Posted by LeonNC on January 17, 2001 at 02:31:57:
Jim,
Thanks for your help. The seller mentioned that she has good credit but if she has to keep the house she will either get foreclosed on or file bankruptcy. If I purchase subject to, how would it effect me if she filed bankruptcy? This should be the last major hurdle in my decision. The numbers are close.
Thanks!
LeonNC
Anything I can do with this deal? - Posted by LeonNC
Posted by LeonNC on January 16, 2001 at 15:22:38:
Seller called on my ad today. She cannot afford to make her payments anymore. She said whatever I can do the house is mine if I want it. I’m thinking a sandwich lease will work for me if I can get the numbers right. The house is in a good neighborhood and needs carpet, linoleium, and interior paint. Other than that the house is in great shape. Maybe I can l/o to a handyman.
Here’s the numbers:
ARV is 65k
1st mtg of 51k
Payments are 550mo plus 70 taxes and insurance = 620mo
Fair rent for her house is 600 in good shape
I think the only way I can do this and make it work for me is to ask for 770mo rent to own (maybe with a large rent credit). Does this sound unreasonalbe to get? I would make the agreement state that my payments don’t start until I find a t/b of course on this but I’m just wondering if you think that’s too much rent for this house? It’s a nice house in a good neighborhood that I would like to have but I’m not sure I can get that much monthly.
Thanks!
LeonNC
Re: Anything I can do with this deal? - Posted by TomC (Md)
Posted by TomC (Md) on January 17, 2001 at 10:20:27:
The real problem here is the loan payment. For a P&I payment to be $500 on $51,000 on a 30-yr loan the interest rate must be around 12.5%
If the rate were only 8.5%, you would have a P&I payment of $392.00 and a really nice L/O candidate.
If you have good credit and some resources, you could get the deed and then refi a NOO at 8.5%
How about you take it “subject to” and market it to a retail buyer? That way you minimize the amount of time you are paying the high interest rate.
TomC
Re: Anything I can do with this deal? - Posted by Jim IL
Posted by Jim IL on January 16, 2001 at 18:07:09:
Leon,
Why not get the deed?
If the seller is willing to let you have the house, then why do a sandwich L/O?
Is she behind already on the payments?
How many more can she afford to make, if any?
If she can afford to make at least one, get her to pay that to you, and get the deed.
or
If she cannot afford to make any more payments, make sure title is clear, payments are at least current now, and get the deed.
Either way, you can then sell the home however you want to.
Even if you have to hold it for two months, you can recoup those funds from the money you get upfront from a buyer.
And good terms should move any house within a few weeks time.
Good luck,
Jim IL
Re: Anything I can do with this deal? - Posted by Ron-Va
Posted by Ron-Va on January 16, 2001 at 15:59:02:
Hey Leon,
Yes I think you can do a L/O on this. I have done a couple just like this where they needed reapirs but I L/O as is. I did no work at all. If it would help you can do a little clean up but thats all.
I would L/O for $72,000 but discount it 3 or 4 thousand for them to do the work. So they are getting a deal and you are still getting a good price for the house. I would try for the $770 rent but if you have to you could take less especialy if they have a large Option fee to give you.Also I would not give any rent credits unless they ask for them. Oh yea make sure you put in the contract a time frame where the repairs have to be done or they may never get to them.
Now MAKE SURE you check out your T/B good and put someone in there that is going to pay you and who you can get qaulified for a mortage later. When you have very little cash flow you may as well get them to go ahead and close if you can. Start looking for a mortage broker if you don’t have one.
Also make the lease with your T/B for one year only so if they can’t close you can raise the rent and get more option money if they want to stay. I have two L/O right now that it states in the contract if they want to extend the L/O they have to give me another $5,000 to extend it and it is nonrefundable of course.
Hope this helps and maybe you will get some other responses from the experts here.
Good Luck,
Ron
Re: Anything I can do with this deal? - Posted by LeonNC
Posted by LeonNC on January 16, 2001 at 18:47:27:
Hi Jim,
I guess because I haven’t purchased one subject to yet I’m a little nervous about doing it. Especially with a house that has a payment that high for it’s value. Also I’m not sure why but selling on a contract didn’t even cross my mind. Maybe it’s the tax thing about selling on contract that turned me off somewhere. Two questions…
Does it matter who the lender is? I believe she said it was Centex or something like that. I’ll find out. She just refied in September but can’t handle it. She is current but is going under.
If I sell on a land contract won’t that put me in a position to have to pay taxes on the difference between my purchase price and my sale price? Is this something I should worry about?
Other than that I’m beginning to think I MIGHT do this one. If I can sqeak out some PCF then I’ll do it. She was more than open to the L/O I’ll have to see about getting the deed.
Thanks for the help
LeonNC
Re: Anything I can do with this deal? - Posted by Jim IL
Posted by Jim IL on January 16, 2001 at 23:01:38:
Leon,
I will not touch the Land contract questions, I am not the one to ask about tax issues.
But, getting the deed would be the best way, because then you own the home.
You can still sell it via a L/O.
And, you can deduct the interest and RE taxes paid on it because you own it.
That may help with the soft cash flow.
I try to not sell on Land contracts, but will IF the buyer has more to put down.
I prefer L/O’s because I feel I have more control.
Just my $.02,
Jim IL