Sounds like there was a bit of appraisal fraud cooked in there. 33% over market value is a lot. Even still, money down is money down. It's not here's 40K, pay the buyer 30K, *then* pay money down. Or did he bridge finance with a credit card? Or maybe a loan shark? I have friends who boosted downpayments with outside loans. That's illegal, where I'm from. You realize if buddy tried this in '04, he would have been taken to the woodshed? Sorta ironic because a quintupling of home prices over 5 years is a once-in-a-lifetime event. That guy must have levered himself to the absolute tits. Any whiff of a soft market and that guy would have tanked hard. From what I know, and I don't know much about it, it takes 15-20 years for a rental to pay for itself. Given the guy was buying a *few* properties each year, by the time the 3rd year rolled around, the rent barely paid 15% off the first property. Let alone, all the rest. So he must have HELOC'd the entire she-bang. And then the McD's on top of that. It's not really a story of ingenuity or hardwork. More like total ignorance mixed with break-neck leverage. A tall tale, to be sure. A lot of "Highroller" legends, gamble like that. Your friend got very lucky he lived through that RE bubble. And it didn't pop before he could finance a drop with outside income. I'm not saying flipping can't make you rich. I know a few people that got rich from it. But over decades, not a few years... Unless of course, they cashed out right before the axe dropped. But that's blind luck. Like that ole grouch Timmy Geithner kept prattling on about it. Ironic?
Wow, you ought to consult with the banks and the state's attorney general's office. I just grabbed 2 of the local papers for the week and looked for the foreclosures. Every single property going to the foreclosure auction had an appraisal value and a disclaimer that no property could be auctioned for less than 70% of the appraisal value. I then called a realtor and he told me that a majority of those properties barely get sold for the minimum. That's 30% equity at closing. He also told me that about half of them are actually worth remodeling and flipping. He said he picks up one good one a year himself. The other half are tear downs. If I had the initiative it would be worth buying a few of them but as I stated earlier, it's too much work for me.
His 1st McD's broke ground in 2001 and was leveraged to the hilt. I remember him putting in 60 - 70 hours a week in the beginning to make it a success. Those hours are more hours per week than all of the flamers in this thread have ever put in sweat equity in any project they ever attempted. He's an outstanding person. The flamers in this thread . . . not so much.
Maybe you can educate me because I only bought a property with money down. So you're saying as long as the appraised value is higher than the closing value, the difference can be used toward the downpayment? Meaning the bank doesn't ask for the downpayment before they provide the loan? How does that work?
It's not that cut and dry. A lot of it depends on the person purchasing the property. If the bank knows the person is good for the loan, good credit, they've done business with them in the past, they've made money from transactions with them in the past, etc. This is the way banks use to do business, when they made money the old fashion way. In our community we have highly stable and successful local banks and we have national banks. The local banks are profitable, successful and have money to lend on quality projects and to good credit risks. The national banks are profitable, successful and are broke when it comes to loaning money to successful local businesses and successful local business people. Things than make you say . . . mmmm.
you mentioned complaing about the govt for 35 years,i Assume that started in your college years,that would be in the 70's, did they have crack in the 70's