Has anyone been successful at buying properties from one of these said firms and paid less than what you could get for rent on a property? How long is the payment plan and do they finance for the life of the loan or are you required to refi at the end of a certain period of time?
I am looking into this avenue of investing and would appreciate some feedback.
Thanks
Rob
Can’t imagine how that would leave anything on the table for an investor, but i would be interested in the pitch.
I have never tried to work with another investor or investment firms it takes away the freedom of making my own decisions.
Redhawk
I am not looking to make a profit it would be nice. I am not in the position right now for it to be a wash. I am not even thirty years old and looking for the long term.
This exactly how we sell our properties. The way we work our program is after we acquire the property direct from banks (bulk REO purchase), we research the market rents in the area. Once we know this amount we subtract taxes, insurance plus factor in a discount of 15-20%
Example:
Estimated Market Rent: $550 - $650/mo (we will take the lower amount)
less Taxes: $100/mo ($1,200/yr)
less Insurance: $50/mo ($600/yr)
20% discount: $65/mo
Monthly payment= $335
We will then sell the house for $500 down, $335 per month, 15 years at 10% interest.
We then reverse the calculations to solve for PV (present value). Pymt: $335; Interest: 10%; Term: 15 years; Based on these numbers our Present Value is: $31,174.24 (our selling price to the occupant buyer is $500+$31,174.24 = 31,674.24).
We use a Contract for deed agreement so even though we offer owner financing, the deed does not transfer to the occupant buyer until all obligations namely all payments have been made.
We do not put a balloon on our owner financing and no pre-payment penalty. So they can stick with our loan for the next 15 years or refinance anytime they want or sell the property down the road.
We sell mostly to owner occupants although we do get some investors that buys for long term rental. The properties are sold “as-is” the occupant buyer is responsible for any rehab and pays for all taxes, insurance and utilities.
Once the property is cash flowing, we sell the note/contract for deed at a discount enough so that the investor gets a 16-18% rate of return.
Interesting! What areas do you have properties available? Do you get luxury homes as well?
Inventory is mostly in the Midwest and Southeast where rents are strong. No mansions yet; Hopefully soon. Based on our research we are expecting better inventory of REOs that we can buy from Banks and direct from Fannie Mae.
The current houses we buy usually range between $50K - $100k in Fair Market Value. Hopefully the next wave of REO’s will be in the range of $100k - $300k FMV.
Our business model will remain the same so we end up selling these homes to occupant buyers at a good discount. And when we sell the note/contract for deed along with the actual deed to the investor, they get a further discount. So in case there is a default and the investor takes the house back, they would’ve picked up the house anywhere between 40-60 cents on the dollar.