WLOC - Posted by Gary

Posted by fnord42 on June 06, 2002 at 12:02:37:

wow, you barely answered his question at all. Just lots of other advice and a pitch for your services.

He has a system, and it works for him in HIS market and at HIS comfort level. He just wants to go a bit bigger and for that he needs a bit more capital. The places you buy on 50 cents on the dollar are not the homes that he is ready to turn into L/O, so it would be nice to get REO or foreclosure, he doesn’t want the hassle.

The first thing to try, in my mind, is see if a bank really would give you a WLOC. you will need to write up a business plan, a good one. You have a good income stream and a lot of equity, so you would probably be a good candidate. You might not get the amount you would want in the first success, but LOC’s can be grown once you have a track record of using it and paying back.

I would try that before embarking on a big change to your business process as Ed pitches. You have a niche, and not everyone in your market can be Pete or Randy.

WLOC - Posted by Gary

Posted by Gary on May 04, 2002 at 23:32:19:

Ed, I am a seasoned investor in OHIO who owns 20 SF homes that have an average equity of 30k. I am a real estate appraiser by trade and buy investments whenever I find a good deal. I actually find more deals than I can get financing for. I gross over 100k per year with a net of 75-90k. I operate as a sole proprietor. The properties I buy are typically listed or FSBO and are in nice condition. I typically target 3 bedroom brick ranches (they are the easiest to L/O)My objective is to purchase these at least 10k below market value(100k) and L/O them for two years at 5k over market value to get a 15k gain. I then sell using a 1031 tax def. exch. I typically buy with a 20% DP to avoid PMI. Lately I’ve been running out of down payment money. My credit score is 680-720. I need to keep the interest rate at 7.5 to 8.25 to keep a $150+ cash flow on these deals. This eliminates the hard money lenders. Trying to create creative financing on these deals is very difficult. These sellers are not extremely motivated and the realtors talk them out of it. Where can I find the money for the down payments? I currently have a $35k biz LOC is this the same as a WLOC? If not what bank department offers these? My lender’s mortgage department is starting to get cold feet since I have over 17 loans with them. Other banks don’t want to touch me. My goal is to buy 10 more houses over the next 12 months so that if half of my L/O buyers actually buy I can then go out and buy 10 more each year. I actually have a waiting list of people who want to L/O my brick ranches as soon as I get them.
What do you recommend I do for down payment $$$?

Re: WLOC - Posted by Ed Garcia

Posted by Ed Garcia on May 05, 2002 at 02:58:00:


You’re a holder. The WLOC, Working Line Of Credit, is not for an investor who buys and holds. Although that there is no question that you’re doing well, I don’t like what you are doing or the way you’re doing it.

Your portfolio and the way you buy, is lacking balance and lease/options are nothing more than glorified rental agreements. Rental agreements to buyers who don’t qualify for loans, meaning that they are credit criminals in most cases. The underlying financing is in your name restricting your borrowing power with increased liability of the underlying loans. The reasons you’re selling in this manner are two fold. 1-tax ramifications and the other is that you feel that you’ll get top dollar. Although you are right in both cases, the problem is cash flow. You constantly are running out of money to do more deals.

I also am suspect that you are buying to high and paying too much. You think you’ve found a nitch buying method, but as you can tell I don’t agree. I see you as a property manager.

In Dayton Ohio, there are two gentleman name Pete Julian and Randy Porter who bought 125 houses at 50 cents on the dollar last year. They have about 3 WLOC’s totaling 4.5 million dollars. As a rule they don’t use their own money and never run out of money to do deals.

Earlier in this post when I stated that you are lacking balance in your purchasing method, what I meant is that you are looking to repeat your method with no diversification. You’re not buying and selling, which would give you new cash to do more deals. I know that you think that you’re selling and maybe some day all of them will eventually go down. Mean while you could have doubled your business if you used another method.

One of our fellow members of Creonline named Angel Guttierez use to say that, a fast nickel is better than a slow dime.

I would be happy to talk to you about this matter in more detail if you should care to call me. My number is (909) 944-0199. There is no question that you are ready to go to your next level. I hate to say it, but you are a perfect candidate for my workshop.

Ed Garcia