Hello Everyone,
I remember reading somewhere on reiclub.com about what exactly LTV(loan to value ratio) is and how it is applied in r.e. investing.
I want to refresh my memory on that, but I can’t find that post.
Any help would be appreciated
Thanks
Dan
I don’t know about you people and where you are finding properties qualifying 65% LTV but only thing I can find close to that percentages are in the areas that, you would have to carry guns and/ or police escort. Oh wait, there is one that might qualify but the whole basement is full of black mold which has moved into duct and up stairs and bank is really motivated. Offered bank buying just the land but it would cost too much to remove the house to rebuild.
I really have to know, where are these 65% LTV properties that you are finding and making money?
I have a property that a lender is ready to give 75% LTV, but wants me to drop the home owners price another 10-20k. He seems to be more concerned about cutting the r.e agent out of the deal, than picking up the home and moving in on it. Other than that he said its all good. I think the key is making sure the numbers look right.
BandB- The answer to your question is probably in the glossary on this site.
Shamatso- It’s tough to find a property at 65% of the LTV unless you look in the right places. Forget about the MLS, listing agents are pushing those POS properties for top dollar. When I started doing rehabs all I could do was properties with acquistion + renovation= 65% of the ARV because thats all HML would pay for. I could pull this off by approaching owners of vacant properties who were paying property taxes every year with no thought of selling. These properties aren’t going to be available on any public list or they would be swept up in a heart beat. You’ll have to do the leg work or recruit others to do the leg work.
http://www.reiclub.com/real-estate-terms.php#L
Loan-to-Value (LTV) - The ratio of the size of the loan to the value of the property. If the loan is $80,000 and the value of the property is $100,000 the LTV is 80% ($80,000 / $100,000).
Most lenders have established LTV thresholds depending on several factors like your credit score. With my rentals, I try to keep the LTV at 80% or less…then, I have at least a 20% equity stake in all of my properties.
Keith
I am happy with 10 to 20% discount on single family homes; providing that, property has a clear title and needs no more than 5K worth of cosmetic work. I have (3) contractors specialize in cosmetic work and they are in and out my property in light speed. Time is money!
I have seen couple of investors (associates) buying at 30 to 40% discount and then the fun really starts for them in dealing with contractors that shows up late or delays with rehab work. Additional unforeseen work added to the projects can almost drive you crazy not to mention cost. To this date, I have not seen one rehab work completed on time! OK, they announce profit but did they include their time into the formula?
I have done the numbers, investors getting at 30%+ discount make little more than I do but I take my regular monthly vacations and weekends off… normally they can’t.
;D
Danny TheGreat, How do you find vacant, or abondoned properties? Besides bird dogs, can you go to the city hall or anything and ask about properties that are behind on land taxes or anything along those lines?
Danny TheGreat, How do you find vacant, or abondoned properties? Besides bird dogs, can you go to the city hall or anything and ask about properties that are behind on land taxes or anything along those lines?
City hall is a goldmine. You can find out of state owners, code violations, tax records, etc. I like the code enforcement office the most but thats just me. Police also send complaints to the code enforcement office when a property looks like its turning into the place to smoke crack. So police know where the vacant houses/ buildings are as well.
So, when you buy those type of properties in crack house locations… are you getting good tenants or buyers that want to live in that area? I have learned from others to stay away that type of property. I do understand that there are so properties with distressed situations with investment and money potential but it sure isn’t worth the headaches. But that’s just me.
Good luck to all of you.
So, when you buy those type of properties in crack house locations… are you getting good tenants or buyers that want to live in that area? I have learned from others to stay away that type of property. I do understand that there are so properties with distressed situations with investment and money potential but it sure isn’t worth the headaches. But that’s just me.
Because it is/was a crackhouse does not mean it was in a crack hood, lol, what alot of people are doing is, they will put a down payment or get financing for a home in a good neighborhood, grow their stuff, thinking that no one will notice, but when they do get busted the house sits their vacant, and if it ends up being listed, unless it is waaaay below market value, no one will purchase it. I have such a house that I am after right now. I can rehab and sell it for 320k, asking 270, I will try to offer 190 and see if it works, but if not whatever.
City hall is a goldmine. You can find out of state owners, code violations, tax records, etc
When I go into city hall, what exactley am I asking for? sorry I never done this before, do I just go to the information desk and see if they will give me information for out of province owners, tax records etc.?? I think its alot more difficult for me, see I live in Toronto, Ontario. And generally all of Canada I think, atleast Ontario, has privacy laws, that is why I cant find out who is dilinquent on their mortgage payments or property taxes. So whether or not the city hall is a gold mine for me, I dont think so…Ill check it out though. But if they will not give me info on dilinquent mortgage payments and taxes, they probably will not co-operate with this information, plus they ask : "and who are you exactley? why should we give you this information? " as if im a stalker or something. There is a computer where I can type in an address and get the owners First and last name, from their I can track down their number, and whether or not the mail is being forewarded anywhere, but thats not much help unless I know what address’ are the ones that I need. If anyone can come up with a creative way to get around privacy act, please help. Canadian Gov. has come up with every law to try to stop investors from purchasing the home, and getting people out of bankruptcy, they would much rather have multiple people in bankruptcy, since they get the house and resell it right back at market value, regardless of equity in the house.
Obviously, you have not dealt with a crack house. (crack is not grown) 
I think everybody is entitled to their mistakes. I think anyone who want to tackle anything they haven’t tried should consult others who have and by all means… get a second opinion.
I don’t buy properties in areas where the properties are all in bad condition and the whole block is crack factory and retail outlet.
The ones I go for the ones that have simply been neglected and as a result homeless people go their for shelter and people go to do their drugs. This doesn’t always happen to the properties but it’s not uncommon I walk into a house after I bought it and someone is passed out on the floor. (Prompted me to get a concealed weapons permit)
The only time I would ever buy a vacant property in an area where most of the area was in bad shape is if I quietly bought ALL of the properties and turned the whole street around. I have never done this yet but I would certainly like to.
I like doing projects that are total crap and need extensive renovation. I don’t do any of the work and I don’t manage the contractors anymore so any headaches involved don’t belong to me. My guys are very experienced and most of my contractors are very good so usually theres no serious problems about the schedule or budget.
Recruit the town you work in as bird dogs. Neighbors don’t like living next to a pile of crap and happily drop a dime to make $500 and have that crap turn into a diamond. Then they get on the phone and tell their friends and family I gave them $500 AND renovated the vacant house. Occasionally I get phone calls from people in different states reporting a vacant house and ask me to renovate it and pay them $500 dollars.
Young- I don’t know anything about Canada, sorry.
Okay when I said crack, I was incorporating all types of drugs,I thought we were talking along the lines of any drug house, but if your specifically targeting crack houses all the power to you. The home that I personally am trying to make my offer on is an ex-growhouse, where they were groing large amounts of weed, and I do believe that is grown, as there is a plant, water, and some sort of substance, I think called dirt.
Danny, how does it work down there, do you walk into city hall and ask at the reception for a list of, or any properties that are abondoned… neglected properties? I know for sure they wont give me any information on pre-foreclosures. Divorces Im not too sure about, maybe if I go to the court-house.
Most rehab lender will do 65 to 80 ARV( After Repair Value)
Here is the calculation:
Offer= (ARV x 72%) - ( Repairs + Holding + Closing cost )
Note: if you want low closing or no closing cost will require higher rate.
530,000( ARV) X 72%= 381,600 is enough to buy $380,000 short sale but not enough to do repair of 38,000. ( see below) That 38,000 down is your repair.
10,000+18,000( example: 386,000@ 10% = 38,600 divide by 12 months. Hold for 6 months $3216 IO X 6 months =$ 19,299) +Closing cost $10,000 = 38,0000
What if the property sit longer. Where is your reserve to cover your ass.
381,600 - 38,000 (10,000+18,000+ 10,000) = 343,600 Offer
Some lender max at 80% due to borrower cash. If you had gotten a higher % of ARV, you would not have to put the cash.That is leverage. the 38,000 I would keep just as emergency to cover my ass if the property will not move. Pad the repair alittle.You pull the wall, sudddenly you have water damage behind the wall.
530,000 -418,000( 380,000 to buy short sale + 38,000- Repairs ) = $112,000 profit
That is why I want to expand into the states, you guys can target pre-foreclosures, or foreclosure for that matter, and get that type of deal. In Toronto, good luck finding a home that is 20% or more below fmv. That scenerio listed above, by Johnny Q, would never land you a deal here, the market is appreciating value and homes are selling left right and centre at fmv, foreclosures / power of sale , are listed by the bank at market value, with little intentions of coming down to low, definately not 30% below, regardless of the amount of equity.
Different lenders go to certain ARV. That calculation is just that. Garabage in garbage out.It is a tool. Now for tronto, if that is the case. Pay full value is fine. Do lease otions with FSBO and tenant buyer
Ok I understand how flips work, buy below market value, repair, resell, I know how the wholesale thing works, where pretty much I become a bird dog for another investor, can someone provide me with a link or explain to me, how lease option works, everytime someone talks about it, I end up looking like this :eek2:
Will explain lease options later