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To Buy or Not to Buy - That is the Question!?

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etrey

New Contributor
Read Fastlane!
Jun 10, 2015
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Hi all - I am going to get a little personal in the post and would really appreciate some honest feedback. Obviously, at the end of the day - we'll have to do what we'll do - but it would be interesting to hear opinions from fellow business owners and real estate investors.

I have run my own digital marketing business for ~3 years.

I currently rent a house in the south-east coast of the US ~$1,000 a month. My wife and I have over $150k in student loan debt (8% interest). We have some CC debt - but should be out shortly. Debt ratios not a major concern here as student loans are pay as you earn.

I live in an area near a major university that is actively being "revitalized". I was considering the pro/cons of an FHA Rehab loan. Does anyone have experience with/or recommend this type of mortgage? Should we continue to rent as we grow the business/pay off debt? Or is there a major advantage to buying now? Should we buy a multi-unit dwelling as an income generating asset? (these are hard to find and usually overpriced)

Lastly, with quite high home values right now in the market- would it be good to look at foreclosures or liens?
 
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WJK

Legendary Contributor
EPIC CONTRIBUTOR
Speedway Pass
Oct 9, 2017
2,362
5,358
Alaska
Hi all - I am going to get a little personal in the post and would really appreciate some honest feedback. Obviously, at the end of the day - we'll have to do what we'll do - but it would be interesting to hear opinions from fellow business owners and real estate investors.

I have run my own digital marketing business for ~3 years.

I currently rent a house in the south-east coast of the US ~$1,000 a month. My wife and I have over $150k in student loan debt (8% interest). We have some CC debt - but should be out shortly. Debt ratios not a major concern here as student loans are pay as you earn.

I live in an area near a major university that is actively being "revitalized". I was considering the pro/cons of an FHA Rehab loan. Does anyone have experience with/or recommend this type of mortgage? Should we continue to rent as we grow the business/pay off debt? Or is there a major advantage to buying now? Should we buy a multi-unit dwelling as an income generating asset? (these are hard to find and usually overpriced)

Lastly, with quite high home values right now in the market- would it be good to look at foreclosures or liens?
Like always -- it depends... Are you going to be living and working in the area for the next 5 years? Do you have an emergency fund sitting in your savings account, so you can face any thing that happens? Are you good at doing fix-up work if you buy with a rehab? How solid is your marriage? Can you weather living in a construction project and still love each other? Can you find a rehab project in your area and move fast enough to purchase it? Do you have extra funds available for all the stuff that goes wrong with a rehab project? You can figure on spending at least 20% on all the stuff that comes up. Can you afford to take time from your business to do another side project -- like an all consuming rehab? And then you ask about becoming a landlord -- that's a whole skill set in itself.

Can you increase your income stream or find a side job to do debt reduction? Can you find a way to cut your expenses and put that money toward your debts? Student loans scare me because you can't every get rid of them except by paying them off. It's a very serious debt. I would sure hate for you to over extend when you already have CC debt and student loans...
 

CashFlowDepot

Gold Contributor
Speedway Pass
May 16, 2009
710
1,273
Central America
Hi all - I am going to get a little personal in the post and would really appreciate some honest feedback. Obviously, at the end of the day - we'll have to do what we'll do - but it would be interesting to hear opinions from fellow business owners and real estate investors.

I have run my own digital marketing business for ~3 years.

I currently rent a house in the south-east coast of the US ~$1,000 a month. My wife and I have over $150k in student loan debt (8% interest). We have some CC debt - but should be out shortly. Debt ratios not a major concern here as student loans are pay as you earn.

I live in an area near a major university that is actively being "revitalized". I was considering the pro/cons of an FHA Rehab loan. Does anyone have experience with/or recommend this type of mortgage? Should we continue to rent as we grow the business/pay off debt? Or is there a major advantage to buying now? Should we buy a multi-unit dwelling as an income generating asset? (these are hard to find and usually overpriced)

Lastly, with quite high home values right now in the market- would it be good to look at foreclosures or liens?

Instead of the traditional route, do these two things instead:

(1) start looking for those old run down houses, track down the owners, then sell your contract to a rehabber IF the deal requires cash to purchase. This is called wholesaling. It will help you get out of debt much faster plus you'll learn more about the housing market there.

(2) Every time you talk to sellers, you should make two offers, one that is a low ball all cash offer (for wholesaling) but also make an offer that is about 10% more with you paying a small down payments then monthly payments. I rarely mention anything about interest. If the seller says yes to your seller finance offer, then this would be the house you would buy to fix up then move in to. You won't need to get an FHA loan if you go this route. You could also start accumulating some of these "seller financed" houses as rental properties.

(3) if you find a house that you can buy with seller financing but you really don't want the house, then you can still write a contract to buy it with seller financing then resell it quickly to rehabbers who would love to buy the house without paying cash or getting a hard money loan. Here's an example of a deal my daughter did like that:


A few years ago my 27 year old daughter closed on a deal and she made a total profit of $16,833

She didn’t have a penny in the deal and she did not go to the bank to get financing. No credit report was every asked for or presented.

Here’s how she did it . . . and HOW YOU CAN TOO:

She negotiated to buy a run down property from the owner for $97,000 with ZERO down and ZERO interest with $600 per month payments. It is worth about $175,000 fixed up and needed about $10,000 in repairs.

The advantage in ZERO interest is that every time you make a payment the principal balance is reduced by that amount so you can get the house paid off quickly.

My daughter actually made 3 offers to the seller and asked her to pick the one she liked best. The seller picked the highest price offer even though it had zero interest.

I tried to talk my daughter in to keeping the property as a rental or fixing it up and selling it to a retail buyer, but the only kind of real estate deals she has done are wholesale flips so she just wanted to do a quick flip.

To give her a taste of what cash flow is like, instead of wholesaling it for one payday, I did finally encourage her to sell the house with seller financing to a rehabber for $106,500. We put a balloon on the note so she’d get payday #2 in about 6 months.

She got $6500 at closing. Remember, she didn’t have a penny in the deal.

Plus she got 6 months of approximately $250 per month cash flow

When the buyer could not pay her off in 6 months she offered to extend the loan for 2 more months for an additional $1,000

When the buyer closed with their retail buyer, my daughter got another check for about $8700

So, how did she do it?

Well, there was a little help negotiating the deal from Mom.

If you don’t have a creative real estate savvy Mom to help with your deals, then the next best thing is to learn as much as you can about creative real estate and financing so you can learn how to make money and buy houses without getting traditional financing. That's what my daughter did too..

And it’s exactly what YOU need to be doing in this challenging real estate market. There is no need to use your hard earned cash or to borrow money from a bank or private/hard money lenders.

Real estate opportunities are all around you.

If my 27 year old daughter can do this…YOU CAN DO THIS!

Best of Success… and Freedom

Jackie Lange

P.S. Could my daughter’s deal be better? YOU BET!

She could have substituted the collateral when she sold.
She could have kept the property as a rental.
She could have negotiated a discount on the seller’s note before payoff.

But, if we made the deal too complicated, my daughter would not feel like she can go out there and do these deals all by herself.

So sometimes it’s better to give up a little profit to help a young person gain a LOT OF CONFIDENCE.

All good lessons!

P.P.S. I know you will ask..

She found this opportunity by just driving around looking for houses that appeared to be run down and vacant.

The seller inherited the house. She lived in Georgia. The house was in Texas. She had no interest in even coming to see the house. It NEVER DID SHOW UP ON PROBATE RECORDS! The closing was handled with a copy of the will and a few heirship affidavits. If you only work probate, you’ll miss great opportunities like these.
 

ruzara5

Bronze Contributor
FASTLANE INSIDER
Read Fastlane!
Read Unscripted!
Speedway Pass
May 1, 2011
178
184
Currently in Washington State
considering the pro/cons of an FHA Rehab loan. Does anyone have experience with/or recommend this type of mortgage? Should we continue to rent as we grow the business/pay off debt? Or is there a major advantage to buying now? Should we buy a multi-unit dwelling as an income generating asset? (these are hard to find and usually overpriced)

Lastly, with quite high home values right now in the market- would it be good to look at foreclosures or liens?
Definitely you are in a debt restructuring process. Upfront this is coming from a practical financial approach. Just adding some food for consideration. Housing and real estate. You know your comfort zone. Real estate in general can be a great fit. It can also be jumped on at the wrong time (2007). Or biting off too much of a home ownership pie. Could be a time for a improvement of purposed savings within the structure. Minus a ownership approach until a more agreed situation is acquired. In the area of where this is being written. Pacific northwest US. Housing is got the west coast effect. It is up. For the most part seeing local homes that four years ago sold for 30% less or more is room for consideration. There are deals. Well researched. For some it is not the right time. With a productacracy business in place. It could be beneficial to consider some leverage and some reward with care. Certainly could be some advantage. If your buying a duplex and can work with a rent one side and keep the other side for your living quarters. Rent can help over time. More details with rent of course. There is that point for measured adaptation when your at that part. Check reports online and in your area of construction and residential and commercial activities in your town. Alot of approaches on this one.
 
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