Newbie Needs guidance - Posted by Mike C


#1

Posted by PBoone on October 31, 1998 at 15:42:32:

This deal is way to skinny, unless someone has made a mistake with the 87K market value, or rents for this type of property can be rented @ approx $1200. per mo.
Pat


#2

Newbie Needs guidance - Posted by Mike C

Posted by Mike C on October 31, 1998 at 15:02:40:

I am just starting and eager but I want to make sure I am not jumping in over my head. The property is listing for 87K and seller owes 81K.Seller wants no money and just wants out .tried to assume loan but stipulation against assuming and not living in property.
Difference in what is owed and price is realtor expense.There must be a way to get this done but I am lacking in knowledge at this point.Other question is does it look worth the trouble? Thanks in advance
Mike C


#3

Re: Newbie Needs guidance - Posted by Jason-DTX

Posted by Jason-DTX on November 01, 1998 at 16:01:16:

It would be a good deal if the realtor wasn’t involved. You could just take over the loan subject to follow the previos advice from Brad.
Even though it is SKINNY it would be a free house that you don’t have any money or credit invested in. What’s your ROI on an investment of zero $, “good enough” as Lonnie says.
Its ok to do a deal with no equity when you have good underlying financing in place and no money invested or loan liability.
You could wait until the listing expires and then try to get the house. Its not worth it if you have to put money in the deal.
Jason


#4

Re: Newbie Needs guidance - Posted by Rob FL

Posted by Rob FL on October 31, 1998 at 16:46:40:

Read Lonnie’s articles. Tell the realtor the situation and then ask for a discount or a note from them. Otherwise I agree with Pat, the deal is too skinny.


#5

Re: Newbie Needs guidance - Posted by Brad Crouch

Posted by Brad Crouch on October 31, 1998 at 16:14:57:

Mike,

You could have the seller put the property into a trust, using a trustee of YOUR choice (you could even do it for him if you know about such things). Arrange the insurance to have your trustee named additional insured on the policy. Record the deed in the name of the trust. At this point, the seller is the beneficiary of the trust (but the trust agreement does not get recorded . . . private document).

Then execute a “master lease option” with the seller, including a “right to assign”.

Set up a loan servicing company to receive monthly payments (from your tenant buyer) and make disbursements to the underlying loan, with balance going to you. The loan servicing company (or other third party) can escrow the closing documents so you will be able to eventually close on the property, even if the seller renegs or cannot be found.

Then run an ad saying “Rent to Own” and sub-lease to a tenant buyer with an option to buy at a higher price than the price you agreed upon to buy (5% to 10% higher, or whatever the traffic will bear). The lease option you give your tenant buyer should be for a year or 18 months. The “master lease” you have with the owner would be for about three years, renewable two times (if that can be negotiated). That would give you control of the property for 9 years, or until a tenant buyer exercised their option.

If the property is listed with an RE broker, you can let the broker have half of whatever initial option consideration you receive (about 2% to 5% of the purchase price, depending on your market), plus the full commission when the tenant buyer exercises his option to buy.

Actually, the broker’s commission is the problem of the seller (technically), but since the seller is receiving no money, this might be the way to get the deal done. But don’t rely on the broker to find YOUR tenant buyer.

This will only work if the property can be leased for a greater amount than the payments on the underlying loan (at least $100 to $200 a month more). So you need to determine what the rents are in that area. If the numbers don’t work . . . pass. If there is a monthly profit, as well as a spread between the sales prices, you might have an acceptable deal here.

Do your homework to make sure the property is not encumbered or about to be foreclosed upon.

Hope this helped some.

Brad