OfflineOk so I think I just came up with an ultimate strategy if everyone and everything goes according to plan, but I want to share it with yall to see if this seems right and if I can get my questions answered in the end of this. My strategy is to not use any of my own money. First, I'll lay out the Step by Step Plan. Then, I'll finish with questions that I truely need answered so I know if this is right and I'm not just crazy for thinking it. Here it goes: NOTE: This is just an example, and you tell me if I'm right.
I do Matt's Strategy: 1 out of 30 gets accepted as a low offer.
Property's FMV $250,000(current comps around area)
Property is Listed @ $200,000(since it's a short sale)
My Accepted Low Offer is $175,000(under contract)
I go out and look for a hard money lender:
I ask Hard Lender for $213,500 and accepts in return that he gets his $213,500(Offer $175,000 + $38,500 from 2% Closing Cost, 20% down, comission) + half of what I profit.
*WIN for lender, he gets his money back + half of my profit.
So that's $250,000(FMV) - $213,500(hard lend) = $36,500(Instant Equity/my profit).
Seller gets his $175,000, Bank gets there money, Agent gets commision. WIN WIN WIN for Seller, Bank, Agent.
Since I paid for the property in Full Cash $213,500(for offer+closing+down+commision)
Now, I can go to the bank and 100% Refinance for appraised value of $250,000(comps in area)
Pay back the hard lender his $213,500 + $18,250(half of what I make/equity from Refinance)
So let's Recap and See everyone's conclusion:
*Seller gets his money.
*Bank gets their money.
*Agent makes commision.
*Hard Money/Private Lender get his money back + half of my profit.
*I used none of my money, profited $18,250 from 1/2 of equity from Refinancing and splitting w/ Hard Lender, and now have a property with tenants and a +200 CashFlow.
Here's where the questions come in play, since I don't know how and who profits from a short sale as far as the bank and the seller goes.
*Can I 100% Refinance the property through the bank since I paid everything in Cash?
*Do I have to hold the property for a certain amount of time before i can have the option to refinance even though I paid Cash?
*Which type of loan (i.e Conventional, FHA, VA) should I choose to Refinance by or is their an exact one I can only choose from if I want to 100% Refinance this property?
Would a Hard Money Lender be willing to compromise such agreement? (Even though, I know I'll be able to pay him back before end of month so his % wont effect me)
You don't need anyone's approval. Sure, everyone has an opinion. Which do you choose. Go with your own gut feeling. Apply whats been taught and provided in the books, on line journals, forums, etc. and go for it.
If you run into road blocks, be flexible. Re-adjust. Re-apply. But just do something and learn along the way.
Go to Page 178 of Dean's Profit from Real Estate Right Now book, that's Dean's personnal experience. You are about to do what is written in that page.
Also try to read David L. story on page 119 of the same book. That will give you much courage. Hope you like it. LA
Everytime you repeat the words "I CAN DO IT" with conviction, you cancel or override your fear and increase your confidence. By repeating this affirmation over and over, you can eventually build your courage and confidence to the point where you are unafraid. -Brian Tracy-
I would call banks first before you jump into this deal, to make sure they will give you what you are looking for. The bank is going to give you 70-75% of FMV in a refinance, so if your purchase price is low enough, it would work out to 100% financing. You can also ask them about seasoning etc. But have that piece, or ingredient ready to go, before you do the deal.
Cathy
Cathy B
Follow my progress at:
http://www.deangraziosi.com/real-estate-forums/investing-journals/44397/...
Appreciate your feedback.
Wow I didn't even know this strategy was put to use already. But I have the book in my hand and I'll be sure to read those pages when done typing this reply. Thank you so much for the resource and information.
Thank you for the heads up, now I can get an idea of how low of an offer I should put in to know I will get 100% back when I refi. I'll be sure to look into the information you told me to check 1st.
I think the two main challenges will be:
1. Getting a HML to do a deal without putting in any of your own money.
2. Dealing with the seasoning requirements required by banks to do a refi. Remember that the HML will probably charge around 15% (1.25% per month, or $2500 on $200k, interest only). If you have to wait 3-6 months before you can refi, factor that in. The HML will need to see you can make those payments.
Hope that helps and good luck!
Tom
After you mentioned that 2nd challenge, I went to 10 different banks and I did not like what I heard.
8 out of 10, must wait 6mos to refi and they base refi of the sales price or assessed value at that time, whichever is lowest. The other 2, the refi is 55% with a 20yr mortgage while the other is 70% with a 30yr mortgage but you have to wait 6mos to a year to refi. So overall they all have the 6mos to a year stipulation and low return % on refi for investment properties. So if I cant benefit from a refi, what makes you think an investor would want to take a property of my hands through a wholesale where he's just going to see the same figures. It's really disappointing to be out here in Hawaii just cuz since things are so expensive, ppl and banks make it impossible to profit due to the strict rules, regulations, guidelines, whatever it is. If I was in the mainland, it would definitely be easier but I'm not there, so I'm going see if there's a different way.
Instead of going to different banks and be disappointed, you can try Loan Officers. Get an experience LO that can negotiate to multiple banks not only in your State but all over USA. Let the professionals do the tricks. Hope this help. LA
Everytime you repeat the words "I CAN DO IT" with conviction, you cancel or override your fear and increase your confidence. By repeating this affirmation over and over, you can eventually build your courage and confidence to the point where you are unafraid. -Brian Tracy-