I’ve been doing my homework, reading, talking to people, looking at rents and believe I have a good feel for how much I can realistically expect in rent, for the type of unit (single family home, or duplex)
All the books I’ve read seem to talk about how there are multiple ways to finance and give nice overviews of how the methods work, but doesn’t really get into the nuts and bolts, actually setting them up. So how do I actually get the $$ for my first unit.
1- Do I just start shopping the local mortgage brokers, and tell them I’m want to finance a rental?
2- If I can find a seller who is willing to finance, how do I set it up? If it happens to be a seller you knows as little as I do - how to we go about making it legal, binding, and make both of us feel like we are protected legally?
3- “Subject To” how to set one of these up (again, to be legal and binding)? I would hate to pay a mortgage for someone else, only to have the property not be mine in the end. :shocked
4- Escrows - I know what they are, but I don’t know how to set one up? How much does one cost?
I measure just fine -
I have enough for at least 10% down for the price range of homes I’ve been looking at,
I also have enough set aside on top of that to cover 3 months rent + expenses (Assuming I’ve did the math correctly and got my operating expenses correct)
I only owe on my house - no car loans, no balance carried on my CC etc.
My credit score hovers around 800
I’m not looking for a no money down deal - I’m looking for a bit of knowledge on how to set an seller financed deal.
My seller-financed deals I got from Realtors. One I got from the newspaper. If a Realtor is involved, the seller will be paying commission and you’d better count on 10% downpayment so the seller can pay the Realtor and other costs.
Start reading the newspaper want ads, Pennysaver, etc. every day and make phone calls to those FSBO (For Sale By Owner) ads. Get a good little script that you are comfortable with…“I am a beginning investor looking for a rental property to invest in. Can you tell me about your house?” After a while you will get an idea of your market. What is the asking price? What is the sq. footage? What is the price per sq. ft. and how does that compare? Drive by these houses and you will learn areas. View the houses inside and you will learn what needs to be fixed.
Can you make your house a rental and buy a home that you owner-occupy? A duplex maybe? You should have enough downpayment to make that work. That is often how people start. Are you going to do buy-and-hold?
Congrats on your credit score, no debts and your realism. You are going to be successful as a real estate investor.
Call and make appointments with the mortgage officer at 2-3 different banks. Try to include at least one small local bank.
You sit down with the banker and tell him you are a real estate investor and ask him to explain to you what sorts of product they are offering. It’s his job to make loans and a big part of his job is to sell those loans, so he will be very happy to explain to you all of the options.
Pick a bank that you like that offers a loan you like and ask to get pre-approved. They will have you fill out an application and they will get back to you and let you know how much money they are willing to let you have if you chose a property that they feel is safe to lend on and if that property will appraise.
But at least you have your lender and know how much money they will give you.
Once you find a prperty, you submit the information about that property to the bank, and the rest of it is handled by your escrow company. Escrow does all the paperwork and moves the money from the lender to the seller.
If you find an unlisted propety and the seller will carry paper, you should have a lawyer draw up documents for you. The loan document is very simply. Basically, it is a promissary note that gets recorded with the county recorder.
If you are buying with any owner carried financing, set it up through an escrow company. They will collect the payments, pay the seller, and keep track of how much has been paid and what the interest is.
That escrow service is about $12 a month, split between buyer and seller. It’s worth the money to have a disinterested third party keep track of the payments. Also, they keep track of the interest if you make occassional accelerated payments. Extra payments can really confuse a private seller.
On owner financing, all the terms are negotiable. On bank financing, you take what they offer.
I was just wondering about this the other day. Are there any calculators you can use online to figure up the exact amount left due on a loan if someone pays extra on their payments? I’m very familiar with the PMT formulas in MS Excel and the online calculators that just figure your equal payment amount based off purchase price and interest. A calculator to figure the amount left due to extra payments would be very useful.
Investors will pay all cash for FSBO property only!
Please call. XXXX
2.) Screen all call to find out the motivated one.
Ask them what is there current situation for selling?
If I pay you cash, what is the bottom line?
Try to get 20% discount or more because I am paying cash.
3.) Do option contract with seller.
4.) Find end buyer. Qualify buyer and sell at full appraisal.
Conatct an escrow company.