Determining strike price - Posted by Courtney Kostelecky

Posted by Brent_IL on October 28, 2003 at 15:35:33:

Keep in mind that asking price isn?t the same as market value. Coming down on price $10K isn?t relevant if they were asking too much to begin with. In my area, cash-to mortgage sales have approximated 95% of asking price for the past 25 years. A real estate agent can give you the local numbers from the MLS.

I routinely do Purchase/CFD by buying on one set of terms and selling with another. I mark-up the true market value by 10% and sell with a 1% of contract price monthly payment. That?s about all that a first-time home buyer can handle. For me, it?s sort of like a 1.1% rent-to-FMV ratio without the expense of running the property.

Currently, three to five years isn?t a long time if you are counting on a T/B to refinance as your exit. I?d give your T/B two years. You can always extend it at your option. You want time to get someone else in, if needed, before your balloon comes due. The certainness of a R/B being able to get a loan isn?t the given that it once was. One of the reasons that I rely on substitution-of-collateral so much is so I can sell or refinance if my R/B?s can?t.

The thinness of a deal has a relative significance. Financing has no impact on appreciation. If you have little to lose and every thing to gain and the seller has full disclosure, thin deals are O.K. Basically, that?s what L/O?s are all about. The thing about thin deals is that if things don?t turn out the way that you anticipated, you can get wiped out quickly. It?s imperative that your contract with the seller doesn?t impose obligations on you that you can?t meet under adverse circumstances.

Determining strike price - Posted by Courtney Kostelecky

Posted by Courtney Kostelecky on October 27, 2003 at 20:24:45:

Hello all. Relatively new to the board, but have found if very helpful, and a thanks to all who have responded to my previous posts. If someone is asking 109 (market value) and you can get it for 100 (9k spread) and then re-market it for 119 on a 1 or 2 yr l/o that seems to be a good deal. My question is what do you try for in general as a strike price. I know, we shouldn’t be concerned with price, but motivation but this is the reason I ask. I’ve read quite a few books on the subject of CR, and most say that if you can get terms, you can give them more money. No terms, great price. I’m finding quite a few “potential” deals where I can get the house on decent terms (3-5 year) and can get them to come down on price about 10k, but after analyzing different deals in the archives, the general consensus has been that these deals are “too thin” therefore too risky. Your thoughts…???