I Need My Cash Back!
Help! I bought a house 50k cash, fixed it up, and have been waiting on this buyer whose second extension just ran out. I need cash yesterday as my credit is in going down the drain. What can I do now? no time to play around.
Run an add, consider owner finance, wholesale it out to another investor, put up FSBO signs, advertise on TCI.
[addsig]
Thank you John for your advice.
We are pursuing intenet "we buy ugly homes for cash" type places right now. We do not have the luxury of FSOB because we need a cash buyer and we already have a contract with a realtor. We just need to retain what we can of the cash we purchased it for (never mind roofing ourselves in the middle of summer labor value lost!) I imagine that the best way for quick cash is these type sites? Also, we are hesitant to get a home equity loan because a) we don't have "real jobs" b) we don't want to ruin our conventional financing for a house that we just moved into.
Get a quick second mortgage and /or refi the house for the higher value at 80-90%. Then put back on the market.
You might want to consider selling with owner financing, structuring the deal so you can sell your note at closing for the least discount possible.
Bottom line: you need your cash out, because you paid cash for this property. The assumption is you are in reality about your situation. Yes, you have a realtor that you signed with at your own choosing, and yes, the note will be sold at a discount.
Property value must be at least $50k ARV, as supported by appraisal.
You offer 5% down, owner finance the rest, suggested rates between 8-9.5%.
BENEFITS:
- Faster sale
- Enlarge the buyer pool
- Offer one-stop shopping
- Avoid title seasoning, seller 2nds, price reductions
Hope this helps, Dave
Dave,
thank you for your intelligent and thoughtful response. I wish I wrote in sooner, as we sold the house to another investor who is going to sell it to another and on the chain goes. He made at least 20k in 15 mins. A lot easier than rehabbing!
Anyway, I didn't understand what you meant when you said "structure the deal so that you sell your note at closing for the least discount possible. " How would we be able to guarantee that we could sell the note? To whom? What is the least discount possible? Discount refers to what? See, we are new to all of this, from the northeast and wanted to start rehabbing in Florida. Well, here its all over my head- all investors who own properties for a week at best! Passing documents to eachother- its crazy.
Thanks again, hope to talk some more,
Wendy
Wendy, you are most welcome.
Most people think that seller financing means either owning property free and clear, taking a down payment, and financing the balance and holding the note to maturity, or selling that seasoned note at a discount on the secondary market, which is what I do.
Or, people will have a loan in place, and sell the property with a contract for deed or land contract and essentially wrap the debt, taking the spread between the PITI payment on their underlying loan, and the installment payment on the land contract. Plus they get a down payment as cash up front.
However, many rehabbers would rather take all that money, time and energy, and flip the property to extract it back out to do other deals, which I personally think is the smarter way to go. You can always take that capital, and leverage it to buy rental properties, but to buy, fix and HOLD does not make sense to me. Buy and hold does, and buy, FIX, and flip does, two separate types of investing.
Getting back to seller financing, most rehabbers do not realize they can structure their newly created note so that it can be purchased AT CLOSING for a cash lump sum. All seller financed paper is purchased at a discount to keep the rates reasonable for end buyers, but so the investors buying these notes can hit yields that are acceptable to them AND so they have some equity in their notes. THEY ARE INVESTORS TOO, and like real estate investors, paper investors have to buy at some discount as well.
But the discount can be minimized so that the cash price for the note works for the rehabber, and when they add that cash lump sum to the down payment and first mortgage payment (which the rehabber also keeps at closing from the end buyer), they cash out of the deal, avoiding title seasoning problems, other bank red flags, having to take back a seller second (throwaways and unmarketable largely), price reductions etc.
There are no guarantees in life, just like the loan officer who tells you the loan will be closed and last minute they can't do it for this reason or that. However, upon review of the application from the end buyer, their credit, the appraisal, and other information, you would get a written agreement to purchase with stips to be met before the note will be bought, and at what specific price.
For the rehabber program, there is one buyer we work with, as not every note buyer will buy unseasoned notes on rehab deals, so it is a third party investor group to answer your question.
You can check my profile if you want more specific information.
EXAMPLE:
Purchase price: $50k
Repairs: $15k
Hard money loan: $70k
So you are into this property for $70k. Let's assume it's ARV (after repair value) is $120k.
You would take 5% down, and seller finance the rest:
5% down = $6000
95% first lien = $114,000
This first lien might be purchased for $105,000. If interest was at 8.25%, the P&I payment would be $856.44.
TOTALS:
Down payment: $6000
1st Lien Sale Price: $105000
First Mortgage Payment: $856.44
Total cash at close: $111,856.44
Total gross profit: $41,856.44
Of course, there are closing costs and holding costs, but this gives you an idea of what I am talking about.
If you want to move quickly, and understand the time value of money, which says that dollars in your pocket TODAY have more value than dollars in your pocket a week, month, year from now, then you will see the power in this program, plus you avoid lender hassles, because you are the bank!
Hope this helps, best, Dave