Creating notes with graduated payments ? Or whatever will work (long and rambling...sorry) - Posted by Andrea

Posted by Michael Morrongiello on April 27, 2000 at 17:16:20:

Welcome to the customized world of free form financng VS “off the rack” lending.

You need to take a good hard look at your numbers to see what you NEED to make them work. Assuming the seller is motivated and owns the property free & clear or has a large equity, then negotiate with the seller to finance you.

Yes he can take back a note with payments and interst lower during the first year or initial few years and then to increase, etc. - Let your imagination run wild and see if you & the seller can agree.

If the seller really wants some CASH, then a note funder like myself can come in and cash out some or ALL of the note with that seller to get him/her a lump sum.

To your success,

Michael Morrongiello

Creating notes with graduated payments ? Or whatever will work (long and rambling…sorry) - Posted by Andrea

Posted by Andrea on April 27, 2000 at 10:52:52:

Hope this is the right place to post this…it’s interesting to have to decide where is the best place sometimes 'cause it helps to clarify the questions that really need answering.

I’m struggling with my note education… partly 'cause I’m having to learn everything in REI from scratch.

Earlier this week, I posted on the main newsgroup
re. a property that’s been offered to us and didn’t get anything but a ‘run for the hills’ from MrCapital… undaunted and wanting to use this as an exapmle to learn from, I proceeded to the court house on Tuesday.

Here are the details:

7.5 acres w/older mobile and small shop building
300’ of highway frontage (but not direct access)
no zoning
deed allows for 2 SFH
access is off private road maintained by the subdivision behind

Owner wants $119,000 @ 10% w/ $10,000 down (his standard has been 10% anyway… he threw this our way just before heading out of town for a week, so I’ll have to clarify that) But the upshot is that he’s been wanting to rent this (came from a 1031 exchange in January), but hasn’t been able to; we have friends who will move in as soon as we say go. He’s rejected them as tenants before.

Only listed comp I could find is 7ac further south (not as good location) for $95,500; that’s bare land.

Other smaller pieces (2acres or less) are running more like $30-$35T/acre

Here are the drawbacks that we’ve come across:

The current septic arrangement grants easement to the neighboring acre w/a commercial building it was once part of the same lot (some family feud caused the split 15 years ago…couple of brothers fighting over a woman of all things )

The ground water is very close and the county guy (called himself ‘the final word’ ) said, well, I can’t kick you out, but there’ll have to be raised systems used there when the old one fails, which he quoted at $9,000 ea.

Now, one of the things I’ve been struggling with as I dink around with the numbers as best I can is the idea of ‘over paying’ for a property in order to get it to cash flow… sounds nuts, right?

Let me explain…'course the goal is to have no money in this directly:

That road frontage piece (less than an acre) could be sold to the guy who now owns the acre that was split off in the feud… he has the best access to it and when we brought it up in passing, he said ‘YEAH, I’ll take the frontage!’ as if we would be making a doofy move. Really, I would view it as a win/win tpye thing. It’s of no use to us w/o the access (it will NEVER have direct access because they are currently widening the road and will be encouraging common access from now on) and could be used towards the downpayment.

A 2ac back strip, which would include the other yucky corner of this property… (it’s kind of swampy) would be included in the subdivision process (have a surveyor looking at the possibilities this week; free estimate) and developed for use as a MH rental lot which I would find a cheap mobile to put on. I also want to get commercial use listed back on the deed.

Now to the point of graduated payments; near as I can figure:

FMR (currently) is only $500 as it sits and I figure the payments to be close to double that.

Developing that back piece will certainly up the income about $200/mo (I plan to include a trade for a well and septic system with the owner and neighbor in the price somehow; they have the tools available) and selling the trailer that’s there now ‘Lonnie style’ will help with the payments for a few years (+$200)

My idea is to find a way to pay less a month until all these incomes can come around to supporting the payments… the remaining four acres could be used (eventually) for mini storage, or as our ‘dealer lot’ for Lonnie deals, or whatever… Or maybe later refi for lower rate will be possible, Or maybe, we sell it down the line, Or maybe we only sell the back section for some reason later… flexible is my middle name :wink:

Can anyone help me with the math to make this a deal?

Have a wonderful day!