Letting a good deal go - Posted by Jeff

Posted by Matt G on December 28, 2004 at 12:22:05:

Ed-
I agree. What I see so often however is that “newbies” are so sold on the no money down concept that they have to understand they have to make it on the “potential” upside. It also comes in to “schooling” the buyer that you have to give up cash flo for no money down.
I really appreciate your insight.
Did you get my message regarding "Western thrift and Charter one, Ed lizinski,a nefarious crooked dealer. My broker friend just got had by the him.
What I don’t understand is how can my friend and Western thrift are on the application,yet Western thrift paid Chater one?? My friend had a contract with Charter one as an associate of Western Thrift and represented Western Thrift? This is very confusing? Mr.lizinski, was terminated in Nov 04 and failed to pay my friend. her and her husband have 5 children.
Any advice would be helpful.
Best Regards,
Matthew

Letting a good deal go - Posted by Jeff

Posted by Jeff on December 28, 2004 at 09:22:54:

I think I am going to let my first “deal” go due to financing/weak rental market. I just can’t make the numbers work. The property is worth $135 and I can get it for around $112 with a $4k fix-up allowance and 2/3 closing costs paid. However, rents are lower in the neighborhood than I thought, at around $800-$900 (I was hoping for $1,000, but not realistic) for a 3/1. My payment with 100% financing would be about $815 a month. Can’t seem to get better than that and who knows how long it will take to find a tenant. Already frustrated with real estate investing. Maybe I’ll stick with what I know, stock/bond market investing…

Re: Letting a good deal go - Posted by dave

Posted by dave on December 30, 2004 at 15:16:07:

it’s not real estate, it’s the deals you’re spending your time on. this deal rated about 10 seconds of time spent on evaluation. there’s no money here

Letting Go/100% Loan - Posted by Nocci01

Posted by Nocci01 on December 28, 2004 at 20:57:43:

Letting Go: before you do so, how about an adjustable rate mortgage? Some lenders will allow an interest only payment on up to 80%LTV (loan percentage of purchase price) and some are even allowing the other 20% second lien to be interest only now. My friend in Dallas recently refinanced a condo that he owns into an interest only ARM that doubled his cashflow from $300/mo. to $600/mo. Maybe this is higher than what you can get but an ARM might be the solution until you can sell the property or collect higher rents. Maybe you can add an additional bed and/or bathroom if the city/HOA/deed restrictions approve to improve your value and monthly rent. Either that or keep searching…don’t expect to be successful by looking at a few deals. You have to keep looking. Be creative! That’s what CREOnline is right?

100% Loan: A different friend of mine bought a rehab for $55,000 and got funding for $98,000 (includes the purchase price, $30,000 funds for repairs, and $13,000 for all closing costs including insurance and escrow accounts). His home is now appraised for $141,000 and he has a $300/mo. cashflow. Even his earnest money and appraisal fee were given back to him at closing. Now I’m no rocket scientist…but if he put no money into this deal and walks away with $43,000 instant equity and a $300/mo cashflow…ooh…I’d trade that for stocks or down payments any day! Even if it were only $10,000 equity and $150/mo cashflow!

Ed,
Your advice is a good idea. I’m not against it but I do know that not all beginning investors like to flip. It just depends on how you want to run your business. It’s much like stocks, you can be a day trader or a long term investor…or both. Real estate investors can do the same thing exept real estate isn’t liquid. Some people like to sell rehabs, buy wholesale and flip for a profit, some like holding property just for the monthly cashflow, and some want to wait until the appreciation and amortization kicks in. I hope this hasn’t offended anyone. They are just my opinions.

Re: Don’t lose any sleep… - Posted by Ed Garcia

Posted by Ed Garcia on December 28, 2004 at 10:17:34:

Jeff,

I?ve got some good news. Don?t lose any sleep about your deal.

When you said that (I just can’t make the numbers work.), that say?s it all.

This business is about number crunching and the numbers tell us if we have a deal or not.
For starters you don?t know how to figure a deal.

When you said (The property is worth $135 and I can get it for around $112 with a $4k fix-up) using your numbers on a good day, your LTV (loan to value) is only 86%, and that doesn?t include financing fees or holding cost. So in the end you?d be over 90% LTV.

In addition, when you figure your Cash Flow, you take your purposed rent, lets say in your case it was even the $1000 that you were hoping for.

You take the market rent, which in your case is $1000, and subtract 25%. The reason you
subtract 25%, is this is the generic figure lenders use to cover taxes, insurance, vacancy,
and expenses, on a property 1 to 4 units. Taking 25% off of $1000 leaves you $750.
You figured your mortgage payment to be $815 per month. That would give you a $65 negative cash flow. So even getting the rent you wanted the numbers wouldn?t have worked.

I hope this post has been helpful to you,
Ed Garcia

Re: 100% Loan on NOO Investment - Posted by Matt G

Posted by Matt G on December 28, 2004 at 10:12:30:

Jeff-
all things equal.what can you expect from a “0” down investment? Basic investing means “a return on your investment” the 100% investor has to look at longer term goals 3-5 yrs with the home value to create his/ her return.

Re: 100% Loan on NOO Investment - Posted by Al Rodenburg

Posted by Al Rodenburg on February 11, 2005 at 10:45:01:

See www.mortgageoffice.com for information on 100% investment (NOO) property loans. Each investors looks at it differently. Al

Re: 100% Loan on NOO Investment - Posted by Ed Garcia

Posted by Ed Garcia on December 28, 2004 at 10:40:37:

Matt,

Sorry, but I don?t agree with you. In real-estate, a good investor makes their money on the buy. Down payment or investing money in a deal is irrelevant to the deal.

Jeff could have put money into the deal, and it still would not have made it a good deal.

Yes, you can pay cash for a property and get a tidy return, but then your evaluation of the deal would have been cash on cash return. If you had given me that same cash, I would have purchased property on leverage, and got you a better return on your cash 10 fold.

When doing a deal, we make our money on the buy, and it must cash flow.

The old philosophy, was to buy and hold. It?s still a good philosophy if you pick and choose the right properties to hold, such as commercial properties,or properties with up-side, which by design are to make a return.

Today for most of our Creonline investors who come in the business with little or no money, they need to learn to be masterful at flipping. They need to learn how to buy, fix, and turn deals. They are now Real-estate investors who are now conducting their real-estate investing as a business.

The new philosophy is a quick nickel is better than a slow dime,

Ed Garcia