Need help getting Ower to finance!!! - Posted by Stacey

Posted by Ronald * Starr(in No CA) on June 27, 2002 at 20:54:37:

Stacey----------------

The answer to this one is the individual. You do not indicate that you have talked with the person closely and found out what the seller will be doing with the money. There may be some major purchase that the owner needs to make, or some debt to pay off. There may be no way to get seller carry back from the owner. I’m not saying this is the case, but it might be. You have to talk long and friendly with the seller to find out the situation. Not only the situation but the seller’s views about money, selling the property and so on.

Whether the owner will have to pay taxes on the property? Who knows, you have not told enough detail. If this is the property owner’s personal residence, probably not. If it is an income property, probably so.

I like the argument that the seller can make money on the government’s share of the sales price, IF the seller will carry back a purchase money loan for you. This works only if there will be capital gains income taxes to pay. “If you sell the property for all cash, you will have to pay about X dollars income taxes on the capital gain–say $20K. After you pay off the $20K taxes, you will invest the remaining Y dollars–say $135K here–at what interest rate?” If the answer is less than about 8%, you can point out: “If you carry the $155K loan to me, I will pay you 7.5% interest on the total amount. So, you will be making interest on the money you would have sent to the government in taxes. In this case, you will be making about $20K X .075 = $1,500 a year on the government’s money. You just won’t have had to send it in to them, so you can use it make money for yourself.”

Another strong argument is that the gain is spread out over many years. They only pay tax on the gain as they realize it, as part of the monthly mortgage payments.

If the owner needs some money, but not all of the equity, one way to go is the following. You get a new loan against the property for the amount cash that the seller needs. Then, the seller carries a loan back for the remaining sales price. If the institutional loan to you is less than about 2/3 of the purchase price, you should be able to get financing even with a troubled credit history. Just be sure you can pay on both loans.

Another way to give the seller cash it to have the seller provide two or three loans, the total being the amount of the sales price. One or two of these separate loans may be sold off to investors for some discount, providing cash for the seller.

Remember, the no or low down deal is not available for most properties. It works iln an few circumstances. One of those circumstances is what you have here, a free and clear property. However, even in a circumstance where it could work, it may not be acceptable to the seller. To find a deal like that, you need to hit a mass of sellers with offers. In each case try to craft the offers to fit their circumstances. But don’t be surprised if many reject your sales construction. It is the rule of numbers: many offers, a low percent of acceptances equals a few deals.

Good Investing************Ron Starr***************

Need help getting Ower to finance!!! - Posted by Stacey

Posted by Stacey on June 27, 2002 at 11:01:47:

I?m attempting to get owner to assist in financing a deal for me. He owns the property free and clear ? FMV is 155K. What are some of the benefit to him for financing part or all the deal besides, a consistent stream of income? What would be some disadvantages to cashing out. Would he have to pay taxes on the money he recieves from the sell. I need some motivational factors to his benifit.
How would you structure this deal.
He needs to sell by 7/15/02.

Re: Need help getting Ower to finance!!! - Posted by Sandy

Posted by Sandy on July 10, 2002 at 22:28:19:

Check out the website northstarfinancialresources.com They have an option that they do called a “simultaneous closing” (I think that on the home page is a tab that says, “Cash Now” or something like that…it’s that tab). Anyway, they go into great detail explain the abouts/why/questions, etc. on why that works for both owner and seller. Maybe that would be an option that would change your seller’s mind.
We’ve done a simultaneous deal through them before, and they did a really good job. Maybe they can help you? I don’t know a lot of your detail, but I’d check out their website or call them.