Hello all,
I am getting calls from sellers that I would call “motivated” (most of them don’t live in the house anymore, the listing expired, they can’t afford the payments etc.). The houses are fairly new (built since 2000).
The problem is that there is absolutely no equity, sometimes they owe more than even their asking price for the house ! Also, the monthly payments are around 1100-1300.
I know you need atleast a 20% equity cushion for sub-2 but is there anyway to get these houses ? B’cos if we don’t it is a given that the banks get them after foreclosure and sell for retail BWT, I live and invest in Austin, TX.
I pretty much started the same way. Buying zero down no equity deals with almost break even cash flow. Not a bad way to buy if you can afford the negative cash flow over a period of years until you build some equity. Not just the negative the payment is $1200 and the rent is $1150 but the vacancy and repair losses as well. This is where I fell short and could only hang on 5 years and lost all 25 or so that I aquired. If you can mix in a few 20 % equity deals with some of these you may do better than I did. You may be able to offer these as lease purchase deals to homeowners with a little cash up front and maybe a few hundred positive cash flow which is still too thin for a lot of investors including Tim Randle. You would still be doing them sub2 as no way you could afford the costs associated with a new loan. Matbe find a money partner who can use the negative cash flow inexchange for a piece of the profit and the depreciation expense write off generated by the property.
Hope some of my rambling helps. Lets meet and do lunch to discuss more perhaps
Ted, thanks for the reply. I guess you can’t blame the seller - it is the lenders that lend on almost no money down and even overfinance closing costs; the owner 2 years down the road figures out the property taxes are too high and wants out ! Right now, I want to do rehabs and get some cash and then I can think about these no/low equity deals. I just got a contract on a condo in North Austin that I am looking to rehab and sell and couple other offers on SFRs I am waiting to hear from.
Yeah, let’s meet up sometime and chat. BTW, are you having a club meeting tonight at your place?
Srb,
Nice to meet you. I do a lot of those deals her in Atlanta. Tedjr is right about getting them as lease purchases. I already have a Resident/Buyers list with 3-10k to put down, so I put property under contract through l/p agreement with the right to show to prospective buyers. I use their $$ to bring loan current, and go from there. No negative cash flow so far. Good luck with those, and if I can help in any way, let me know. This is a great forum with lots of experienced people that have gone through the pitfalls and are willing to help.
I find my Resident/Buyers through various means, but the most successful way for me is through relationships with mortgage brokers and loan officers. I take 5 or 6 to lunch per month, and have formed lasting relationships. What I do is ask them to send me all the people who could not qualify for a traditional mortgage, but had some sort of downpayment. In turn, I agree that when it’s time for them to cash me out of the lease/purchase, I would bring the business back to them.
Another way is to run an ad and bandit signs with something generic:
Rent-2-Own
4 bed, 2.5 ba
NO QUALIFING
NO BANKS NEEDED
XXX-XXX-XXXX
Tee, thanks for the previous post. I was about to ask anyone if they knew any ways to find these people who can’t qualify. If anyone else has any other suggestions/answers, I would like to know as many as possible…though this one seems really good. When you find mutually beneficial solutions to any situation, it makes it a lot better. Your idea seems to benefit everyone.
As I have said before, just reading these forums everyday is an education in and of itself. Thanks to all who post, and good investing to all.
BWT, I live and invest in Austin, TX.