Need Help Structuring First Deal - Posted by Keith (AL)

Real Estate Investing
#1

Posted by Keith (AL) on June 06, 2000 at 21:34:02:

Jim, you’ve planted a seed of an idea in my mind.

What if I forget the L/O with the buyers all together and purchase their house straight up (assuming the numbers work). I get a document from their mortgage company stating they will finance the new home contingent upon the sale of their current home. If they buy the new home from me I get $25k. I can then use say $11k of this as the “down payment” on the purchase of their house (90% LTV NOO). I walk free and clear with $14k in my pocket and another home with $11k equity that I can owner finance or L/O.

The only other question is finding a mortgage broker to put this together. Do you think I should use separate brokers for each piece? That way the broker of the new house doesn’t low ball the purchase price because of my $25k profit. This may be a question for Ed Garcia…

Keith

#2

Need Help Structuring First Deal - Posted by Keith (AL)

Posted by Keith (AL) on June 06, 2000 at 14:10:36:

Hi everyone. This site is a tremendous resource and I would like to thank everyone for the info I’ve received here. Now on to my problem.

I have entered into a L/O on two new homes with the builder of the homes. These are upper middle class homes in a very nice neighborhood. On the house in question I have agreed to pay $1450/mo Lease for 12 months with a $164,000 option. The house has been listed for $189,000 and is comped at $181,000.

I have found a prospective T/B who has agreed to pay $1550/mo with a $189,000 purchase option. She is receiving Social Security money for her 3 grandkids (mother & father dead). The husband is retired military and also works for a local company. I think they can pay the monthly rent.

They can probably be approved for a VA loan at 95-100% LTV if they didn’t currently own a property.

Here’s my problem. I’ve requested a 5% option consideration ($9450). They don’t currently have the full down payment but have proposed to pay $1000 down and provide a promisary note on their current home for the balance. Their current home (according to them) is worth $110,000 with a first and second mortgage total of $93,000. So they can’t sell this house using a Realtor (not enough margin).

Questions…

  1. would you allow them control of a $180,000 +/- home with only $1k down and take a 3rd position on their current home?

  2. would this deal be more attractive if I entered into a L/O on their current home? Sort of like playing dominos. I find a T/Ber to Lease and subsequently purchase their current property, they pay me my down payment get a loan for the new property exercise their option. I then pay the builder by exercising my option.

It looks to me like there’s $25k profit - closing costs if this deal could be structured correctly. There’s also the possibility of making a little by L/O their current home too.

Any insight into how to structure this deal would be greatly appreciated. THANKS!

#3

Re: Need Help Structuring First Deal - Posted by Jim IL

Posted by Jim IL on June 06, 2000 at 14:38:48:

Keith,
I’d run them by my local mortgage broker to see just how close they are to qualifying for a loan on the new home?
Of course the mortgage broker will in all likelyhood say that the old home must be sold first, and then you can buy that one from them to handle that.
I’d make the whole deal contingent on all factors working out.
Taking $1k to hand over control of a $180k home is ust not prudent to me.
But, if the lender says they will fund the new home 100% or even 90%, it may work.
You could get the old home “subject to” or with a Land Contract, and then carry a second for the 10% of the new home.
Now, you have your funds to pay your seller on the new home, you have the old home, your CASH profit now, and a note for cash flow from the second you carried.

Just my $.02, but I’m tired today, so this may all be junk,
Jim IL