Thinking out loud... (long) - Posted by Bryan H (ny)

Posted by Mark-NC on July 11, 2001 at 07:57:08:

I am originally from that area and have since moved to NC. 5 years ago. One thing I can tell you about Binghamton is you shouldn’t have any problem at all picking up properties. The hard part is going to be finding qualified buyers should you decide to sell. But all in all once you figure the Market out I think you should do very well.

I think you did the right thing by Getting Bronchicks course because I feel that you will probably end up with alot of “subject to” deals in that area.

If you feel you don’t want to be a landlord on your first deal, Don’t! However don’t let the deal go, you may be able to put a contract or an option on the whole package and wholesale the package for cash to another investor in the area that has or wants rentals. In fact if the numbers are good I can give you the name of one guy that would be very interested in them.

There is another frequent poster on this Board Named Brian Renfrow. He is from Norwich NY. He may be a great contact for you. Brian is very helpfull and Good guy to Know. You can search the archives for some of his posts under BLRenfrow.

If you need help post the details of the deal. That way we may be able to give you an idea of what might or might not work on this deal.

You will need to find out fair market value of each property. You will also need to find out. What type of neighborhood is it in? What are the current rents? Do the properties need work, if so how much? If he is willing to finance what type of terms is he offering? Are they all rented now? How much does he owe on them or does he own them free and clear? If he does have underlying financing what is his payment amount? These are just a few questions that would need to be addressed to make a decision.

Or if you like you can contact me I may be able to steer you in the right direction.


Thinking out loud… (long) - Posted by Bryan H (ny)

Posted by Bryan H (ny) on July 11, 2001 at 02:43:47:

I’ve been tempted by REI for about 6 months now. I’ve read Sheets’ course and have been reading this board for about a month. I should be recieving Bill Bronchick’s “Land Trust” in a day or two. I’m the type that can easily suffer from analysis paralisis, so I figured I’d better just do something and worry about the consiquenses later.

I just started running my ad, basically just to see what kind of response it would get. It’s been out for 10 days and have been getting about a call every other day. 1 potential buyer, 1 checking it out for her daughter, a couple of them not yet motivated. I haven’t been too impressed with the results, but I think they’ll become better w/ time.
I talked to a seller tonight with 6 properties (14 units total) he wants “nothing more to do with”. I’m not sure he has the right motivation level, but I agreed to meet with him Thur. to see what we could work out. I didn’t get into much detail with him on the phone because I was at work. I did explain that I specialize in assuming payments from sellers and make my money by reselling with owner financing. He told me he has owned the props for about 10 years, is experiencing failing health, and his wife is nagging him to get rid of the properties (he hasn’t listed them yet and expressed concern over the realitor’s commission). From our conversation, he doesn’t seem very attached to his equity. He also seemed open to the idea of just getting rid of his payments. I’m sure in the end, he will want some of his equity. I also explained to him that we may be able to create notes and sell them off at close to face value as a means of getting some of his equity after he brought up the subject of selling notes.

The big problem I see with his properties (without finding out the details) is that all units are leased. This means that I would have to hold the props and be the landlord. This is not my intended starting strategy. I want to do sandwiched “subject to” deals to minimize my involvement and risk. But I don’t want to pass on the possibility of starting my investing off with a bang.

My questions:

  1. After 10 years, what percent should I expect him to have paid down his principle?

  2. Was I correct to tell him that we may be able to create notes and sell at close to face value?

3) If I like what he has to offer, I know I should tie everything up with a contract and work out the details later. But I don’t have a contract and have no idea what to put in it: how specific do the purchase terms and price have to be spelled out, does money need to change hands to make it binding, what are good escape clauses, etc.? Would anyone be willing to share thier contract with me along with an explanation of it?

  1. Who else has had the chance to start off ‘big’ like this with properties you intended to hold and rent? Did you take it? Did it work out for you? Was this your intended strategy?

I think in the end, I’m wasting my time with this because I just don’t like the idea of assuming the risks of lanadlording until I have the money and experience to deal with typical rental problems. Plus, I know that I don’t understand the details of the many possible types of deals in order to give a convincing sales pitch. I think I might be able to pass these properties on to my dad (who already has a couple rentals) if I work out the deal, so I’m going to try to figure out a deal if for nothing other than the experience.

BTW, is there anybody experienced in or near Binghamton, NY? I’d love the chance to pick somebody’s brain in person.

  • Bryan

Re: Thinking out loud… (long) - Posted by JohnBoy

Posted by JohnBoy on July 11, 2001 at 08:15:17:


You said you have read the Sheets course. I’m assuming you have the course then? You should already have a contract to use that comes with that course to get the property tied up under contract.

You then talk about wanting to do sandwich subject to deals. I think you meant you want to take over properties subject to and then sell them on a L/O or contract for deed? Doing a sandwich subject to would entail taking over a property subject to and then selling to your buyer by letting them take it over subject to. Not that you couldn’t do it this way, you just need to do it properly to protect yourself. That means if you were to allow your buyer to take it over subject to from you, you need to make sure you get a release of liability signed off from your seller to release you from your obligations to him. Otherwise you remain liable to the seller regardless of whether your buyer was to keep paying or not. Once you let your buyer take over subject to they would then own the property leaving you in the middle with no ownership rights and still responsible to the seller under your agreement with him. This why you would want to get a release.

If you take over subject to and then sell on a L/O or contract for deed you remain in control of the property by retaining legal ownership until your buyer pays you off.

If the seller is concerned about paying a commission to a realtor then this usually means one of two things. He either doesn’t want to give up any of his equity which means he’s looking to get it all, or he doesn’t have enough equity in the property to cover the commission. If he’s looking to get his equity then he doesn’t sound motivated. If he doesn’t have the equity then this could be the ideal subject to deal.

As far as how much principle will be paid down over the next 10 years, you would need to read the mortgage and note he has on the property. Go by the origination date and run a amortization schedule based on the loan amount and interest being charged. Subtract the number of months he has already paid on the loan to see where his balance is now and then run down the chart another 180 months to see where the principal balance would be in another 10 years from now.

If you’re plan is to sell these with owner financing then why do you care where the balance would be in 10 years from now? You don’t want to carry the financing that long with any particular buyer. You want to keep your financing for short term periods to avoid having to foreclose against your buyer in the event they default on the payments. If a buyer doesn’t pay you off within a year or two then you can rewrite a new contract or start over with a new buyer. Keep the contract with your buyers short term.

If you plan to create notes to sell at closing you are going to have to qualify for them just the same as you would getting a loan from the bank. If you’re willing to put new financing in your name then why bother when you can just go to the bank and get your own loan without any one having to take a discount on the note??? Keep that discount for yourself by reducing that amount from the purchase price and save yourself some money. If you can’t qualify for a bank loan then chances are you won’t find a note buyer that would be buy the note from the seller since you will be the borrower on the note. If you did find someone to buy the note the seller would have to structure it at a higher interest rate and take a steep discount on it. That’s assuming you can’t qualify for a traditional bank loan.

As far as holding these for now as rentals, how much time is left on the leases? You also said he claims to be tired of these and just wants rid of them. It may be because the tenants aren’t paying the rents on time or may be behind. If that’s the case you can evict them in the near future since chances are they will be late paying you also. Another option is to approach the tenants and see if they would like to own the property instead of just renting and sell it to them.

If the leases only have a few months left on them it would give you time to market the property for a buyer while the tenant continues to cover your payments while paying rent. Just tell them you won’t be renewing their lease because you’re selling the property.

If they have 6 months to a year left on the lease then you will just have to honor it until it expires unless you were to work out a deal with the tenant to buy the property from you. If they don’t have any cash for a down payment and if they have decent credit they could get a signature loan up to $5k from a finance company or they might be able to borrow it from a relative or take a cash advance against a credit card.

As far as what to put into your contract to tie up the property while you figure out your options, what ever it is you need! What do you need? That’s what you make the contract subject to, verifying and approving of the things you need to check out.

Do you need some time to inspect the property? Then a subject to buyers final inspection of the property by such and such date clause would be something to put in the contract.

Will you be obtaining any financing? Then a subject to buyers obtaining favorable financing subject to buyers approval clause would be something to put in the purchase contract.

Basically, you put what ever it is you need to check out and approve of before closing the deal. Those would be your escape clauses. Of course, you don’t want to get carried away or the seller will think you’re some kind of goof and you’re not serious about buying the property. So keep it within reason on things that matter.

Re: Thinking out loud… (long) - Posted by terry

Posted by terry on July 11, 2001 at 08:10:48:

buy the properties,write the offer to assume the loans
and dont maake any payments on his equity for 12 months enough time to get comfortable being a landlord or sell to another investor you could just do a lease option and sell to another investor.