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Hi Jackie,
Glad you are back.
I am also working on my business plan for 2008. I want to do a combination of wholesales deals to generate cash to pay off some debt and master leases for cash flow.
I wonder if you already have a plan to target owners that are good candidates for master leases. I know owners of vacant/empty houses are definitely the best candidates but I am not sure what would be the best way to find those owners. Any ideas?
I would also like to incorporate some type of options into my plan. Need to stay away from conventional financing.
Thx/Rafael
Rafael,
You’ll have to make adjustments to your wholesale strategies. There are fewer rehabbers buying houses these days because they are having a harder time selling to a retail buyer UNLESS the houses are in much nicer areas… or you’ll need to sell to landlords.
Jackie
It sure is nice to spend time with family and friends during the holidays but I’m ready to get back to work.
I’m already making my business map for 2008. Business Map? It’s my step-by-step road map of what I want to accomplish and my detailed plan of how and when I plan to get there.
Here are some of the items on my list:
grow the membership at CREWealth.com & and get more activity in the forum
I’m starting an affiliate program for CREWealth.com in late JanuaryFor real estate, the name of the game is BE CONSERVATIVE!
Do master leases – only with $250+ spread & less than 30 minutes from my house
Wait for the really great real estate deals then buy cheap – with seller financing.
Get seller finance deals – keep as rentals
Get options for seller finance deals – sell with highest “down payment” sales only
Finish the manual and start promotions for a seminar I’m teaching in March in Dallas
Do you have a business map? What’s your plan of action for 2008
Rafael,
I’m not doing anything that requires my buyer getting conventional financing. It’s like trying to squeeze a square peg into a round hole. SOME investors can still get instutional financing for rentals if they have 740+ FICO scores and good debt to income ratios.
I know some retail buyers are still getting loans but I sure would not want to base my whole business model on that. it would be too frustrating! I know a lot of people are getting to the closing table only to find out the loan terms have changed or the lender has bailed out.
Ideally it is better to always negotiate seller financing when you buy so you can pass that on to your buyers with a WRAP. It will make your life so much easier — but that does eliminate REO properties. ( You’ll want to hear the conference calls in January to learn more about this technique)
For master leases, vacant houses are ideal. The problem I’m finding is that most owners have payments that are too high for a rental. Today, I talked to a lady who has a $1030 PI payment on a vacant 2 year old house worth $125,000 ( she owes $105,000) The taxes are due – $3000 and insurance is another $1200 a year. This house will only rent for $1000 MAX and she can;t afford to EAT the difference each month. Offering it with seller financing is not even an option with those prices.
So, for master leases, you’ll have to wade through a lot of junk to find the good deals.
Lonnie deals are another ideal way to make a lot of cash flow in this market!!!
If you find any great deals on mobile home parks GET AN OPTION – there are a lot of buyers for them and they can still get financing – it’s terrible terms though so if you can get seller financing and wrap it when you sell that is ideal.
Lots of opportunities out there – we just need to re-tool a bit to make it work. It’s a GOOD THING!
Jackie
Wydell,
No matter what answer I give yoy about financing, it will be different next week. The financing markets are changing so rapidly that it is not a good idea to rely on institutional financing to buy a park. Your best bet it to find a park where you can get seller financing or master lease the park. Institutional financing is always credit score driven.
Jackie
Hi Tom,
Options are the very tool to use to seize opportunities while you remove most of the risks.
Because it is harder for some people to get instutional financing, there will be a bigger demand for owner financing. That creates an opportunity for us.
When you sell with seller financing, you’ll get a nice downpayment – usually 5% – 10%. Since the buyer does not have to spead a lot of their money on loan fees, points, appraisals, application fees, etc… they can put down 100% of whatever they have saved up.
Ideally when you are offering seller financing, it is because you have negotiated to buy a house with seller financing.
That gives you the ability to WRAP the loan.
Here’s are some example:
House worth $180,000 – in very good condition
underlying loan of $150,000 with fixed interet rate.The sellers have already moved. The house was listed with an agent with 6 months and no bites.
What can you do with this house?
you could buy subject to the mortgage
BUT… then you’d be making payments on a vacant houseyou could buy with a lease option
BUT… you’d be making payments on a vacant house unless you negotiated to not pay until you get a tenant in ityou could just do a performance lease ( ala David Tilney)
You’d get a few hundred dollars a month in cashflow and reduce your risksor.. you could buy with seller financing that wraps the underlying loan and get the ability to resell
the advantages in doing it this was are that you can sell for $180,000 or even $185,000
you get a down payment and you get monthly cashflow.BUT…. the problem is that you could still get stuck making payments on a vacant house for several months
To reduce your risk, you would just get an option to buy the house with seller financing SUBJECT TO you being able to find another suitable buyer within 30 days. So, you don’t have to do the deal unless you find a buyer and you’vegot 30 days to do it
This is much safer than a subject to deal.
Then, to sell it, you do an open house for 2 days only. You advertise that the house will be sold – with seller financing – to the person with the highest down payment. You’ll literally get people fighting over who will give you the most money.
I’ve done this many times and it works great.
When you find the buyer, you exercise your option with the seller.
If you don’t find a good buyer, you’re out of there – no risk.
What do you think? Will you give it a try?
Jack will be talking about a lot of other creative option strategies at his seminar in February. Is anyone going?
I’ll see you thereJackie
Tom,
See the new videos in the Learning Annex – under Options. This will give you even more ideas.
Jackie
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