My first deal - Posted by Rajen (ga)

Posted by B.L.Renfrow on November 03, 2000 at 15:16:32:

Rajen, unless I am missing something, this is a TERRIBLE deal.

First, you need actual comps…not a single Yahoo search. The best way to obtain valid comps is to either ask a RE agent to run them for you on recently sold property, or go to your courthouse, get the recent sales yourself and then get in your car and start driving.

You say the seller is willing to sell for $74,000. But he owes $86,000. If you exercise your option next week, or next month, is he going to be able to show up at closing with the $12k difference? I wouldn’t bet on it.

And WHY on earth would you consider giving him a $4k nonrefundable option consderation? Option consideration is something you should COLLECT from YOUR tenant/buyer, NOT something you PAY. In fact, this seller should be paying YOU to solve his major problem for him here.

Next, notwithstanding the above issues, what about this potential tenant located by the seller? Is he qualified as a tenant/BUYER? Is he even interested in buying? And if so, HOW MUCH option consideration is he able to come up with? Furthermore, as a T/Ber you should be able to collect above-market rent from him, since you are giving him good terms.

If you are convinced there is a deal here, several Atlanta-area investors frequent this board. Perhaps it would be helpful to contact one of them directly…maybe they know the area or would otherwise be willing to offer location-specific advice.

Finally, I will go ahead and e-mail you seperately Bronchick’s lease and option agreements, since you are having trouble downloading them from his site. They are in pdf format, so you’ll need Acrobat Reader on your computer to open them. But PLEASE…think twice, or three times, before you USE them on this deal. Unless I have overlooked something, there is NO deal here.

Brian (NY)

My first deal - Posted by Rajen (ga)

Posted by Rajen (ga) on November 02, 2000 at 23:13:36:

Hi friends,
I met with the seller today and there is a possibility of my first lease/option deal.
The details are,
The property is located about 50 miles south of Atlanta.
It is 3br, 2ba house with 2.7 acres land. The house was built in 1996 and it is in very good condition.
The house has well water and septic system. The seller has installed ‘Brinks’ alarm system.
Yahoo.com shows its value to be $ 82,000. The seller wants $ 74,000. ( He turned down a previous offer of $ 72,000 !)
It has 1st lien of $ 76,000 and 2nd lien of $ 10,000. Total payment, for both the loans, is $ 717. He is ready to sign 4 years’ term of lease/option for total of $ 4,000.
He has a rentor (or possible ‘lease/option’ candidate), who will rent it for $ 750/month. The rentor is ready to occupy ASAP and ready to give deposite of about $ 2,500.
He wants to sell quickly due to two house payments. (Both, husband and wife are working.) That is why they want to sell or rent quickly and ready to take a loss. The seller showed me his old appraisal (dated January,1999), for $ 72,000.
My questions are,

  1. Is this a good deal ?
  2. Apart from ‘title check’, do I need to check anything else ?
  3. How can I check the tenant out? what should I check ?
  4. If the 2nd is private, how can I approach the note holder for discounting his 2nd ? What should I offer ?
  5. How should I structure the offer (or offers) ?
  6. The seller wants to know which portion of the $ 4,000 is refundable and which portion is not ? (He wanted the entire $ 4,000 to be non refundable. I could not convince him for
    ’0’ non refundable portion.)
  7. How can I ease seller’s mind that the payments will be made regularly. (He wanted the payments to be made to him.)
  8. Do I need to have more information ? on what ?
  9. The seller wanted to written contract to show to his attorney. I agreed to a blank contract. ( Please e-mail me the blank lease/option contracts, since I am unable to download from the web site. The computer freezes up !)
  10. How much delay in 1st payment can I ask ?

I have promised the seller for guarenteed payment for the entire lease period and take care of the maintenance and repairs.
This is my first deal. Your help will be very much apprecited.
Thank you,
Rajen.

Re: My first deal - Posted by Jim IL

Posted by Jim IL on November 04, 2000 at 05:20:52:

Rajen,
RUN from this “deal”, because there is not one here.
You are putting too much into this for a very small, only “possible” return.
This seller is not motivated and I know there are better deals out there.
Go find one, and call this guy in 6 months when he STILL has it, and will sell on YOUR terms.

Happy hunting,
Jim IL

Re: My first deal - Posted by doug,ky

Posted by doug,ky on November 03, 2000 at 15:29:26:

If I were you, I ask is this seller really motivated.

  1. Wants $4000 option consideration on a $82,000 home on which he owes $86,000.

  2. The seller wants his lawyer to go over the deal. (Deal Killer)Its bad enough now wait till he gets done with it.

  3. If he owes $86,000 now. How is he going to sell it four years from now for $74,000.

  4. He wants the monthly payments made to him.

There is no deal here the way it stands now. All of these things you know are no good, yet, you would like the readers here to say go for it. Well, The seller needs to make some concessions. You need to delay this seller and make him call you back when he’s motivated. I would tell him that’s it not good enough (tactfully). He needs debt relief and you need to make a profit. If says well I’ll just rent it out myself, say fine and but keep in touch for when he does his first eviction or replaces an air conditioner, that would be a good time to contact him.

Doug,ky

Re: My first deal - Posted by B.L.Renfrow

Posted by B.L.Renfrow on November 03, 2000 at 08:20:33:

Let’s see here…this seller wants YOU to PAY him $4000…so YOU can make his payments on his OVERENCUMBERED property, YOU can be responsible for repairs, YOU can locate and screen tenant/buyers, YOU can collect their payments, thereby solving HIS problems…all for monthly cash flow of $38.

Where do you see a deal here?

Brian (NY)

Re: My first deal - Posted by Eric FL

Posted by Eric FL on November 03, 2000 at 06:54:32:

To do a check on the tenant go to tenantcredit.com. If the second mortgage is private like for a car, truck, or just something that has nothing to do with the house then I would try to asked the seller to pay for this mortgage himself. Do this by offering more for the house or more consideration. (The 4000 dollars that is refundable) If this is the amount of money that is going to be credited toward the purchase price over the time of the option then its not refundable. The way I work my L/O are when the contract is singed and the consideration is given and I back out a year into it. All the money I spent is lost and the house still belongs to the seller. When I do L/O I make sure that the credits I get towards the purchase price every month is 20-50% of the payment. I try to get as much as possible so at the end of the lease I bring down the purchase price enough to buy the house or sell it for profit to a buyer. Also put in your contract that you are able to sell it anytime you want during the lease.

I hope I didn?t confuse you! I hope this helps!

Eric Fl

Re: My first deal - Posted by Rajen (ga)

Posted by Rajen (ga) on November 04, 2000 at 11:01:51:

Thank you very much friends. Your responses were really an eye-opener for me. It really showed that I have a lot to learn before I can do any deals. You have really saved me future headaches and frustation because of the deal. The seller was acting really dumb about the deal and that threw me off the track and I became over confident. Fortunately I haven’t signed anything yet, everything was just verbal and we were to sign the papers after he is through with his attorny. He never called back. So the deal is dead now. I am glad I am with avery nice group here, where I am being directed to the right decision.
Once again, thank you friends for your help. I really appreciate that very much.
Rajen.

Re: My first deal - Posted by Rajen (ga)

Posted by Rajen (ga) on November 03, 2000 at 12:56:59:

According to Yahoo, the value of the property is $ 82,000 and the seller is ready to accept $ 74,000 for it. Also I am locking the price for 4 years in a growing area. And the potential rentor has already contacted the seller and is ready to sign the rental agreement. I agree there is not much of a cash flow, but looking at overall picture, I did not think it was a bad deal at all. Therefore before making final decision, I thought I would run the scenario to the experienced people and take their advise, hence the posting.
Please help me by answering my questions. And please, I need the ‘lease/option’ contracts. I can not download from ‘legalwhiz.com’, because my computer freezes up as soon as I ‘click’ print. So please please e-mail me both the contracts ASAP.
Thanks for your time.
Rajen.