I've been sending out direct mail pieces to people going through foreclosure and have started to receive calls (about 1.2% response rate). No sales are imminent but now that Brookview has my application on hold, I have less confidence in my ability to close the sales. The sellers I am marketing to need quick closing and I was counting on hard money to have the wherewith all to do that.
At the last seminar I attended Don DeRosa talked about doing "subject to" purchases. His claim was that you could buy houses for "nothing down" by essentially taking over the mortgage of the person who is facing bankruptcy. But, this is not really true. You need cash to bring their payments current, you need to pay closing costs and sometimes need cash for the seller if they have any equity above their loan value.
So I am considering my options about how to increase my liquid assets:
- Capital One has offered to increase my installment loan from $14k to 30K. Interest rate will go up 2% and payments up $200/month plus a negative impact on my credit score
- Another bank says they will refinance my rental property for up to $40k cash out. I would have to pay off the Capital One loan but my net payments wouldn't increase. The cost to take out this loan is about $4k and it would take one month to get the funds.
- My wife has a garage to her condo in China she is trying to sell. Her ex has promised to buy it but he is not reliable, so I am not sure if I can count on it
- Try to re-focus my strategy to "wholesale flipping" of any properties I find.
- Start to focus more on getting private money
In my younger days I often tried the Casey Serin route, trying to get loans on top of loans and over-leveraging my self. I think that I will try patience this time and stay focused on my goals. Our need to get instant gratification often creates an urgency to act quickly and make bad decisions and settle for mediocre deals (just like the desperate teenager that settles for a mediocre boy/girl friend). When we were looking at houses this past winter my wife seemed to get impatient that we didn't buy for a long time. But in the end we got an excellent deal that continues to increase in value.
It's disappointing to be turned down but not the end of the world. So for now I will resist the urge to rush out and borrow more money and focus on items 3, 4 & 5.
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