I've been really busy lately....
LOTS of stuff coming down the pike regarding seller financing that will either make or break the seller financier.
By the way, I'm considering archiving this blog, since I will be using Word Press for all of my marketing in the future. Why?
Because there are more professional apps for it, and I'm now relying on Optimized Press for the structure, and it is not compatible with Blogger. Sooo....
Back to the point.... In the next few days, the most worst news for anyone attempting to seller finance their houses, is about to be realized, unless we protest with our congressman. The legislation is designed to focus ALL financing toward institutional financiers and away from any competing alternatives.
This doesn't effect sub2 deals, but it really impacts reselling our houses.
One of the really bad thing is that the contracts we offer can be rescinded by the buyer within 36 months of the initial term! Another really bad thing is that there can be no balloon notes created; they must go for 30 years. So, leases with options are going to get real popular as the main exit strategy for resale, unless something else is done here.
Stay tuned....
"Is this the party to whom I am speaking...?"Unfiltered calls are the pits!
Last month I abandoned all heretofore protocols of mine and posted an unfiltered craigslist ad.
Why? I had a friend who had a friend who needed out of her small house yesterday. Frankly, I don't like doing low-end deals, especially, if I can't get the deed, and it's going to be lease/option deal --- and especially when the house isn't that nice.
That's nearly 3 strikes. The third strike would be trying to cover an adjustable loan, on an underwater house. Forget that.
However, my friend's friend needed help so I thought, "Well, if I owned an upside down rental, and needed a way to protect my credit, and I didn't know any way, and I found a guy like me to help me, he would be my hero." So I succumbed. I'm so desperate to be a hero.
I didn't have a buyer's list ready for either a lease/option house, or one this cheap. So I had to scramble to get things together. So, I experimented with the generic craigslist "lease option" ad, based on some proven ad copy I developed from earlier times. However, I left most of the qualifying information out of the ad to get the largest response, in my attempt to remind myself why highly tailored ads are critical to maintain --- and used to avoid having to wade through a bunch of trash calls.
My experimental ad copy worked, but I left out another important ingredient. Meantime, I got exactly what I advertised for...a pile of unfiltered buyers with no money for down payments. Whoops!
The real point of this, is that certain shotgun ads work. However, when it does, we'll be on the phone forever with "Looky Lou's!" who aren't serious (or ready) to actually buy our houses if we don't first say what we must have... Otherwise, we just get the just curious, and the tire kickers, that waste our time.
So what was the missing ingredient here, besides not qualifying with the ad copy?
Why, it was not using voice mail to capture and qualify leads. If we're not using a 3rd party lead capture, then what? It means that we're gonna have to do the screening in person.
In years past I was the "Marvin Milquetoast" of phone interviewers. I all, too often, operated from my heels. I rarely felt in control, or confident about how to cut to the chase. That was then. Not no mo.
Now, I've got one question that I ask every buyer before we get down to business...to see IF we can get down to business, so that I'm not wasting my time personally helping the curious weigh their options at my expense. And what is that "one question?"
You can find it in my creative real estate investing course I call, "Screw The Bank!"It's my "no credit - no down payment - no hassle" real estate investing system that allows me to find the most anxious buyers and sellers in this market who will let me pocket $30k in 90 days."
I'm in the throws of "master lease option" negotiations on two mid-sized apartment buildings in California.
One building has low rents and the other has missing rents. One seller wanted to know what happens to his credit if I missed a rent payment. The other one objected that I was making no guarantee that I would refinance before his loan came due.
These are great objections, because once they are met, then we get that much closer to a deal.There's more.
I've re-learned never to negotiate over the phone. I was sandbagged on the phone two days ago by a seller who insisted they I tell him what I was going to offer him right then.
This was my second phone conversation. The first time I talked with him, I mentioned the out of state units that are presently master leased. He didn't flinch. However, this time, he was impatient to literally tell me to "go to....(a hot place down under), if I was going to suggest a master lease with him!"
Well, I'm used to flat rejections, but this is a time to remember that telling a seller over the phone what you want to do without first putting something in writing is a mistake. We need to make the offer in writing first (even if it's a letter of intent), and at worst followup on the phone after first submitting something in writing (with all the objections handled in writing).
It's all about the order of things.Interestingly, I'm still gathering up potential objections to study. So the worse the seller's attitude is, the more I'm gathering ammo for my next "objection-meeting" presentation. The question I'm asking myself today is what my limit is on the security deposits? My thought was to offer only one or two month's worth of mortgage payments.
However, this one project is so underwater, that any money I give the seller is just money I can't use to cosmetically upgrade the project, keep it current, and make it more marketable. Hmmm.
Meanwhile, I'm sending out more letters this week to the same group of sellers I found online, and in my driving two months ago. Anybody care to give me advice here? Meanwhile if you would like to know more about taking over loans, getting the title, without credit or cash, click this sentence.
This house is going to cough up $26,000 in rents over the next 18 months.
Meanwhile, we found this house after two hours of driving our farm area and taking down addresses of vacant and abandoned property.
I researched this property and found out the owner lived close by. The property is in default, but not scheduled for a trustee sale.
It's been vacant since last Fall.
Now all this information helped me know how to pitch the seller. The fact that the seller wasn't even trying to rent out the house tells me this seller was tired of dealing with it and out of options.
Well this house is a great candidate for a loan mod and/or a short sale. The property is in terrible shape outside, and needs a cosmetic overhaul inside. Flooring, paint, some hardware replacement, and built-in appliance installation(s). Then there's landscaping overhaul (cleanup, trimming and watering). Total estimate $3,500 (less if we don't replace the flooring).
Market rents are $1.00 per square foot or $1,460 a month with 1,460 square feet of rent-able space, not including the garage.
While we rent the house out, we'll work with the owner to modify the loan, or short it. The 2nd will get about $3,000, and the first will be reduced by $30,000 for a total encumbrance of $90,000. Plenty of room for profit with a sale of $158,000 to a credit challenged buyer.
Meanwhile, our rent of $1,460 over 18 months will net us about $26,000. We'll pass on the cost of back taxes to the end user, if our short sale/loan mod is successful, and include it in the sale price. Meanwhile, we've got insurance costs of about $700, and we're paying the buyer a few hundred for granting us title (held unrecorded in escrow, which is our personal safe deposit box), until we can successfully negotiate either the loan mod or short sale.
All this to say, Sub2 profits come after taking action, not sitting around wishing things were easier!
Normally, I would tell you about just the pretty houses we buy, but this proves that money can be made out of something ugly, too!
If you would like to know how we structure deals just like this one, click the link below.
"How To Make $26,000 in 2 Hours...!"
I've been really busy lately....
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