I am a somewhat novice that has been assigning loans and deals to rehabbers in Fla. I’ve been getting paid small marketing fees for my work but have found many deals that do not meet my lenders’ and buyers’ criteria. I found a deal the other day that I assigned for $360k. My assignment fee was 3% which wasn’t a bad take for a few hours of work. The house needed about $5k in work and the value was about $495k ARV. I feel like I lost out on alot of money if I was able to get a hard money loan to be able to take this one on myself. The LTV on this one would have been about 73% which is more than most lenders will go but the house is an easy sell at $430-$450k. Are there any lenders out there that can help me avoid losing out on higher profits??? I had a rough year last year and my credit was damaged by a string of hard luck. I want to get reestablished and start getting more aggressive but I need backup… can anyone help
I wouldn’t be too hard on yourself. From your numbers, you made a little over $10K for “a few hours work.” Not too bad, IMHO.
Before you decide that you’re missing the boat on these “great deals” you may want to run the numbers on them.
For example, what is an “easy sale” at $430-450K exactly? Does that include any repair work? What is your estimated holding time? Closing costs (both sides)? Agent fees?
Run some quick numbers: $360K purchase, $5K rehab = $365K hardmoney loan (we’ll assume that you get it). 5 points for the loan is about $18K added to the note and we’ll round up to cover additional costs. So you have a loan balance of $385K. At 15% interest, that’s $5000/month payment (assuming $200/m taxes/insurance yeah right).
So, assuming that you have an “easy” sell from an agent getting 6% and it only takes you two months to do it, you’ll have $385K + $10K (2 months payments) + $26K (agent fees) = $421K - $430K = $9K. And that’s assuming that there were no closing costs in either the purchase or the sell of the property (doubtful).
Create your own “private bank.” (I hate the term, but I’ve heard it used.)
I am lucky enough to have a friend who will loan me $250K at 3.5 points and 12% interest with no documentation…all on my “say so.” He’ll loan me whatever I think is right, which is some cases has been 85% LTV.
Then he tells his friends that he’s making 20%-plus annualized while secured by real estate, and now I have four other guys who are each committed to loaning me $250K when I need it. Now I have a million-dollar “private bank.”
You could try running an ad in the local paper. Certainly there are “Capital Wanted” ads such as “Earn 12-14% fully secured by real estate.” Run one and see what happens. You might get a call from an investor who will loan you money for only a nice coupon like 12% and no points at all, and he might do 80% LTV deals for you.
Nothing ventured, nothing gained.
Just write an option on these properties
This market is falling, no doubt about it, you don’t want to start off by playing “catch the falling knife.”
Here’s what I do…
Let’s use these numbers to make the math easy. You find a home that needs work… The seller wants out and needs $300,000 (insert your number here) The house is worth $400,000 after $25,000 in repairs. You explain that you can bring in a buyer for the house right away for $280,000 (nobody gets asking nowadays) and here’s the best part… Unlike a realtor you will actually pay them to let you sell this house. Tell them you’ll give them $500 (insert your number here) for a 60 day option on their house. If you can’t get it sold in 60 days they already have made $500 just for giving you a shot. Tell them the $500 is their’s RIGHT NOW, not a deposit, go spend it. $500 for 60 days. just keep saying it.
Spend some money and have a lawyer draw up the option agreement, you only have to pay once then just make copies. Once they sign you call your buyers or advertize the house. Be sure to tell them you’ll need some time to show it to buyers. Bring the buyers in and you make money on anything over the option price.
Very sweet way to make deals. The absolute lowest risk you’ll ever find. And, when it works everyone makes out.
And then you pay taxes on that earned 9k (at 28% income tax bracket PLUS 15% self employment tax, that’s 43%) That brings your 9k to roughly 5k
thanks for the help… I get deals like this pretty often and I went into this business to focus on wholesaling…to now it has worked well so I guess I shouldn’t focus on what I haven’t yet succeded at…I just want to make sure I’m not leaving anything on the table
You are leaving something on the table…
Leveraged risk (that what real estate is)
Potential cost overruns in rehabs
Slow selling properties
In this market, the way you’re doing it, makes it almost impossible to get hurt. That’s a very good thing.
Keep going those deals. Add to your cash.
Some guy’s never use their own money. I understand that concept and agree with it, but there are times when the ability to move very quickly with your own money can make you returns that most people just dream of.
Keep up the good work and SAVE, SAVE, SAVE!!