Re: DEAL 1, - Posted by CGS
Posted by CGS on August 02, 2011 at 12:50:27:
I have some more info regarding this deal. Please let me know your thoughts and if this changes anything.
My contact has actually put a deposit down that is non-refundable pending his satisfaction with the house inspection of 1,000$. He is signing at the end of August and had this couple in mind that he had been working with when he purchased the house.
The couple that wanted to buy this house had foreclosed on their last house and their credit was destroyed. The husband works as some kind of trucker and makes ~4,000$/month of steady income that has been verified by the contact. The couple has saved up 14,000$ for the down payment and has provided proof of funds to my contact as of today.
The house itself is comped at about 40,000 and I have the address (any reason why I shouldn’t put the link here?). Description of hte house on zillow is “BRICK FRONT 3 BEDROOM 2 BATHROOM CAPE COD. THIS MOVE IN READY HOME HAS NEWER WINDOWS, FURNACE, AIR CONDITIONER, COPPER PLUMBING AND DIMENSIONAL SHINGLE ROOF. LARGE KITCHEN WITH A PANTRY AND BREAKFAST BAR. LIVING ROOM HAS A FIREPLACE, COVE CEILINGS AND BUILT INS. GREAT ROOM OFF THE KITCHEN IS THE PERFECT SPOT FOR A DINING ROOM AND ENTERTAINMENT SPACE. THIS HOME HAS A GORGEOUS HUGE FENCED BACK YARD WITH TONS OF PRIVACY.?More”
The pictures are numerous and look like it is probably nice.
Now the workings of the deal…
Contact has done this deal before and has all legal paperwork in order. The paperwork provides for his inspection, requires the purchasers to buy homeowners insurance and put the land contract provider on the lease, and stipulates a 2k non-refundable down payment at closing. The closing will be done with all three parties present and signed back to back. The land contract purchasers will be repaying us for the closing costs of the pro-rated taxes so closing costs will be around 500 dollars my contact says. The contact wanted 3k, I’ll probably ask him to take 2,500 since that was my original estimate and used in my calculations.
My contact asked for my tentative decision by tomorrow evening. I told him I would give it to him and that it would be pending a thorough review of documents/the house/the couple by me.
-Contact paid 1k down and bought a house for 35k with payment due at the end of August.
-Couple will buy it for 50k with 14k down (proof of funds provided) and 8% over 6 years
-Contact was thinking 3k for finders fees/leg work/etc.
-Contact has already done background/financial checks
-Calculations above change slightly and the return on this investment is 14%/year + reinvestment of the funds as principle/interest is paid. I know the 14% is less than you usually look for but this seems like an extremely passive/safe deal and once the money starts coming back I can reinvest it possibly increasing the effect rate of income?.
-I have loans at 7%/year for school that could be paid but I will have a stable income as a Dr. and am willing to take a gamble now if I can make money now
-I have more funds to do other deals.
Does this change anything for you? Would you do this deal? Thoughts?