If you were to go after....

[txrigdiver]

properties with a strategy of no money down and with owner financing

1) What would you look for on the positive side and what would your warning signs be?

2)What would your exit strategy be and why?

Rhetorically)Guess what I want to figure out how to do correctly and effectively?

[Tom Henderson]

properties with a strategy of no money down and with owner financing

1) What would you look for on the positive side and what would your warning signs be?

2)What would your exit strategy be and why?

Rhetorically)Guess what I want to figure out how to do correctly and
effectively?


Good question. The answer will depend on your goals, and how you structure the note. The positve side is that you can structure the note anyway you want, or if you can negotiate, you can change the note after you have signed. You can build in discounts, you can substitue collateral, you can have the holder subordinate, you have have step payments, you increase or decrease payments etc..the sky is the limit. For example, recently a new investor heard a presentation of mine, and got an almost nothing down deal. She got the property for $2500 down, to be applied to the note. (The seller had no money, so there were going to be closing costs. She just paid them and subtracted it from the note.) She has a year to pay the remaining $7,500k. If she does not refinance or sell in 6 months, she will have to make a $2k payment, the remaining $5,500 will be due in a year...Did I mention NO PAYMENTS?) By then she believe she will be able to refinance. You can see the possibilities are endless.

On the negative side, if you are going to hold and are wanting cash flow, getting in with zero down will mean that debt service could be high, and put you into a negative cash flow, so be careful. Also be very careful about balloons. They have a tendency to come back to bite you. Anybody who thinks 60 months is a long time never has taken out a 5 year balloon. There are ways to bust balloons.

On the positive side of an exit strategy, you can structure the note to let it be assumable, with no recourse on you. Nice, huh?

Know how to use notes and the time value of money to your advantage is an excellent way to increase your wealth, and as John Michael says, "Create Deals".

Hope this helps.

Tom Henderson
H&P Capital Investments LLC
214.575.8292
www.hpnotes.com

[txrigdiver]

Tom, Thanks for your time. I'm fascinated with this way of purchasing property and at the same time knowing that the sellers unique circumstances create the motivation to sell their property this way, it almost seems to good to be true for people doing these kinds of purchases (me pretty soon) and awfully risky for the property owner doing the financing. I guess all that shows my lack of understanding about this method.
The answer will depend on your goals, and how you structure the note I guess my first posting of the question wasn't written very clear, sorry about that.
My goal would be to generate cash flow on a short term basis but always keeping my eyes out for the property that I could keep long term to generate on going cash flow, like a good rental.
Originally my question was geared to the characteristics of individual properties and what the positives and the negatives of the property/condition/financing would be so I would know which properties to target hoping for a better success ratio.
I've worked that out one out. Any property for sale is a target and only after making an offer or sending a letter will I know whether the seller is properly motivated and that's the first part. Narrowing it down from every property for sale I could target expired listings, fsbo's, and properties that are looking for renters.
OK, now I know who to send letters/offers to. Is there a general formula or some kind of script or sample letters, or even boiler plate letters to use when making a no money down/owner financing offer? I guess, what's the best way to open dialogue up in a way that builds trust? I can write decent enough probably and with some guidelines could probably write a decent enough letter/offer. It's all the options we have when structuring the deals where I think I'm getting hung up up at. I need to know what situations,(being able to recognize those situations) call for which strategy to use. Does that make sense?
Thanks,