high fianance on luxury home, Ed can you help? - Posted by Scott Az

import · February 11, 2001, 10:50am

Posted by Remye@email.com on February 12, 2001 at 21:32:11:

Scott AZ
You already know a deal like this is hard to pull off, I was thinking you should try to get the house under contract for 60 days while still allowing the owner to continue to market the home on his own. I’d then start up the old publicity bandwagon and contact the local radio, TV, and news papers to drum up attention. I’d Also fax reward letter to every realtor in the phoenix area as well as other well known realtors that do business in high end luxury homes. I’d offer to pay whom ever found a buyer for the home $250,000 at closing in addition to thier %6 commission if we close within the sixty days of my contract. Id could increase some publicity if I were to give away money to charity in the name of the realtor. Just a hint. You might be able to pull a couple hunred thousand out of it, who knows?

import · February 11, 2001, 10:50am

Posted by Scott Az on February 11, 2001 at 11:50:31:

Hello to all, I have found a home in a ultra exclusive location that is for sale. Here are the details…
Asking Price- 2.9 million dollars
Appraised last year at- 4.0 million dollars
My question is how do I approach this seller and make a offer that is a low without insulting him? Also what do you believe would be a good exit stategey for this home? I’m looking for a quick turn around, with a extremely lucrative back end profit. Is any one out there familiar with deals this large? In case you havent noticed I’m a newbie with no experience. Any info very is appreciated. I know I have left out some very important information. So please if you need more info to help pic apart this deal let me know. This situation poses many “what ifs” but lets use this as a exercise to pick each others brains, and see whats really possible. Is this the deal of the life time? To all the big guys, espeacialy Ed, Can you help?

import · February 11, 2001, 1:06pm

Re: high fianance on luxury home, Ed can you help? - Posted by Ed Garcia

Posted by Ed Garcia on February 11, 2001 at 14:06:58:

Scott,

You’re in over your head. This is not a quick turnaround property. To sit on a high dollar property like this one would kill you. If you could buy it for 2.5 million with hard money, the cost would be 13% and 10 points. The monthly debt service alone would be $30,604.

These properties, as a rule are slow movers. The reason is obvious. If you’re going to play in this market, you better have deep pockets.

Scott, after reading my post, if you think you still want to play, call me. Your best bet if you think you can, is to flip it. I’m sure you’re going to find that the brokers will scrutinize you, before allowing you to tie up the property.

Ed Garcia

import · February 11, 2001, 2:29pm

Re: high fianance on luxury home, Ed can you help? - Posted by Scott Az

Posted by Scott Az on February 11, 2001 at 15:29:00:

Ed thanks for your response, This topic is also being discussed in the main news discussion board. What I was trying to do was to get the house under contract for 2.5 million for 60-90 days. I would create a owner fiananced note and sell it at the closing table. I believe I could get 80% ltv wich would be 3.2 million, I would then carry a second fro $800,000 for 15 years @6% for somewhere around $6500.00 per month. Does this sound possible?
Thanks Scott AZ

import · February 11, 2001, 3:16pm

Re: high fianance on luxury home, Ed can you help? - Posted by Ed Garcia

Posted by Ed Garcia on February 11, 2001 at 16:16:26:

Scott,

Of course it sounds possible, but I don’t think it will fly. Scott, lets put things in their proper prospective. Just because the note business is in some cases, not as strict to curtain lending criteria. Doesn’t mean that they are going to be stupid and not look at the deal for it’s face value. Scott, A Hard Money Lender will cut the LTV to 55% because of the size of the deal, to compensate for the movement of the market. Even if the market is hot, investors in that price range are aware of how that market is fickle, and can change.

The size of the deal, will make the investor of the note take a second look at the deal.
Note buyers are no different than anybody else, they want to purchase notes that make sense. At this point and time, any lender or note buyer who got involved with this deal, just bought a house.

If you’re a player in that market and have some retail buyers, contacts or connections, then you have the ability to captivate or create other opportunities. If you know that market, and are involved in it, then I might think differently.

As for now, I see this thing as, “Mental Masturbation”?you’re playing with your brain.

Ed Garcia

import · February 11, 2001, 3:11pm

Re: high fianance on luxury home, Ed can you help? - Posted by JohnBoy

Posted by JohnBoy on February 11, 2001 at 16:11:17:

I seriously doubt that you would find a buyer to pay full market value for this property, especially in 60 - 90 days! Homes in this price bracket sell well below market value all the time. Paying $3M on a $4m property isn’t uncommon. That’s usually what it takes just to get the thing sold!

Think about it. If YOU had this kind of money to spend on home like this, would YOU buy one that was designed and built for someone else, OR, would YOU rather have your home custom built to your specifications??? That’s a LOT of money to just pluck down on someone elses dream home! In order to get this thing sold you will need to offer it well below market value. The only thing you would have going in your favor to unload something like this will be LUCK! You just happened to be in the right place at the right time, where the right buyer just happened along while you had the thing tied up and they just absolutely WANTED this house! In this price bracket with the number buyers qualified to buy a home like this, how realistic will that be??? It will all boil down to getting LUCKY! So you will be risking the marketing costs involved in hopes of getting lucky with finding a buyer. My guess is that you would get better odds at the crap table in vegas on one roll of the dice shooting for box cars at 30 to 1. That’s just my opinion.

Also, what is it with creating a note to sell at closing to get this deal financed??? Trust me! If you can find someone that can afford to buy a home in this price bracket, selling a note at closing will be the least of your problem. If you could find a note buyer willing to buy the note at closing on this, then the buyer could probably walk into just about any bank and get their own financing! Just because you want to sell a note at closing doesn’t make getting the buyer financed any easier. In fact, in most cases it will be harder and a lot more hoops to jump through than just getting a loan through a bank!

If you were to get this property for $2.5M, then think in terms of dumping it for $2.7M - $3m just to get a fast sale and walk away with a few hundred grand for your troubles! Your talking about flipping a high end property for retail! That means offer it well below market value just to attract a retail buyer and let then know they are getting a deal on this to help them decide this is a good deal for them!

Also remember, you stated before the seller has been trying now for three months to sell this. You can be sure this seller has plenty of contacts with people in the income brackets that could afford a home like this and has already tried to find someone in his area that could afford this, especiall being located on a country club! This means you will probably need to advertise this thing in major papers in major cities across the country to lure a buyer in for this. Being located on a country club in AZ. would be an advantage for doing this to attract high income players in other cities looking for something like this in a nice climate like AZ. But to advertise it in all the major cities will cost some dough! You could try the USA Today that is a national publication.

All in all, just remember, you’re betting on the come here to get a buyer in this price bracket and with those being far and few between, your gambling with your advertising costs hoping to get LUCKY and risking your dollars to pull it off! If you can afford the gamble to take a shot at this to reap the reward of possibly making a few hundred thou., then go for it!

import · February 11, 2001, 3:23pm

Re: high fianance on luxury home, Ed can you help? - Posted by Scott Az

Posted by Scott Az on February 11, 2001 at 16:23:06:

Thanks johnboy for the response. If i could get the price down to where i could flip fast for wholesale maybe its possible? I realize my holding cost are overwhelming and finding a buyer is the biggest problem. Im just interested in the theory behind the sale.
thanks for the input
Scott Az

import · February 12, 2001, 7:36pm

Re: high fianance on luxury home, Ed can you help? - Posted by NC Paul

Posted by NC Paul on February 12, 2001 at 20:36:23:

A safe bet might be to get and use a Real Estate Sales license, make 6% commission on 2.5m and be happy without the risk. If you have an inside track with the seller you might be able to get the listing contract. Ed and Johnboy have pretty much nailed the reasons for not trying to do this big one as a note sale. For working a note sale, usually sticking with lower priced properties is a better way to go. These properties are the ones with a sale price in the affordable range of a large demographic group. (ie: middle class starter homes, 90-115k) If you have a large established market for the house you want to deal with you will have an easier time working the deal and less chance of losing your financial backside.