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I had a meeting yesterday with a big time investor in my area. The meeting was to discuss ways we could work together. She asked me about my business and I explained how I do CA's and SLO's, but when I talked about double closings with SLO's she laughed and took it more as a joke. Her response to my SLO explanation 1st was no one would sale there house to me for 100k knowing I would sale it to a tenant buyer in the future and make 10k profit. So, I explained to her a little more how that would sound in a conversation with the seller. After my explanation she was a little more understanding, but insisted that even if I got the seller to agree it wouldn't work because no mortgage company would finance the deal. She explained that if I bought from the seller and got an appraisal around 100k and there was a simultaneous or double close. And then Closed with the buyer and there was another appraisal for 110k they wouldn't do it because the deal would seem fishy. Maybe it could be done if there was a 2k profit but never, I repeat, never if the profit was 10k or more. She said those days of real estate are over. Especially since back in the day Mortgage companies could use their own appraisers. But have to use a 3rd party in todays market, it simply wouldn't work.

 

 

I have never actually done a SLO, so all I have is theory. So my question is, how right or wrong is she? Are SLO's dead?

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What makes SLOs more difficult these days is not the closing of them as it is finding sellers with the "equity" to make the deals work; but there are still some out there. I have never completed a double close. My guess is maybe the seasoning requirements.

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Steve hit the nail on the head. Sandwich deals are difficult because finding properties with numbers that work are hard to come by. It has nothing to do with a homeowner resenting the idea of you making money. If you can solve a homeowner's problem and he gets what he needs from you, he won't squawk at your making money.

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Also, you are not getting an apraisal at time of your agreement with seller. So when you go to close you aren't going to have an apraisal at 100K and then one at 110K. You are going to have an apraisal at time of closeing for the 110K and your contract with the seller should be at 100K or less. So your criteria should be buying the property at around a 15% discount. Wholesalers are finding properties at 30-40% discount. It comes down to being a numbers game. Ramp up the marketing and only speak to motivated sellers who need their mortgage covered and are losing money by keeping the house especially if it is vacant. So don't let anyone tell you that you can't do something. Period. Their are people out there that are finding homes at much larger discount and doing double closings. Find a good mortgage broker to work with and have all your buyers use him for their funding. They don't use your mortage guy, they don't buy your home. Same with your title company. Also, make sure you have good criteria for your SLOs. I would say 300 mo cash flow, purchase the property at 15% bellow market value, and shooting for a 15-20K profit when it closes.

 

A man is measured by the size of the obstacles he overcomes.

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Also, you are not getting an apraisal at time of your agreement with seller. So when you go to close you aren't going to have an apraisal at 100K and then one at 110K. You are going to have an apraisal at time of closeing for the 110K and your contract with the seller should be at 100K or less. So your criteria should be buying the property at around a 15% discount. Wholesalers are finding properties at 30-40% discount. It comes down to being a numbers game. Ramp up the marketing and only speak to motivated sellers who need their mortgage covered and are losing money by keeping the house especially if it is vacant. So don't let anyone tell you that you can't do something. Period. Their are people out there that are finding homes at much larger discount and doing double closings. Find a good mortgage broker to work with and have all your buyers use him for their funding. They don't use your mortage guy, they don't buy your home. Same with your title company. Also, make sure you have good criteria for your SLOs. I would say 300 mo cash flow, purchase the property at 15% bellow market value, and shooting for a 15-20K profit when it closes.

 

A man is measured by the size of the obstacles he overcomes.

 

I agree with all of the above. It seems you already have the upperhand if you believe it is possible, go get the business! All you need to do is talk to enough people to find one to say yes. One will. And then just start hitting the numbers again. I don't do a lot of networking with other investors, I find the more people in the deal (investors/agents) the more complicated it is.

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I don't do a lot of networking with other investors, I find the more people in the deal (investors/agents) the more complicated it is.

Couldn't agree more. Too many cooks spoil the broth. . .

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What makes SLOs more difficult these days is not the closing of them as it is finding sellers with the "equity" to make the deals work; but there are still some out there. I have never completed a double close. My guess is maybe the seasoning requirements.

 

This is very true, especially in the current market!

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If it is a deal with a double close and a seasoning issue I avoid the double close and just step out of the deal so it is a direct deal between seller and end buyer and get my fee in escrow for me releasing my interest.

 

Paying the seller a few extra bucks that I would have spent on a separate closing anyway for his co-op makes him happy even though the purpose was to hide a big profit by double closing. If it is too much for the seller I just add the buyer to my deal and let him buy me out using one of a few ways. Seller doesn't get the extra bucks.

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