Thanks for your thoughts, Ron. I am definitely on the same page as you in terms of this not being the strategy to use when someone is in foreclosure or for someone who wants to stay in their home. Really just for those who already want to move but don’t have the money to do the repairs that would get them the most at selling.
The lack of control was also something that had been nagging at me, but I am thinking that the strategy is similar to Joe Kaiser’s deal with where they deed him 50% when he brings them current, so maybe some of his assurances could be modified for the situations that I am thinking of.
Enjoy your day.
I would appreciate any feedback on this strategy…especially any aspects that I might have overlooked.
The basic premise is that I coordinate and pay for repairs, taking a 2nd lien position on the house. The owner most likely would still live there, pay the mortgage payment, etc., until the house is sold. When the house is sold, we split the equity.
Example:
ARV $155K
Mortgage $111K
Repairs $15K
Closing csts $10K
Money left over $19K (we split)
I know I would need to incorporate several aspects into the paperwork, including that I will foreclose if owner is late with payments, I reserve the right to accept/decline any offers on house, use my realtor (who charges less commission), and perhaps something about the time frame in which the house must be sold. Anything else?
I know that there are other ways to structure this deal, such as subject to, but this way seems more appealing to those owners who aren’t so motivated that they will forgo their equity but don’t have the money to do the repairs. Little work on my part and a decent ROI.
It might work. I think that the profit you provide in your example is probably too little for the work.
I don’t like one aspect of it, however. That is the lack of control. You don’t own the property. You don’t control the owner making the payments to the lender. I’d recommend not doing this approach with those who are facing foreclosure. Maybe ok for those who are just cash poor and equity rich.