Posted by ScottE on April 21, 1999 at 22:38:43:
John,
Thank you for you post. Do you think a short term (~5years) and a significant discount(around 50%) help the risk any?
Scott
Need help structuring possible 2nd - Posted by ScottE
Posted by ScottE on April 21, 1999 at 14:58:01:
I got a call today from an older gentleman that I had talked to several months ago. He owns a vacant, 3/1, 1550 sqft house free & clear(it was his residence until '96). He wasn’t flexible enough on the price to make it a great buy because it needed some fix up, however it sounds like he has a good buyer on line and he called me because I mentioned that if he took back a mortgage or a second, I might be interested in buying it from him at a discount to cash him out completely. He had two previous L/O tenants that jacked the place up and he doesn’t desire to hold the paper.
The seller is asking $48.5k, FMV=$53k. The buyers supposedly have qualified for $45k, but don’t have $4-5k in down payment money or, obviously, the balance.
Is there a profitable way to structure this deal? I think the seller would be flexible on discounting whatever he carried back just to cash out.
Thanks!
Scott
Re: Need help structuring possible 2nd - Posted by daveh
Posted by daveh on April 22, 1999 at 07:05:28:
Scott,
My experience with this type of simultaneous transaction is that you must have both a motivated seller and motivated buyer to make it work. Sounds like your seller hasn’t owned the property long enough to get motivated.
In addition, you have a property in shaky condition, buyers with no down payment and most likely shaky credit. This is probably a waste of your time right now. But, you may want to check up on it in a month or so.
Re: Need help structuring possible 2nd - Posted by Bud Branstetter
Posted by Bud Branstetter on April 21, 1999 at 17:21:32:
Scott,
Would you buy a second with little or no down and a high LTV? Note buyers even want to reduce the 1st ITV to 70% when there is nothing down. Without knowning more details the second behind the institutional first is not very saleable until aged. My approach might be to see what cash he had to have up front. Then do a compensating none approach on the 2nd. Or an option to buy portions of the second every year or so. I would also be talking to the buyer as to what cash he can put in when. Can he add more to the payment than straight 30 yr amortization? Like 5yr on the second? $4500 off the value does sound like too great a discount because it needs fix up.
Re: Need help structuring possible 2nd - Posted by John Behle
Posted by John Behle on April 21, 1999 at 16:20:46:
The loan to value ratio on the first loan would be 85 percent based on the value. Very few buyers would buy a second on top of that. Most would look at the sales price and calculate the 93% LTV that you would have with the first on that one. If you are looking at investing on your own behalf, it would be a risky deal to buy the second on this property.
Re: Need help structuring possible 2nd - Posted by ScottE
Posted by ScottE on April 21, 1999 at 22:36:33:
Thank you, Bud, I see your point. Even though I know it’s risky, I thought I’d ask. I talked to the buyers and they be willing to go 5 years on the 2nd, but I’m not sure what kind of discount the seller is thinking.
As far as the repairs on the place go, the buyer is supposedly a former full-time trim carpenter and is handy in other home aspects. Ironically, his wife is a mortgage broker, which makes me a bit suspicious as to why they’d need so much help on the numbers, you know?
Scott