idea for creative offer - Posted by BobCO

Posted by Tom on January 18, 2001 at 10:07:40:

Becareful, our hot market has leveled a little, areas that were selling in the 170s last summer are still there or lower. Yesterday I listed a house for 159K, I sold the same house (neigbors) for 169K in November. Point is don’t get caught thinking real estate always is going to go up as fast as it did last year.

idea for creative offer - Posted by BobCO

Posted by BobCO on January 17, 2001 at 18:02:38:

I have come to this site for over a year now and I am trying to make my first “creative” deal. I look forward to any advice, thank you in advance.
House has an existing mortgage that is 2 years old, balance $130,000, fixed 30 year at 6.75%. Current PITI $1120/month.
Appraised value $175,000.

Tenant in place at $1300/month thru January 2002. Owner told me that when he originally rented the house out (a year ago)comps in his area were going for $1500/month but he was more interested in getting and keeping a tenant.
Owner is willing to do a subject to deal.

Owner wishes to sell house because there is a strong possibilty that he may be leaving the area for a new job and he considers the house an incumberance. He also believes that it will be difficult to find a buyer with a renter in residence.

What would be a fair (I believe in win-win)offer for this scenario.

For me cash flow is less important than apreciation. The market in my area is red hot and has been for a few years. I think this has the potential for a great no-low money down deal. Any advice?
Have I left out any critical information?
Thanks again,

Re: idea for creative offer - Posted by Jim Locker

Posted by Jim Locker on January 17, 2001 at 18:29:06:

Don’t sneer at cash flow. Cash flow is the bird in the hand. Appreciation is the two in the bush.

What “red hot” area are you in? You realize, I hope, that such areas don’t stay that way forever, and sometimes “bust” instead of merely “going flat”.

IMO, we are entering a time when red hot markets are going to cool off considerably. Maybe not all of them, depending on how deep the downturn is.

The deal you are looking at here seems to have decent equity in it, and you might have room to raise the rent.

Re: idea for creative offer - Posted by BobCO

Posted by BobCO on January 17, 2001 at 18:46:46:

Hi Jim,

Thanks, We are in the Denver area. I agree cash flow would be nice but is not a requirement for this deal, especially if we can get in with low-no down. I do agree that there is room for a rent increase (it is a 4 BR 2 BA, 2 CG) but current lease runs another year. Any thought on how to structure? Should we offer a balloon in 2 years and just offer to take over payments subject to?

Re: idea for creative offer - Posted by dewCO

Posted by dewCO on January 18, 2001 at 11:47:50:

Has the seller told your what they are looking for,or if they are motivated in some way? That’s usually the jumping off point. Usually you try to get them to mention a number (offer) first and then figure out what works for you! Not sure what you’re referring to on the subject to with a 2 year balloon. If they give you the deed subject to the existing loan, then you don’t need a balloon, because you already own it. If you are doing a wrap, then that’s a different scenario.