getting it, and I’m too cautious with my money to plunk it down on one of these expensive courses when I can’t fathom how it can work. My granddaddy always said “something you get for nothing is usually worth it” (i.e. real estate for no money down)and in some cases something you get for something is worth nothing too (costly get-rich-quick schemes).
Now if someone wants to get in with me on buying and rehabbing in central Arkansas, I can sink my teeth into that. The worst I’ve ever done is to double the value of a property I bought. With my eye for decor, I should be gay. An S&L used one of my rehabs as the venue for it’s tv ad shoot.
Posted by Carrie-Oh on February 16, 2004 at 22:32:30:
You can basically “broker” deals. Real estate agents make money with “no money down”. This is one way to do it. Buy Ron Legrand’s course on e-bay.(Not familar with Sheets)Don’t care for Legrand’s style, but he does explain it. I can actually see how I can solve a desparate sellers problems.