Posted by Rob MacFarland on November 22, 2000 at 10:59:44:
ED,
Your response reminded me to ask you a question on flipping … especially in a case such as this. When you are sucessful with a FLIP, everyone wins. But what if you attempt a FLIP with an “option” or “contract with weasel clause” … are unable to find a buyer … and do not buy the home. Have you told your sellers up front that this may happen? Knowing that “reputation” plays a big part in this industry I am more than curious. Thank you.
I came across an ad in the Sunday paper, the headline read, “Distress Causes Sale”. That caught my attention. I called and these are the details. The house is a 3/2/2 in a growing, desirable area of town. Its FMV is around 135-140K. Selling price is 120K. The owners are approaching foreclosure and owe 8000 in payments. The PITI is 1200 per month. All they want is to get out from the property, and are willing to do a lease option.
My problem is that I don’t have 8000 to make it current. I was thinking about using a Tenant Buyer’s $8000. Does this seem like too much to ask for an option payment?
I welcome any other ideas on how to work this deal.
Re: Any suggestions for this deal? - Posted by JohnBoy
Posted by JohnBoy on November 22, 2000 at 12:02:10:
Rather than mess with trying to do a L/O with this deal and having to find a tenant/buyer with $8k to put down as option consideration…offer to take the loan over subject to.
Before you record the deed, find a buyer first. Once you know you have a buyer then you can record the deed and take over the existing loan. Now that you are the OWNER of the property you can offer to SELL it with owner financing. By being able to offer the financing you can get more down that a typical L/O. You get between $10k - $15k down and finance the balance amortized over 30 years at 11% - 12% on a contract for deed with a 2 year balloon. Now you can use your buyers down payment money to bring the loan current and still put $2k - $7k in your pocket, make positive cash flow every month and have a nice payday on the back end when your buyer refinances in 2 years. If the true value of the home is really worth $140k today, then you should be able to sell it with owner financing between $145k - $150k!
Re: Any suggestions for this deal? - Posted by Ed Garcia
Posted by Ed Garcia on November 22, 2000 at 10:13:06:
Aaron,
I think you’ve got a handle on this one. Structuring it as a lease/option was right, or as a FLIP was even better. I feel to get $8000 down when doing a sandwich lease on this size of deal is unrealistic, and by the time you ad the $8000 to the deal, you’re at $128,000 not counting debt service and expenses. If you were to use your own money, you would want a better deal. What you don’t tell us is, what is owned on the property. Maybe there is more room it this deal? But if there’s not, and the seller owes what they’re asking, PASS.