Posts tagged as:
mortgages
SELLER FINANCING FROM BANKS!
Did you read the title correctly? I said, “We are getting seller financing from banks!” Most of the nation is crying, whining and complaining about how hard it is get financing at banks. Perhaps they should be asking for a different type of financing from banks………SELLER FINANCING!
I just got back from another meeting with some of my investors, partners and students and found that one of them had taken my advice, followed my strategies and asked a bank for seller financing on a house that she wanted to buy from them. They agreed offering seller financing at 7% interest only payments. Our student has a one year call so that they can close on the property and sell it or refinance the seller financing in plenty of time. The house provides a $450 per month positive cash flow for the investor.
The crazy part is that my student didn’t stop there. They ended up asking the bank if they had any other properties for sale and found one that the bank owned (because they took it back) that had a mixed use zone on a piece of land smaller than an acre. They are going to have a floor of commercial space on the first floor and over 30 condo units on top on less than an acre sized lot! My student will be able to buy that for about an $800,000 purchase price.
This property will require less than 25% of their own money out of pocket and be financed again at 7% interest only as seller financing from the bank. Since the bank was giving them an extended time frame to close (due to their contract strategies and negotiating time frames) they will be able to pull a building permit to build their project and start construction in less than 60 days after they close on the project.
I think the craziest part of all is the fact that this bank has also committed to do a construction and development loan to get the project built behind their seller financing so that my student will be able to get the original seller financing paid off. WHAT A DEAL! My student Roberta was so stoked I don’t know if she could see straight.
What many of you don’t realize is that with all the foreclosures and repossessions going on in the marketplace right now, banks are holding near record numbers and amounts of non-performing assets and mortgages. What are these banks going to do with all of these properties and non-performing debts? Many banks have so many of them they can’t get to them all. They literally have boxes and boxes of non-performing files. Why do you think some of these banks are taking 5-6 months or more to get an answer back on a short sale?
I find it odd, amusing and titillating that I can go into a bank, ask for a mortgage, get rejected, talk to someone else in the bank about getting seller financing (which requires less paperwork and far less credentials) and get a yes. HILARIOUS! We are entering a new age of seller financing. Everyone, including banks, will seller finance.
Savvy investors will do anything to learn these strategies and techniques and them implement them. How much do you really know? What are you prepared to do to learn more?
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Finally Some Government Financing Support!
In 2003, FHA instituted a 90-day waiting period for resale on homes purchased by investors. This meant that when a home was purchased it had to be owned by the current owner for 90 days or more before a buyer could come in and use an FHA or VA loan to buy it. This measure was put in place to protect consumers against predatory lending.
FHA recently announced that it had agreed to temporarily waive the 90-day waiting period for home resales. This is an effort to allow investors to pick up foreclosure inventory and resale it to owner occupants using FHA and VA financing. While this is not a huge thing in some investors minds because many people will need more than 90 days to rehab a foreclosure anyway it is good to see the government considering investors and their needs.
Perhaps this trend will continue and more things will work in our favor! I know I was excited about this because a lot of the properties my students are flipping are owned a lot less than 90 days when they get flipped. You might be wondering how a property can get purchased by an investor, rehabbed sold and closed in less than 90 days.
This is actually pretty simple. I will give you two tips here to make that happen:
1. I have a lot of students that are buying properties with 30 day plus escrow periods and they are getting permission to work in those properties before closing. Some of them are actually closing on their properties with their rehab either done or very close to being done. See what what MWI students are doing.
2. Traditional rehabbers do way too much work and spend far too much money. They end up having to price their property at a price that it won’t sell at. Less rehab equals a lower price. The lower the price the more people there are that can qualify for the payment and the home!
Don’t make investing harder than it needs to be.
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Another Quick “Bad” Market Profit
I just got word from one of my students that they have made another incredible profit in a “bad” market. This student from Southern California , Ryan Rude and his team, used a program I teach call the “Equity Builder” Program to find some great tenants to put in houses they are working on. This program specializes in turning tenants into buyers.
Ryan used this program to locate some tenants that could qualify for a home right now and didn’t know it. The sale helped a Grandmother, Mother and Granddaughter to purchase a home after many years of renting. Ryan simply located a house that would have a lower monthly payment than these ladies were already paying for rent and sold it to them.
Ryan and his team located a distressed 3 bedroom 2 bath home they bought for $167,000. They put $30,000 in the rehab and then sold the property to these women for $290,000. Their mortgage payment on a fixed 30-year mortgage was lower by over $100 per month than their rent! They were so grateful and excited.
One difficulty they had in obtaining the mortgage was the debt service caused by about $12,000 in personal debt. Ryan had enough profit in the deal to pay for his work, pay his investors, pay off these ladies’ $12,000 in personal debt so that they qualifed and still made $55,000! From the time Ryan closed on the purchase of his investment to the time he sold it was a total of 90 short days. $55,000 in 90 days!
Ryan has learned some valuable lessons about investing in today’s market. The first one is housing that offers lower fixed mortgage payments than rents always sells in any market. The second lesson is that there are a lot of way to help people get mortgages that others aren’t aware of. One of my favorites is seller financing.
Anyone that thinks that this is a bad market just has a bad attitude! Keep up the good work team. You can do it!
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