Great opportunity? - Any advice appreciated!! - Posted by JimR

Posted by Laure on March 20, 1999 at 07:47:41:

I have heard a lot of stories where good people just can’t qualify for a bank loan. One thing or another. And they JUMP at owner financing. I have five I have sold this way since November, and NOT ONE has even asked for a discount on my price ! It’s like taking candy from a baby compared to a MLS listing.

Laure :slight_smile:

Great opportunity? - Any advice appreciated!! - Posted by JimR

Posted by JimR on March 18, 1999 at 18:27:42:

I’m fairly new at creative R/E investing and would REALLY appreciate any advice… Right now I have what I know must be a great opportunity, but I’m unsure of the best strategy! I looked at a property a couple of months ago - it is what LeGrand would call a pretty house - asking price is just over $160K and it has an assumable VA mortgage of 7%. (It is not the old, non-qualifying type, though - I think he’d have to give up his eligibility if buyer’s not a vet.?) This is a MOTIVATED SELLER!! He has not lived in the house for close to 6 months and has moved about 40 mi. away and taken a new job. The property was listed in a FSBO magazine back before Christmas & I called him - he said just make an offer - wants to sell it, will rent - anything! However, since that mag. came out - he had listed it with a broker and he was reluctant to talk to me very much - he did state however, that his mort. balance was close to $150K! (Maybe he’d accept much less?? - I don’t know.) It’s now 3 months later and he still hasn’t sold or rented it! It needs little or no work and should appraise in this area for at least around $150K.

Any suggestions on strategy - or how to turn this into a profitable situation would be greatly appreciated! My objective is either quick-turn profit - or a positive cashflow… anything that can be done with very little cash. (I just bought LeGrand’s course at the convention - but haven’t gotten it to study yet.) Any advice and suggestions from this group would be sincerely appreciated!

Re: Great opportunity? - - Posted by JPiper

Posted by JPiper on March 19, 1999 at 10:40:03:

You’ve got a lot of possibilities here.

One alternative is as Ben suggests. It’s a good alternative for people who can’t qualify right now. Whether you’re able to get $20K-$25K down is another question. But certainly you can get a respectable down payment/assignment fee, and put cash in your pocket.

The other possibility is to either take the loan over in a trust, and then resell on a wrap and/or land contract, depending on what better suits your state. Charge 10%-12% on 7% money is tough to beat, and may lead to even more money than Ben described above. The problem is that you incur additional risk by being in a property a market value, and by being responsible for the underlying loan payment should the buyer default. You can control this risk however. A 12% wrap will put in excess of $500 per month in your pocket?.plus the downpayment. Set a few payments aside for the default contingency.


This is a big money deal. You just gotta show up. - Posted by Ben (IN)

Posted by Ben (IN) on March 18, 1999 at 23:12:02:

When you get Legrands manual study the owner financing part of it. This is a “take a deed” scenario, in my opinion.
Forget about cashflow, just flip it for the quick cash. Buy it for the loan balance "subject to’, and then sell it “No Qualifying!” to a buyer who will buy it “subject to” from you, paying you $20-25K down and taking over payments.
You shouldn’t have any problems finding that kind of buyer if it is a pretty house. It will blow you away what people will do to avoid the bank.

Best of luck.

Ben (IN)

Re: Great opportunity - Posted by Ben (IN)

Posted by Ben (IN) on March 19, 1999 at 21:04:48:


Yes I did miss the payment spread there. I corrected that though.


Re: This is a big money deal. You just gotta show up. - Posted by JimR

Posted by JimR on March 19, 1999 at 10:21:07:

Thanks much for the advice… If I buy “subject to”, I guess that overcomes having to qualify? (Since this isn’t one of the older non-qualifying VA loans.) And I can pass it to my buyer “subject to” the same original loan. Right?

Two concerns, though are: 1-If the final buyer takes it “subject to” won’t it keep the original owner’s borrowing ability tied up for maybe another 25 yrs. - maybe if he’s motivated enough, he’ll accept this.(?)
2-Also, I believe that the mortgage balance is still pretty close to current FMV (~$150K). If the owner hasn’t been able to sell it in 6 mo. for $160K advertizing a 7% VA (qualifying) assumable loan… should I be able to get another $20K or so above the loan bal.- even by advertizing “non-qualifying”??

Maybe I’ll be able to find answers when I study LeGrand - but any additional comments/suggestions appreciated.


Re: This is a big money deal. You just gotta show up. - Posted by Ben (IN)

Posted by Ben (IN) on March 19, 1999 at 20:59:30:


  1. Fill out a lease or a Contract between you and the seller. Make the payments and the term on the lease the same as the loan. This is representative of the incoming cashflow the seller receives from you. It is also documentation the seller can show to his/her new lender to show he isn’t responsible for the payment on the old loan showing up on his credit report. If you use a Contract it ends up being a wash (because a management expense doesn’t have to be factored in).

  2. If the FMV is $160K and the loan balance is $150K, you will have “No Problem” getting $20K down. Especially with 7% interest. In fact, I change my tune on just selling it “subject to”. The payment at 7% is $997.95. Sell it on Contract with $20K down and a payment of $1250/mo. Pick up the cashflow for 30 yrs.

THe fact that the owner hasn’t been able to sell it means nothing! What has he been doing to attract buyers? How has he handled them? Obviously badly because he hasn’t sold the place. And its becoming a problem. He’s beginning to realize he’s out of his depth. You see this is why you do this business, because you know stuff he doesn’t. Your seller sees a house that won’t sell. But you, who understands no qualifying owner financing and marketing, see $20K down (if not more) and $1200 a month.

You see no-one’s getting an appraisal here, you can put the price wherever you want. Let the market tell you what is too high or just right. I tell you what. If you put your ad in and the house sells in a week, you know you priced it too low.

You’ve got to understand Jim that people who can’t get bank loans have slim, slim pickins when it comes to buying a house. When you put these things on the market, so long as its a nice property, they “go”!

But get it under contract first. Depends on your sellers frame of mind too, how motivated he/she is.

e-mail me if you need some help.

Ben Innes-Ker

Re: This is a big money deal. You just gotta show up. - Posted by David Alexader

Posted by David Alexader on March 19, 1999 at 14:46:13:

when you get the deed, you put it a Trust, You then sell with OWNER FINANCING, I personally don’t put non-qualifying because I check credit, not to disqualify them but to see if they have lied to me, and I tell them that. I would raise the price also, To say 165-170 depending on what you feel you can with this house. And then concentrate on selling. It’s like Ben said below you’ll be surprised at the people who come out of the would work to buy this house with huge down payments.

David Alexander