Posted by HR on March 11, 2000 at 01:20:36:
First, I agree that if he sells with lease option, owner financing, (or owner financing with paper discounted and sold) Senator can turn a “single” into maybe a double or triple. We agree.
You are also correct that Senator deserves praise for having done the deal to begin with. I agree that not all deals are “home runs”, and that even a consistent set of singles and doubles can fashion a nice, profitable income stream. Senator, as you noted, did find the deal, negotiate the deal, structure the deal, etc… Most importantly, though, he DID THE DEAL. For that he deserves praise; you are absolutely right.
My only disagreement with you appears to be a style issue. You don’t like to comment on deals unless you have all or most of the facts; I’m not afraid to comment on the information I am given. We have a style difference. The net effect is the same, though: information is shared, and we all may have learned something. Let’s just agree to disagree in our style differences; to each his own.
Since it is my “style” (lol) to make comments based on the information given, I will stick my neck out, Doug, (as is my style) and tell you this: I strongly suspect Senator has none of the back end strategies we discussed. Look at his posts.
His lead post is that he “finally has done a no money down deal.” No money down is a term not exclusively associated with CS, but it is heavily associated with him. This is also the CS newsgroup. It isn’t a wild assumption to begin assuming Senator has a buy and hold strategy on this deal. Next, when proded to give more info, he reveals more details about how he acquired the property. What sticks out in both posts is the negative cash flow, and then his desire later to refinance it.
I strongly suspect Senator wants to keep this deal as a short term (and probably longer term) rental. If these set of assumptions is correct, I submit to you that this “deal” ain’t much of a deal.
The negative cash flow is a problem. So, for me, is using the home eq to get into a deal that doesn’t free up my home eq within 6 months. We both know if Senator had the other back end strategies to begin with, he super-likely would have commented on them from the beginning; you don’t share the profit on a deal and forget to tell how you are going to get there. I’m reasonably sure (and comfortable in my assumption) that Senator intends to buy and hold.
So what’s the net effect from our discussion? If Senator looked at this deal as a buy and hold, he 1) may have learned how some others with more experience than he runs the numbers; 2) He has some excellent ideas in how to turn a single (or a strike) into a double or triple, given some other exit strategies; 3) this discussion proves the importance of continuing to educate oneself about other investment techniques so that you can take what you are dealt and naturally turn it into profit using one of a number of different strategies (instead of trying to cram all deals that come your way into one or two cookie cutters); and 4) this discussion, yet again, highlights what makes this website so valuable: real people can comment on real deals so we all profit more in our investments.
My only wish is that Senator would post and fill in some of the details. Then we both could have some hard data to run off of.