Posted by Kristine-CA on February 13, 2002 at 17:02:22:
David: thanks for your message and all the good questions.
I’m not planning on doing any major repairs. It is a fixer in a very working-class town. It’s appeal is that I would be willing to lease option. 35K is a realistic price for lease/options and carrying paper. The problem with a lot of the deals I have been looking at is that the properties are difficult to qualify for conventional financing because they do not have concrete foundations. So while it is possible to get someone signed up for a lease/option, I think their ability to qualify for financing is problematic. And I’m not very gung-ho about the idea of taking someone’s down payment and cash stream for a couple of years only to re-possess. It appears that this has been the strategy of several other investors in this area. One of them admitted to me that he’s made lots of money over the years in this area because no one ever qualifies for a loan and you just l/o over and over again. Yuk.
I like your suggestion about assuming the mortgage and then having the t/b buy me out. However, I doubt if I can assume the mortgage. I don’t think my credit is strong enough and the loan does not appear to be assumable. Still working on that.
Funny thing about the calls I am getting. I was really hoping to do flips, but in order to solve people’s problems, it looks like other REI methods are needed. Great thing about CREonline–it’s where I heard about all the different possibilities out there. I’m glad to have the ideas under my belt. Now, on to some experience getting these deals done. Sincerely, Kristine
Advice on Subject2/Lease-Option Deal - Posted by Kristine-CA
Posted by Kristine-CA on February 12, 2002 at 16:18:06:
I sent out lots of letters to abandoned property owners and tax-default owners and I’m getting lots of calls. And of course lots of ridiculous asking prices from un-motivated sellers. I was looking for properties to flip but many of the calls I am getting need more creativity. Here’s one that I’m wondering about:
Taking deed subject-to:
25K existing mortgage owner will let me take over/nothing down
Payments $200/mo
FMV 35K
Lease Option:
35K Purchase price
2500-3000 down
Payments 350
Is this too skinny? The seller is a landlord who is burned out badly and elderly. His last tenants in this house stole all the appliances. He wants me assume the mortgage, which I don’t think can be done. But I’m pretty sure I could get him to go for a subject-to contract for a year or two. Buyers with no or poor credit and downpayments are relatively easy to find in this area.
Re: Advice on Subject2/Lease-Option Deal - Posted by Phamtastic
Posted by Phamtastic on February 13, 2002 at 01:26:18:
What letter are you using. I am getting ready to launch a letter campaign of 200 letters every 2 weeks and I wanted to know what LO letter you are using to generate your response.
Also, how many are you sending? How many times do you mail to the same list? How long does it take for some of these respondents to call you after you sent the letter?
I would love to compare notes with you on the letter that I am going to use, but if yours is doing well then it would be helpful for me to not reinvent the wheel.
Re: Advice on Subject2/Lease-Option Deal - Posted by David Krulac
Posted by David Krulac on February 12, 2002 at 18:36:31:
Obviously more equity would be nicer. you didn’t say what repair costs were? and is $35,000 a realistic sale price? what are the comps? how long were they on the market? etc.
The mortgage could be assumable particularily if its FHA/HUD or VA. How long ago did the seller buy the property? What did he pay? and what has been the appreciation in the area since he bought?
Lots of questions few answers! One exit strategy if you can find a T/B with some cash would be for you to assume the mortgage, and cash out to the T/B who would assume the mortgage from you. That would take both you and the seller off the hook, if you can find a buyer with the cash. Sometimes the T/B can get money from parents/relatives to complete the deal if they don’t have it themselves. that would bring their payment down to $200 a month, which even in Pa is cheap living, let alone in Ca.
Re: Advice on Subject2/Lease-Option Deal - Posted by Kristine-CA
Posted by Kristine-CA on February 13, 2002 at 18:01:39:
I’m sending letters to homes that I have identified as either vacant/abandoned and/or tax defaulted for four or more years. Also, these are people who I could not find phone numbers for or could not reach otherwise. The letter is no big deal. It says I am looking to buy a house in your town and is the property at … for sale. And that I am a cash buyer and will take the property as is. Lots of people say that, yes, they are selling but are asking FMV or better and really not the least bit motivated.
As for the numbers. A batch of 50 went out 5 days ago and I’ve received 10 calls. So far, there might be one good deal in there. I send follow up letters to the people who call but I’ve never done a repeat mailing.