Market Analysis and Location Selection
Financial Analysis Considerations
Frequently Asked Questions
Why Would A Property Sell Off-Market?
There are many reasons that a property owner would decide to sell their property without taking it to marketing, including:
Fewer commissions and finder’s fees paid to brokers, which means the seller will net more on the property
Less “sales” risk, since tenants can see on-market properties as a risk to their business and will sometimes move elsewhere
No lowball offers and time-wasting tours from unsophisticated buyers that don’t have the ability or don’t intend to actually close on the property
And less intrusion or unwanted attention upon the operations of the asset
Now, there can also be drawbacks for sellers that let their properties go off-market.
Since they’re not releasing the opportunity to all potential buyers, they may not get the most competitive bidding and could lose out on earning top dollar for their asset.
Why You Should Find
Off-Market Properties?
Better Negotiation
Position
When you’re the sole potential buyer looking at the property, you’ll naturally find yourself in a better-negotiating position.
On-market opportunities, especially ones that are high-quality, will be in-demand and prospects will drive the price up or give the seller a strong position from which to negotiate, meaning you may not get as good of a deal.
When buying commercial real estate, you want every competitive edge you can get.
Privacy
Depending on how high-profile the property or parties involved are, you may not want the local papers or other sources discovering what you’re working on.
This privacy will give you the opportunity to work on your plans in peace without having to answer intrusive calls from other brokers, reporters, and neighbors.
Seller Flexibility
In my experience, working with sellers to buy their property off-market will often lend itself to far more flexibility with the deal terms than you’d otherwise find.
You may be able to work out a longer due diligence period, have more candid conversations with the seller about certain aspects of the deal, or get an outstanding price.
Off-market deals can also become far more creative and you could negotiate seller financing terms, a partnership with the seller where you won’t even need to come out of pocket, or any number of other opportunities if you’re willing to flex that muscle.
Not having to deal with multiple parties can alleviate the stress from a seller and make it easier for them to just work with you.
How do foreclosures work in Texas?
Under Texas law, a lender has to use a quasi-judicial process to foreclose a home equity loan. In this process, the lender must get a court order approving the foreclosure before conducting a nonjudicial foreclosure. Also, Texas law doesn't allow deficiency judgments following the foreclosure of a home equity loan.
How long do you have to move out after foreclosure in Texas?
You do not have to move out on the sale date. If you are still living in the home after a foreclosure, the new owner will have to evict you. You'll get a notice to vacate (usually giving 3 days) before an eviction is filed.
How can I stop an eviction after foreclosure in Texas?
Filing bankruptcy will stop the foreclosure process until the court has ruled on the viability of allowing the borrower to restructure or repay the mortgage. The homeowner also has until the sale date to stop the foreclosure process by paying the full amount of the mortgage loan plus any fees and interest accrued.
Are deficiency judgments permitted in Texas?
Yes. A deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount which the underlying mortgage secures. In Texas, the lender may obtain a deficiency judgment after a non-judicial or judicial foreclosure. (Tex. Prop. Code §51.003, §51.004).
Is there a deadline for the lender to obtain a deficiency judgment in Texas?
For non-judicial foreclosures, the lender must file a lawsuit to obtain the deficiency judgment within two years after the foreclosure sale (Tex. Prop. Code §51.003).
How many payments do I need to miss before I lose my home to foreclosure?
After one missed payment on your mortgage, you are in breach of your agreement with your lender/servicer. Although most lenders/servicers do not start foreclosure proceedings after only one missed mortgage payment, late charges apply and over time can add up. If you continue to miss your payments, it will make it harder for you to catch up. Many/most lenders/servicers will start the foreclosure process after you are two to three payments behind (in Texas).
Is buying a short sale worth it?
For now, the days of easy pickings from short sales are over. Homes in pre-foreclosure and foreclosed bargains are getting harder to find, too.
True, you can still find very profitable deals with a short sale. But you have to work harder and smarter to hunt them down.
If you’re interested in buying a short sale home, you still need to get pre-approved for financing. That step, at least, you can start right here.
Pros and cons of buying a short sale home
The biggest benefit to buying a short sale home is the chance of finding a great deal.
And unlike with a foreclosure, a short sale home is likely to be in good condition.
Often, the current owner will be still in residence and keeping up basic maintenance. A foreclosure, by contrast, might be in disrepair.
Some home buyers choose to put up with short sale complications because they could buy at a bargain price. But you should be fully aware of the potential issues before considering a short sale purchase.
Can I afford an rental investment property?
Purchasing an investment property is entirely different than buying a primary home.
Also, since you are not planning on living in the rental property, you need to secure a standard mortgage loan with the following federal requirements: financial reserves based on property value, the number of rental properties you currently own, creditworthiness and more
Does the math work?
For a rental property to make sense – it should meet these math requirements:
The 1% rule: If the rent is 1% of the sale price, it is worth looking at!
The 50% rule: “You want a mortgage payment (not including taxes and insurance) to be less than 50% of the rent!
. Make sure you really know what your property’s income will be. And make sure that you have budgeted adequately for all expenses, including utilities, repairs, vacancy, and reserves.
Which area is right for you?
Each Investor is different. This is the purpose of having trained real estate professionals to assist you locating the correct property and provide solutions through your potential projects.
Do I Understand What I’m Getting Into?
Being a landlord is definitely a hands on experience. It also takes tenacity and perseverance.
While the rewards can be great, land-lording can at times be quite the task.
Is This Really a Good Deal For Me?
If the numbers really are working from question two above, it is time to take a step back and think about you and how you plan to operate.
before you buy, just stop and think a bit about how this deal will affect you, your investing goals, and your lifestyle.
What If I Don’t Like Being a Landlord?
Many people never even think to ask this question.
Perhaps you can turn the property over to a management company, but that comes with its own set of problems and additional costs that may tip the cash flow negative.
What Is My Exit Strategy?
Do you plan to hold on to this property until you die?
When you are ready to sell, who will you sell it to?
The thing about investment properties is that most often there is little if any retail market. That being the case, as a new investor you have to understand that the only person you are likely going to sell to at some point in the future is another investor.
What happens to the original homeowner after a short sale is closed?
After a short sale, the lender may forgive the entire debt even though the sale’s proceeds didn’t pay off the entire mortgage loan.
Other times, the lender may pursue a deficiency judgment against the borrower through the courts in an effort to recover the shortfall. A homeowner who asks for a short sale should try to get a waiver to prevent the lender from trying to recover the lost money in the future.
The homeowner’s credit will be wrecked for a time, but it will typically recover more quickly after a short sale than after a foreclosure.
What are some Obstacles to expect during the short sale process
Multiple debts are owed. If the homeowner borrowed from multiple lenders, the “junior lien holders” might block the sale. These lenders often receive little (or no) money from short sales. An example would be a home equity lender that secured debt against the home after the original mortgage was taken out.
The seller could cancel the deal. This sometimes happens when the primary lender asks the seller to contribute to the closing costs and the seller balks.
The bank accepts a competing offer. This can happen even after you make an earnest money deposit and pay for a title search, home inspection, etc.
