I am looking for input on finding deals in the Houston area with owner financing and little to no money down and had some questions:
Where are you finding these deals? Newspaper, craigslist? I am a Realtor and using MLS seems to be a dead end to me. Or is it?
How does a wraparound work? As in, who sets it up and collects/distributes payments? Will they escrow in taxes and insurance like a standard loan? Are lenders allowing wraparounds now?
What are some strategies in this market that are working?
Any advice, suggested reading materials, other questions I should be asking?
Look at lease options and the various types of assignments they present. They can be true little down/nothing down deals. I’m not a Realtor so I don’t know about the effectiveness of the MLS for finding these deals. But you can try the online sites such as Craig’s List, and you can also look into mailings which, while somewhat on the pricey side, will produce results.
Google, or look up “A.I.T.D.” (All inclusive deed of trust), or “Land Trust.” Or just create one note that covers the equivalent of both the equity and the loan balance, and make sure the length of the overall note is at least as long as the existing mortgage note, and that the interest rate is the same or more than the existing mortgage note.
If you don’t know what you’re doing, you need to get the help of a real estate attorney (or a paralegal in some cases can help you). Or you can check out uslegalforms for ideas for your state.
Use a note servicing company. They’ll take your payments, make the loan payments to the bank; the money never gets in the hands of the seller. You do not want to make payments directly to the seller …you do not want to receive payments directly from the end/user buyer either. Why not accept payments directly from the buyer?
Because you don’t want to condition your buyer to associate YOU with the mortgage payment(s) he’s struggling to make. Eventually, you’ll represent an enemy if things get tight. This is especially important now that the laws have changed to make an adversary out of the lender with the buyers (due to the SAFE ACT).
Meantime, you’ll assume the persona of a landlord if you accept payment personally, and not through a service. So, always use a third party to handle the payments. It makes the process MUCH more businesslike, and makes both the seller and the buyer feel like they’re dealing with a professional. This is important in seller financing.
If you don’t mind me asking, what is your business model/end goal where these deals are concerned?
Seeing that you’re a Realtor…do you have a bunch of buyer prospects that you need to get into some properties or do you have some listings and need to find tenant/buyers? Are you looking to expand your role/territory/expertise as a Realtor?
Or are you looking for side deals with the mindset of an Investor?
I am more interested in being an investor than I am a real estate agent. I have my license so that I can collect commissions instead of somebody else collecting them, on houses I buy through MLS. I have a full time job and do very little as a real estate agent.
The way I understand it is that at a certain point in investing a license can be a hindrance, and in that case I may drop it.
I am interested in passive income more so than flips, wholesales, etc. I plan on purchasing through seller financing or lease/purchase (or other suggested methods) for little/nothing down and leasing or seller financing myself.
If I do seller financing can I still depreciate the property? It also seems like I read somewhere (possibly on this forum) that contract for deed is no longer allowed? Possibly because of the Screw All Financial Entities Act?
I have been an active investor/realtor for a while. Having a real estate license has never hindered me in doing real estate transactions. Now fishing in MLS for deals is tough, for the type of deals you are looking for. Consider other forms of marketing such as direct mail or even signs, if you can use them Get out to your spehere of influence. Network all the time. You mention that you have a full time job. How many people there know that you buy real estate. Chat with each one and find out who they know, that may have a problem. Jay gave you some good advice. But MARKET, MARKET, MARKET and by the way…keep that license.