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Not sure that I want to wade into this thread, but I've never used traditional bank financing for any real estate acquisition. I once did get a HELOC on my primary residence to buy a rental property but that was a bit different.
Mostly I've used Land Contracts (aka Contract for Deed) and private unsecured loans. A wrinkle in many of my deals is that I prefer to first get an Option-to-Buy. An Option locks in the purchase price yet gives me time to line up the private financing. Six months has been the usual, with a provision to extend the Option for another 6 months upon further payment. It's worked out well as all payments, although non-refundable, have been applied towards the purchase price. Options work best on land since land usually takes longer to sell and Sellers seem more amendable to granting an option, since they figure it's going to take a while to sell anyway.
In a couple of cases, I've also used Land Contracts as a virtual substitute for an Option. Just last December I bought another property on a Land Contract. Small down payment, still held in escrow. One year Land Contract with the balance due in full within that time. Zero percent interest. So, according to Michigan law, I have owned the property since last December but I won't get the actual Deed until next month. I just received a commitment for private financing for 50% so I'm good to go. Hopefully I can flip it in 2-3 years. Bought it for about a quarter of its value from an investor who was hoping to make a killing. He's losing a lot by selling--but he would have lost it all had he not sold. He suffered from big dreams and little experience.
In our area it was very popular for developers who were putting up coops to get 99 year leases on the land from the big developers and put the buildings up a whole lot cheaper .
Well when the leases recently hit the half way point with no contingency plan for what happens when the land lease ends , the lenders stopped loaning .
Values plunged and nothing would sell .
So the coops all had to negotiate now with the developers and reach agreements on the land .
It was millions per building ….all the coop owners now saw their monthly maintenance fee sky rocket .
I would never buy anything on land that was owned by someone else .
About 10% of the buildings in nyc still have land lease deals
Personally I have never been interested in traditional real estate …just buying a property and getting rent never interested me although I have done it .
I like special situation stuff ……the stuff most amateur investors see no reason to own .
After all why would I want to own lease rights that expire worthless , and not actually own the property .
Or why buy coops with stabilized tenants at break even rents ?
In fact we got this fabulous deal from 2 previous owners who lived out of state .
They Knew nothing about how prestigious this building is and they only looked at the rents which were break even on the apartments .
So not understanding what they invested in they wanted out and we got it for a song .
They had to have the dumbest attorney , who never looked in to the actual values and the fact these were boomers who likely couldn’t afford to live by Central Park when they retired so a buyout of their lease was a likely option .
So creative financing does not interest me , creative deals are what I had interest in.
The creative deals we came up with in financing were really to make it easier for the tenants to take the two remaining anpar off our hands not to be creative .
Not everyone lives in New York City and is exposed to the madness of that market... THANK GOODNESS.
Not everyone lives in New York City and is exposed to the madness of that market... THANK GOODNESS.
I agree …
But the point is the issues many see here looking in from the outside as negatives , like stabilization and coop structures ,actually create opportunity that is not available elsewhere.
Where else can investors by apartments worth over a million dollars each and pay half for one and get one free
Last edited by mathjak107; 11-27-2022 at 12:56 PM..
Oh, I had second mortgages on a couple of rental condos once to close the deal.
It was creative enough, and it was prior to the current level of lending parameters. It would not happen today.
I have seen enough people who want to cut corners, work the dirty areas, lie to lenders, etc, etc.
Avoiding "playing that game" seems to be great typical behavior.
Definitions absolutely matter.
Typical behavior?
Working to protect people from gray areas and/or outright grifting?
I will live with that.
Stepping in when people like you want to encourage a guy who disdains brokerage licensing requirements while simultaneously showing he is greener than grass, when he is trying to learn "game" rather than competence?
Seen it many times.
I can live with my behavior, based on experience.
Oh... I was working on my second house when you started playing your little games.
I just don't live in that past as an example to impress greenhorns.
WOW! I'm impressed! You ONCE wrote up a contract with a second mortgage in it (for the principal parties to do). Absolutely amazing!!! You probably won "Realtor of the Year" for that I suppose.
BTW, no one said anything about "cut corners, work the dirty areas, lie to lenders". All of that is simply a figment of your imagination that you thought up with no basis in fact. I have not said or done a thing that was unethical, untruthful, or misleading in ANY of my dealings... nor have I suggested that anyone else do that.
Jackmichigan, I'm a big fan of the HELOC as a tool for doing your own financing when you have run out of options. In fact I'm using it to buy a commercial property right now. The seller didn't want to do any seller financing and I didn't have the time to use traditional lending as there were 5 other offers on the property that were all scrambling to get the ever changing commitment letter due to the increases in rates. So the plan was to go all in with cash (including heloc funds), then pull it out later after close using traditional financing when I have the time to shop it around. The seller accepted the deal and the hero in this story is the HELOC. My equity was there when I needed it! Keep the financing stories coming!!
Not sure that I want to wade into this thread, but I've never used traditional bank financing for any real estate acquisition. I once did get a HELOC on my primary residence to buy a rental property but that was a bit different.
Mostly I've used Land Contracts (aka Contract for Deed) and private unsecured loans. A wrinkle in many of my deals is that I prefer to first get an Option-to-Buy. An Option locks in the purchase price yet gives me time to line up the private financing. Six months has been the usual, with a provision to extend the Option for another 6 months upon further payment. It's worked out well as all payments, although non-refundable, have been applied towards the purchase price. Options work best on land since land usually takes longer to sell and Sellers seem more amendable to granting an option, since they figure it's going to take a while to sell anyway.
In a couple of cases, I've also used Land Contracts as a virtual substitute for an Option. Just last December I bought another property on a Land Contract. Small down payment, still held in escrow. One year Land Contract with the balance due in full within that time. Zero percent interest. So, according to Michigan law, I have owned the property since last December but I won't get the actual Deed until next month. I just received a commitment for private financing for 50% so I'm good to go. Hopefully I can flip it in 2-3 years. Bought it for about a quarter of its value from an investor who was hoping to make a killing. He's losing a lot by selling--but he would have lost it all had he not sold. He suffered from big dreams and little experience.
Interesting! Thanks for contributing.
We actually had a pretty decent thread going here until "someone" couldn't stand the fact that he had nothing to contribute, so he jumped in and picked a fight just so that he wouldn't feel left out.
Jackmichigan, I'm a big fan of the HELOC as a tool for doing your own financing when you have run out of options. In fact I'm using it to buy a commercial property right now. The seller didn't want to do any seller financing and I didn't have the time to use traditional lending as there were 5 other offers on the property that were all scrambling to get the ever changing commitment letter due to the increases in rates. So the plan was to go all in with cash (including heloc funds), then pull it out later after close using traditional financing when I have the time to shop it around. The seller accepted the deal and the hero in this story is the HELOC. My equity was there when I needed it! Keep the financing stories coming!!
Good move. As I've mentioned before on here, I used a HELOC about 6 years ago when I owned two homes (principal residence and summer home) and wanted to buy a different summer home before I sold the one I already owned. That made the transaction much simpler, quicker, and MUCH less expensive. I avoided thousands of dollars in closing costs by using the HELOC.
Once I closed on the third place, I put the other summer home (a condo) on the market (FSBO, of course) and sold it quickly to a lady in the same development. I don't want to mention that I got almost my full "asking price" or someone on here might have a coronary.
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