Alternative view - Posted by Bud Branstetter
Posted by Bud Branstetter on November 25, 1998 at 09:03:49:
Here is a list of my questions and my thought process:
1.) I can’t understand a lender refusing payments in lieu of
foreclosing on a property with an 87% LTV.
>They may be bluffing or they may just be dumb and not care. Remember
2.) Is there anything I can do to help this couple and assume the
$8,000 equity (The back payments only total $1,400.00). They just want
to “GET OUT” and hopefully save some of their credit rating.
>Have them sign a personal note or a note against their car or anything
that has equity. Not that they will pay but you may get something.
3.) The existing loan is at a 13% interest rate. I don’t think I can
refinance as “non owner occupied” due to the LTV, without a
significant amount of monetary input.
>Why bother if you can do a lease option.
4.) I’m not sure the existing occupant/ owners should stay. From my
discussions, they have a money management problems.
>I hope you aren’t planning on lending them buy. Any money goes to
the back payments.
5.) The rents would not support the existing, assumable, $630.00
>You can’t be sure you can’t find a tenant/buyer to pay that until
6.) Can’t flip…not enough equity.
>It doesn’t mean a homeowner won’t buy.
7.) Lease/Option would require a much lower payment (see "can’t
>Ah, the negative thought that says “I’ll not try because it won’t
work.” What will it cost to get the documents signed from the seller
then put an ad in the paper. 50% rent credit against purchase price.
Ask for whatever they have as option consideration from the tenant
buyer. Get enough that will cover back payments. No real monthly positive
and a small back end. I think $65K and $650/mo is a reasonable asking price.
$65K-54K mortgage-1400+(option consideration)-(650x12)/2 is still more
than you had. You can work a skinny deal like this if you do not put
out any money until you find a new tenant. The seller sould be motivated
to work with you. They need to understand that they need to move on
and have to move on quickly.
They could also give you the deed and you offer as owner financing
with a balloon in several years.
If you are so busy with the L/Os making 20-30K then pass. If it would
be a good experience to try go for it. Just don’t put your cash into
the deal until you find a tenant buyer.