Flipping Semi-rural Land
It seems in the last year the price per acre has increased substantially for tracts between 5-50 acres. Most of them have no commercial value other than timber or limited agricultural use. From what I’m gathering, many of the buyers live in a city or town and simply want an occasional weekend hobby ranch/escape place. It seems some justify it as an investment even though it truly isn’t. What’s getting my attention is there is a demand for these properties and they’re selling between 10-30 after being listed where not too long ago, these parcels had extended marketing times of a year or more. The key seems to be they can’t be over ½ hour drive from where they buyer lives. What’s getting my interest is the potential to flip the desirable ones. MOST listing agents living in town haven’t a clue about land value anyway, since their forte is houses in suburbia. I’m considering devoting more time to these properties. Yes, in the back of my mind I would also like to have a hobby farm/ranch for myself. In the past I’ve been able to put the thought off because I knew deep down there was no demand for those properties. Is anyone else flipping these so called unimproved hobby farms?
I do not understand, how the term refinancing is used here. If there is another lender to refinance the whole loan, you will spend another 5-6 k in closing cost. You might be better off asking the owner to hold the note for at least a year. Two month is too short a period to find another lender and get it financed as you will have to find the lender who give you 100% of the value( they are hard to come by) . You may consider offering the owner the premium interest rate to make it a sweeter deal for him.
I understand. I have a lender who after 60 days of owning the property will refinance it for 90% or more. So I get into the deal with nothing down out of my pocket and get it refinanced again for not much out of my pocket, which is better than coming up with 10% of the purchase price or 20% down.
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And please no solicitations.
Thanks.
ANYONE???! 101 people have looked at this so far, but not one has offered any advice?
correction 0% down 100% financing.
Good luck!
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Plus this is a short term deal. Only for one year.
In putting together what one would consider, a "strong" offer package, honestly depends on what is trying to be accomplished, and do you really want to expose that amount of funds to potential losses or being tied up, should there be a problem in escrow.
Honestly, on Commercial Real Estate Investments, I dont recommend tieing up that amont of money, until the last day of closing. The idea is to remain both as liquid as possible and yet give the people involved a commitment.
Here is what I do, when I submit an offer. I go to my local banking institution and open a 30 day money market, or cd product. I then go over to my realtor and give him a copy of the paperwork, for his/her verification purposes and write a promissory note, I stipulate that the note will come back, should due diligent investigations and disclosures are completed with out any problems and contingent upon full disclosure of all information related to the property.
backed by that cd. I call the bank and then make the escrow or title company custodial agent for the paper.
Then After all due diligence is completed and we are about to go to close, then I would have the rents, liquid assets of the property be placed beside my note, to offset all expenses accrued by me, in closing the transaction.
Most banks will realize that even though you have a promisorry note in place, it is backed by liquid cash in the CD, product. There is your down payment and it is still earning you interest. In most states, this would qualify for both verification of funds, and would show intent to place a down payment; even though you may not need to cash the CD or use it; by the time the deal closes due to built in monies, credits and other concessions that are built into the property.
Check with your attorney, to make sure this does not violate any of your particular state laws.
I would then go to the seller on my offer and get him/her to carry a 30 to 40 Percent 2nd mtg. for 10 yrs. 12%. interest only! The reason for this, is that it places the seller into a place of compromise if he sells you a "lemon" or misrepresents the property. Also, in most cases; you will need funds for repairs and vacancies. In addition, in most cases; if the owner has been in business for a while, he/she probably has not been able to keep rents up to market rates. So, you can typically consider a 5 or 10% rental increase, when the renewals come up.
This could put you in a position of liquid cash, at closing; could allow you to keep the CD used to leverage the down payment; and allows you some added protection, in keeping the seller at bay; and readily accessible should there be issues that were not disclosed, at the time of your taking the property.
I hope this helps.
GBRENT, what if you have no realtor and are dealing directly with owner? Like your approach in any event!
Gbrent,
I see reference to the owners taking 30 to 40% 2nd. Mortgage, but would not lender still require 10 to 20% down from buyer ?
Hello;
You sound so new to this that I have to recommend some preliminary REI courses before you get into any of this.
I know this is laughed at in the experienced REI circles, but I started out with the Carlton Sheets course from TV and I did really well as a result. That course will explain all of those questions to you and will help you evaluate the type properties you want to start out with- buying multi-unit buildings without a stitch of experience may be getting in over your head.
Good luck and best wishes.
also I would try and get the seller to hold the 20% second for as long as he would so you dont have to refinance right away
I would have tried to answer the part about buying the company vs. buying the property but this is a good question I hope someone can answer it for us
Okay, so what about this. The one 11 unit building the owner has come back to me and said that he will take $45,000 down and carry back the rest ($130,000).
The building has:
Two Side-by-side Apartment Buildings
Eleven Total Units
1st Bldg – Four Large 1BR Units and One 2BR Large Unit
2nd Bldg – Six Large 1BR Units
Separate Furnaces in All Eleven Units – Tenants pay their own heat.
Currently only Two vacancies
Long Term Tenants
Very Clean and Well Maintained Buildings
On-site Maintenance Man
Solid Brick Buildings
Current Gross Cash Flow - $3,270/mo.
Current rents are low and NEED to be raised
Expenses per month are $1345 (that includes insurance and taxes).
Knowing what I said above, how can I utilize this deal to my advantage without having access to a lot of money? (See first post)
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Sounds good, but what is a contract collections account?
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Sounds good, but what is a contract collections account?
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A contract collection account is simply an account set up within a bank or other dis-interested third party. It gives you your year-end principle and interest amort, etc. Someone to qualify and doc every payment. Ask a local bank if they have it. They should know what you mean.
hi gordo*,
how do you borrow from the bank with no guarantee ?
Large down payment would do it......
datalynx2,
You are right, you did not even consider selling cost, and possible paying of closing cost. i think there is not much money in this.
Yeah, its called bank fraud.
tee hee he
Never mind then.
Glad to be here for everyones humor!