Can anyone give me creative ideas on this deal??? - Posted by Curt (sdcs)

Posted by Curt(sdca) on April 21, 2000 at 11:54:12:

My intentions are to either
1- Flip it (I think I can get 160, but my question is with the cost of selling holding etc. can I make a profit and is it worth the risk?)

2-Lease option with an option to buy in a year or two with me carrying paper. Is this a ok idea carrying paper,if I recieved all my money back from the deal and carried 30,000? (I figure my payments would be 1,300-14 per mo. including insurance etc.)
3-Rent it for 6-12 months and sell it since the market in san diego is appreciating like crazy, some areas had a 40% increase in home sells with something like 13% median increase. The drawback to keeping it for a year is that I would have a negative cash flow of anywhere between 200-300 monthly…

As far as myself financially and credit worthiness my wifes and I credit scores are 700+ and good incomes I also have to other properties one being a rental (which has appreciated about 40% since we bought it last april which is what really gave me the itch. and an owner occupied residence.)
I will need to close a somewhat short escrow 2-4 weeks due to her 1031.
Also does anyone know of any 90% non owner occ. where the 10% can be gifted/owed from a family member or collateral or borrowed $$ on another house,

Can anyone give me creative ideas on this deal??? - Posted by Curt (sdcs)

Posted by Curt (sdcs) on April 20, 2000 at 22:09:45:

I found a hous FSBO in the sunday paper about 3 weeks ago. the asking price was 159,000 comps were about that +/- 10,000-20,000 (odd location 1 block away from million dollar homes one way and a pretty bad neighborhood the other. this house is middle of the road).
The owner is doing a 1031 and needed a 30 day escrow. I offered her 130 explaining that I was buying it as an investor and could not pay any more and she did not sound real pleased so I asked if I could call back in a couple of weeks.
Today she called me and told me she listed it with an agent but wrote the contract with an exclusion that if I were to purchase the property she would not have to use the agent. She has to monday to remove that. She said to me that if I could come up to 139,000 she would do it (it is now listed at 149-)
My question is what are some options I could do with her.
-should I pay 139 and ask her to carry some paper.
-how could I structure it so I had to put as little or no down as possible. (it is non-owner occ.)

Also once I get it I thought about selling it. Could I ask for a little more than market value and offer soft terms like 5-10% down and carry 20-30 thousand. Please help with all ideas…

Re: Can anyone give me creative ideas on this deal??? - Posted by Ed Garcia

Posted by Ed Garcia on April 21, 2000 at 09:58:48:

Hi Curt.

The first thing I would do Curt. Is go to this lady and explain to her that who ever looks to buy
this house, is going to attempt to negotiate the price down.

That’s not an unreasonable assumption. When negotiating, it’s not unreasonable for a potential
buyer to want a 5 to 10% discount. Let say they get her down 5% which is $7450.

Also She is more than likely going to have to pay a 6% sales commission which is $8493.

Now we add $7450 + $8493 = $15943. Sales Price $149,000 - $15943 = $133,057.

Curt, you can now show her that if she takes off a reasonable negotiated amount and pays a sales
commission, she is only going to net $133,057.

You can explain to her, that your aware that time is of the essence and that even if she sells it in
30 days, it will take at least another 45 days to close after that, which could endanger her 1031 exchange.

I would offer her $125,000 and she will more than likely counter at $130,000.

Curt, trust me, if I were working this deal, I would hit this lady a lot harder and with more arsenal than
I’m sharing. I’m doing it this way for your benefit and experience level.

Curt, you tell us nothing about yourself or what your intentions are with the house. (?)

We don’t know anything about you, your credit or financial position. (?)

We don’t know if you want to buy it as a renter, or buy it to flip. (?)

These are important questions, because I may have a change of attitude has to how I’m going to structure
the financing of the deal.

You mention, should I ask her to carry some paper?

Curt, you need to talk to this lady, ask her a lot of questions such as to how much does she owe on the property ? does it have an assumable loan ? What are the payments ? What’s the interest rate etc ?

I feel you still don’t know enough about this deal, to fully understand her motivation.

There are several ways this deal could be worked depending on you situation.

Being none owner occupied, then there’s 90% financing available.

There are many ways to get creative in this deal, such as what Mike suggested. However that’s only one way and it also, could take more time then allowed.

Mikes suggestion is more than likely not the right answer. He has chosen that possibility because he is
familiar with that financial technique, and from what I understand, is good at it.

But I can see so many better ways to do this deal depending on the circumstances of this deal.

Ed Garcia

Consider this… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on April 20, 2000 at 22:56:11:

If you are going to pay her CASH then you need to drive a hard bargain over the price. Remember you have a motivated seller here who may be facing the clock to complete a tax defferred X-change.

Lock in the sales price with her and then inform her that you will pay cash $130,000.00 +/- for the home 45-60 day closing

You then market the “lights” out of this property and offer to finance the sale to prospective “retail” buyers who will pay you $159,000.00 putting down anywhere from 5% to 10% of this sales price in CASH. You will agree to finance the balance by taking back one or two notes dependintg on the strength of the prospective buyers (their credit, employment, stability, etc.)

The 1st lien note is sold for CASH at the time of closing and that cash in addition to the buyers down payment is used to put a few dollars in your pocket and also pay off the seller to you for their $130,000.00 +/- sales price.

You moved right through the property and earn some cash at closing and perhaps also retain a 2nd lien secured by the property that would represent additonal profit to you.

The most amazing thing I see day in and day out with property sellers and their realtors that I counsel is their willingness to automatically lower their sales price when a property has not sold quickly enough.

What they should look at instead is an alternative way to expose that property to the GREATEST pool of potential buyers in the marketplace. I have found that the best way to accomplish this and to get the phone to ring is to advertise that the OWNER WILL FINANCE with NO bank qualifying, down payment required…

If you need some assistance putting this one together feel free to ring me, I am always happy to see if I can help.

To your success,

Michael Morrongiello