FIRST DEAL!!! LAND CONTRACT!!! PUT ON YOUR SEATBELT!!! - Posted by Christopher
Posted by Christopher on May 23, 2000 at 08:55:38:
Here it is. I have been on this board for a while, and with your help, and members of my real estate investment group, i am attempting my first deal - put on your seat belt!!!
HERE IS THE DEAL:
PROPERTY - DUPLEX - 2700 SQ FT, EACH APT. 3 BEDROOMS
HARDWOOD FLOORS, SOME NEW WINDOWS
CONDITION - FAIR - NEEDS LOTS OF PAINT, A
FEW REPLACEMENT WINDOWS, DOORS,
AND NEW KITCHENS AND BATHROOMS.
ROOF WILL BE DUE IN TWO YEARS (est.)
ASSESSED VALUE $65,500
ASKING PRICE $42,000
TAXES APPROX $1700/ YR, OR 140/MO
INSURANCE: APPROX 500, YR
The story goes like this: One’s mother lived in one apartment, and rented the other. Mom goes into a nursing home, and son lives 2 hours away - motivated seller!! Son is selling for mom (obviously). MOTIVATED SELLER
The place needs work. I estimate…$10,000 bucks. The realtor told me that the buyer would "accept something in the 30,000’s. After allowing my fiancee to inspect the place (she is so cool), we decided to buckle ourselves for the deal. Here is what i offered:
“Mr. Realtor, I do have an offer for you. I think it is an offer that is win-win. I am willing to give the seller his FULL $42,000 dollars asking price, but i have to do it my way (The realtor’s eye became SO BIG!). I am willing to give the seller $4000 bucks down so that he can cover his upfront closing costs, your commisiion fee, etc… (This will leave a $38,000 balance). I will then give the seller $380/mo for 100 months ($38,000) with no interest.”
I have excellent credit, and i think the guy will accept. In my eyes, this is a no money down deal (basically)(i will explain) and i am getting the property for essentially $31,000 bucks. AND the property is paid off in full in 8.3 years.
NO MONEY DOWN: I placed my 4000 bucks in
a CD at the bank; the bank in turn lended
me a $4000, cash secured loan . I am getting
5% on the CD, and paying 8.45 % interest on
my loan. (the difference is negligible). I
then give the 4000 i loaned from the bank
at the closing.
DEAL: The devil is in the details. I offered him
$38,000 over 100 months AT ZERO INTEREST. If
you figure the present value of the term ($380
mo for 100 months) at the going interest rate
(assume 9%), the present value is equal to
TOTAl: I bought the property for 26,666 + 4000 =
approx 31,000!!! AND the house is paid off
in 8.3 years (100 mo / 12)
STRATEGY: Live in one , rent the other. This is a
huge benefit to the seller. I won’t just
walk away and let the place fall down. I
should be able to rent the one apartment
for $500/ month after fix up. my monthly
costs (without assuming repairs) is
($380+100(pay back of 4000 loan)+140(taxes)
+$42/mo (insurance) = $662. My cost
for living there is: $662 - 500 = 162 plus
utilities. I will later rent the other unit
for 500 and make a profit.
However, i have never done one of these deals before so any advice on what i should do in terms of the legal end would be appreciated. I am getting a lawyer. AND comments on the deal are appreciated.