Patrick Slota
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Thanks.
Here is the deal. Owner wants $160,000 CASH. I am planning to offer $150,000 and close QUICKLY. ARV is $200,000 and was comp’d by real estate agent, who BTW brought me this deal so I have to give to him to sell. He also has interested party at that price.
House needs minor fix-up…one window replaced, some minor drywall repair, carpet and paint inside…est. $5000 max. Fix-up time less than 30 days…sale time less than 90 days (this price range is a winner in this area!)
Here are numbers:
Sale price $200,000
Commission 12,000
Closing Costs 3,000 (high)NET $185,000
Purchase $150,000
Closing Costs 2,500
Repairs 5,000NET COST $157,500
Profit $27,500 @50/50 split = $13,750
Worst cast, they accept NO LESS THAN $160,000 the NET Profit approx. $17,500 and split is $8,750.
Let me know.
Thanks
Those are the numbers I usually use (70% – repair). When I spoke to my PI’s none of them knew the deal spread…they only said they had no $$ to put into deals right now.
I have done a few deals with my PI’s at these type numbers. I am obviously not trying to make a killing on this deal. I think that 9% is a good return on $157,500 ($13,750). At 12% simple for 90 days it would only be $4725.
I WILL be the seller to end buyer.
Jackie,
I hear what you are saying about protecting the seller (or at least protecting yourself from predatory lawyer types who would view a sub-2 as a way to “screw” the seller).
My only concern would be that once you go to closing with your RTO buyers in 12 – 24 months, the original owner has to sign off on the deed. There could be a possibility that they renigue on doing so, or better yet, having to find them to get their sign off could be a hassle.
-p
Rafael,
I advertised online in Craigslist, Backpage, the local newspapers online ads (free), a couple of local web sites for rentals, and signs around town. Craigslist and the local newspaper ads pulled the best.
My ad was something like:
“PLS Home Solutions has an ever changing list of nice homes in nice areas that are available as Rent-To-Own or Lease/Option properties. 5% down payments and great terms. Call XXX-XXXX today or go to our web site at…”
I answered all calls personally or called back immediately if they left a message on my VM or left contact info at my website.
What I have learned over the years is “Take Action”
Don’t over analyze everything…don’t look for a “magic bullet”…just do a lot of things and find what works best for you or your area.Advertise every day!!
Make offers every day!!Look at it like this…even if it takes you 30 days to get a property Subject-2 and get an RTO buyer in, but you can get 3% to 5% as a down payment on median priced properties ($170K in my area) that’s %5100 to $8500 a month income not including monthly cash flow from rents. Do this every 30 days and….
Jackie,
Just got in from looking at some houses and heard your VM…thank you. And thank you for your words here.
I do not have a contractual fixed time-frame with the owner…what we agreed to in the note was that I would pay him the principal of $11,800 plus 8% simple interest (this because I am sort of using his money…I could get a Private Investor to just pay this off but I have been giving PI’s 12%) WHENEVER the RTO buyer does purchase the house and that he has 24 months to do so. If the RTO buyer buys prior to the 24 months then the owner gets less interest, if it goes over 24 months, the owner gets more interest and will be paid whenever the house does close: he is OK with this…he sees it as better than a long term CD…and he just really wanted mortgage payment relief.
If the owner should want his $$ at 24 months I’ll get a PI to put up the money as a second position on the house and pay him out.
BTW, the RTO buyer’s contract states that if he does not buy the house in 24 months, the price will increase by 5% ($179,900 to $188,895). If he moves out, then repeat the process.
This is FUN, and easy. BTW, I am liking this better than wholesaling…more $$ up front, a steady cash flow and a cash out position down the road. It is IDEAL!
If you are worried about the DOS clause the safest way to do this is to place the house in a TRUST. (Home owners do this every day for estate planning purposes) You create the trust i.e 123 MainStreet TRUST (address of the house). You are the named beneficiary of the TRUST. The home owner signs a deed over to the TRUST (check with local real estate attorney as to what type deed to use) . He is now able to buy another house as the TRUST now pays for the house. The TRUST starts making payments on the house (you do this as the beneficiary). The new “owners” do NOT get a deed until they secure some type of commercial financing… you do not want to be the bank for 30 years. They get the house under a rent-to-own program or lease/option (whatever you want to call it) and make their payments to the TRUST…you keep the spread as a management fee. Once the new buyers get a commercial loan the house is closed on like any “normal” purchase with a real esate attorney and deed transfers from the TRUST to the “owners”.
Jackie,
In my other post about a subject to deal I indicated using a land trust where the owner sets up the trust and makes me the trustee and owner is beneficiary.. owner then deeds title to the trust (same as estate palanning). Owner then assigns his interest in the Trust to me (not recorded, is similar to transfer of stock in a corp.) I am now beneficiary and trustee (me) makes payments to the lender.
You said “However…for the past 8 years I’ve been buying subject to a little differently. Instead of me just getting the deed and leaving the loan in the seller’s name, I actually structure it as seller financing so the seller gets a non-recourse note and a deed of trust. The note says that I make payments that match and mirror the underlying loan. ”
So are you not using a Trust? Are you using the forms that were on the other site i.e deed of trust, wrap around all-inclusive promissory note, special warranty deed, affadavit, etc.
Jackie,
I totally agree with the philosophy of approaching people privately…and that is what I have done to get the few investors that I have now.
I was only pointing out that in order to be sure that you are in total compliance you can do an SEC filing and that doing so is easier and cheaper then most folks think.
I would, however, be willing to bet that those folks who got “busted” did not do an SEC filing and were trying to skirt the law.
Avoiding security issues is easier then you think. Just complete a state SEC filing. In most states it’s only a couple of hundred dollars to do so and fill out a form. There are simple compliance requirements and any decent CPA can help you with paper filings.
Most states allow you to do advertising as long as you do NOT offer any guarantees and do not co-mix monies…in fact for real estate purposes you NEVER touch the investors money…it goes to the closing attorney directly to be applied as required. But NEVER do more then 2 investors per house, one who is in the first position and another who would be in a second, and clearly let them know their positions.
In Tennnessee, where I am, I can actually have up to 15 investors and as long as no one single investor contributes more than $200,000 I do not need to do an SEC filing, but I did it anyhow.
Find an SEC attorney in your state, tell him what you are planning to do, ask what the requirements are and what the exceptions are…you’ll find for our type of business it’s simpler than you think.
-patrick
Jackie,
Have been trying to reach you via email but all addresses I have bounce back. What is a good one to communicate with you on?
You can reply to me at [email protected] if you don’t want it generally known.
Patrick Slota
PLS Home Solutions, LLC
[email protected]First American real Estate Solutions http://www.firstamres.com has a product named RealQuest that is excellant for getting comps.
I think Jackie has a deal with them for CREW members??
Patrick Slota
Greg,
You never tell the seller that YOU will buy the house. The option says you have the right to buy the house within generally 30 days…but you do NOT have to nor should you.
I always tell the seller that I have a large list of buyers for houses and I will be contacting them about purchasing it. I tell the seller that if one wants to buy it that I will assign my option to buy to the buyer. BTW, you collect a few thousand dollars ($3000-$10,000) from the buyer to sell the option to them.
You sell your option to an investor. The investor writes a contract to purchase with the seller. You are the intermediary bringing buyer and seller together (just don’t get involved in negotiations, financing, closing issues, etc. since you are NOT a REALTOR).
Patrick Slota
