Posted by Michael Morrongiello on May 22, 2000 at 22:40:01:
You may have a deal here that can be worked several ways:
Find out what terms you & he can work out for an owner financed sale? (Sales Price if owner financed, how much cash down from you, the note interest rate, amortization term, payment, etc.)
TIP: Try to also negotiate a CASH price or discounted payoff amount on the owner financing if you are able to pay off your seller in a year or less from the time of sale. You’ll see why this might be important later…
If those terms are favorable, and acceptable to you then go for it. If you STRONGLY feel the home can be sold for $70K or more it would seem you have picked up some equity here. However equity does not put food on the table , CASH FLOW does. If you do close on the home you can now go to the following exit stratergies:
Sell it yourself with owner financed terms at a higher sales price and interest rate on the financing and create a “wrap” monthly spread income position. The payment coming in to you will be greater than what is going out to your seller who you are obligated to pay. Once this note is seasoned a little bit (the more seasoning the better- now do you see why the tip above comes into play?) you can then still sell this “paper” off at a discount to a note funder (we would have interest) to convert to CASH, you would then retire the other debt owed to the seller and the cash would above and beyond this would be yours.
Lease it with an option to buy to a prospective tennant buyer and have them give you some cash up front as an option deposit, plus pay you monthly rent so that you cash flow. If they excercise their option in the future then you get cashed out
Just keep it as rental and rent it for positive cash flow and equity build up over time.
Do your homework on the value, estimate the repairs, and move quickkly if it all checks out.
To your success,