Posted by Scott on May 02, 2000 at 14:43:58:
According to Kaiser, the owner continues to make the same payment as on the original loan - no more and no less. It seems like this would work if they obviously have an interest in continuing to live in the house and remedy their current financial problems, whatever those may be. Hoping the guy won’t pay doesn’t seem like the best way to get from point A to point B.
Advice on buying a house and L/O back to owners - Posted by Monique
Posted by Monique on May 02, 2000 at 12:29:49:
I’ve gotten severals calls lately from distressed sellers who need to manage down their monthly mortgage payment and want to sell their home. Of course, they would prefer to stay in their home; so several have asked about our buying their home, leasing it back to them (while they build up their cash and demonstrate ability to pay), and then selling it back to them in 12 months after they’ve seasoned their payments to us.
Has anyone done this?
I can see all kinds of emotions flaring up around how much they sell it to us for vs. how much they pay to buy it back – our profit. In addition to the seller’s emotions, what are the pitfalls?
Thanks!
Monique
Yes: Don’t Do It! - Posted by B.L.Renfrow
Posted by B.L.Renfrow on May 02, 2000 at 12:55:25:
First, if they couldn’t pay their mortgage, why would they be compelled to pay rent? Second, it presents way too many potential problems with ridiculous claims down the road like, “Oh, your honor, I had no idea I was actually SELLING my house to that greedy, nasty ol’ investor.”
Don’t do it. If they want you to buy their house, fine, but NOT with them in it!
Brian (NY)
Re: Yes: Don’t Do It! - Posted by Scott
Posted by Scott on May 02, 2000 at 13:59:06:
Brian,
Just curious if you have Kaiser’s foreclosure course? He in fact suggests doing the very same thing in it that you feel is either high risk or not a good way to go. It sounds like a win-win for everyone involved, as long as they understand exactly what is expected of them and what will happen if they do not perform.
Risk vs. reward - Posted by B.L.Renfrow
Posted by B.L.Renfrow on May 02, 2000 at 14:20:23:
Scott,
I don’t have Joe’s course. I have read his posts about this topic previously, although I don’t believe he has ever posted in great detail how he does these. As Mark says, his goal is to keep the difference and hope they don’t pay. If it works for him, great. I just think the potential rewards are not worth the very real risks - particularly for a newbie, which I know the original poster to be.
Brian
Re: Yes: Don’t Do It! - Posted by Mark (SDCA)
Posted by Mark (SDCA) on May 02, 2000 at 14:13:50:
This was discussed in an earlier post and I posted the same question. I have never understood how this could work. Is the investor taking a loss each month so the (now) tenant’s rent payment is less than his mortgage? If he couldn’t pay his mortgage what makes you think he will pay rent? Most people will do a lot more to make a mortgage payment than a rent payment.
I did see Joe Kaiser doing one of these and asked this exact question. His response was that he hoped the guy did not pay. (He wanted to evict him and keep the difference between FMV and his purchase price.)
Cheers,
Mark
Not enough reward, given the risk for me - Posted by Monique
Posted by Monique on May 02, 2000 at 16:25:15:
Brian,
I’m planning leaving this one alone … unless the buyer wants to sell outright.
Thanks for your (and everyone’s) input!
Monique