Owns FREE & CLEAR! Need Deal Advice! - Posted by Adam (BatPro)


#1

Posted by Phillip (PA) on October 22, 1998 at 10:56:26:

Just to clarify,

My suggestion was to give the owner a 1st at 30%,
Go get a second from a back for 40% for a total of 70% mortgaged.
Then give the owner a 3rd.

This would allow the owner to sell the first whenever he needed some cash, with little discount on the note.

Phillip


#2

Owns FREE & CLEAR! Need Deal Advice! - Posted by Adam (BatPro)

Posted by Adam (BatPro) on October 21, 1998 at 20:41:46:

3 bed - 1 bath, 2 bed - 13/4 bath duplex.
Total rent is $950 / month.
Tax is $1,700/year

Duplex is in good shape i.e. completely renovated in 1985.

FMV $80-82,000. Other duplex’s a little newer a few blocks (same rents) sell for $85-89,000. Duplex is in good area and is close to grade school and rents quickly.

Seller has no mortgage (owns completely). Both units currently rented: side a rented the past 2 years by same individual and side b has a new tenant.

Sellers concerns:

  1. Does not need or want a large sum of money because is he is worried about Uncle Sam.
  2. Is willing to do creative financing of some kind.

I gave the seller a copy of a lease option and he seems open to a lease option. However, Is a lease option the best deal for me?

Purpose of wanting to purchase: I need an asset and would like a little Positive Cash Flow! I smell opportunity since I am currently unemployed.

My question is: What is the best deal for the seller and myself. We did not exactly discuss an exact price but he is open to various financing techniques since he owns the duplex free and clear. He is just worried about paying taxes on the money if he sells.

Seller owns 20 properties including commercial, residential, a 10 unit, and a 6 unit apartment complex.
Seller has been thinking for selling for sometime because he wants to get rid of his residential and specialize in commercial and he does not like the thought of sales people getting a commission. I found the seller through a for rent ad.

I presently do not have job so a mortgage may be tough. What about 60/40 deal? Or Land Contract? Or ?

Any advice given would be very appreciated!

Adam


#3

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by Potash

Posted by Potash on October 22, 1998 at 10:09:33:

Team up with Lette and the Hendricks’ kid. Torment him by riding your bicycles around his house day and night. Pester him with constant telephone calls until he agrees to sell it to you for nomoney down any finance it all at 7% interest. That is the only way your going to get this duplex.


#4

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by John (KS)

Posted by John (KS) on October 22, 1998 at 08:36:20:

What about giving him a small downpayment and paying his equity off in monthly payments of 1% the equity value. Example: give him $85,000 - $3000 downpayment = $82,000 * .01 = $820/month. This still leaves you with $130/month in your pocket. Offer a good interest rate like 9% also.

If you don’t have a down payment, do the same kind of deal with a lease option type deal. No downpayment $820/month with an option to give him $80,000 in 2 years, by that time you could refinace, sell, or restructure the deal, he may just be happy after 2 years to continuing receiving the $820/month payments and not having the headaches of landlording.

I just finished Wade Cooks book, “101 ways to buy Real Estate without Cash”. Sound exactly like the examples in his book. Get it.


#5

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by phil fernandez

Posted by phil fernandez on October 22, 1998 at 08:14:28:

Hi Bat,

Your best bet on this deal is not a lease/ option but a owner financed purchase. With the owner financing you have your financing set up. With the lease/option down the road you will have to look for and secure financing when it is time to excercise the option. At that time you may not be able to get bank financing or interest rates might me skyhigh. Take the sure thing and lock up your financing now and do the owner financing with your seller.

Good luck


#6

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by Phillip (PA)

Posted by Phillip (PA) on October 22, 1998 at 07:26:40:

Just a thought:

Give him a note in 1st position - maybe 30% of total.
Get 2nd mortgage from bank to 70%, this is cash that goes to him.
Give 3rd mortgage that covers rest.

Of course, you would have to record the 3rd after you got the 2nd from a bank. You would need to put it on another property and then slide it over to the new property after the 2nd was recorded.

This allows him to sell the 1st at little discount whenever he needs cash. 2nd is in good position so bank wouldn’t charge you high interest rate. 3rd he could keep for cash flow.

Phillip


#7

Is that spelled Potash OR Potas* (nt) - Posted by ChuckD

Posted by ChuckD on October 22, 1998 at 23:02:05:

nt


#8

good morning - Posted by Gator Shelton

Posted by Gator Shelton on October 22, 1998 at 10:34:05:

Did ya kick your dog this morning when you got out of bed? You seem like that kind of fella with such a positive attitude. Why don’t you enlighten us with what great things you’ve accomplished this week. Being the world’s biggest #**hole doesn’t count.

Gator Shelton


#9

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by Tom Brown

Posted by Tom Brown on October 22, 1998 at 15:25:47:

I agree with the owner financing but you could also structure the owner financing in the option, set the interest, payments, etc now.

It might even be possible to get a rent credit from the current owner and get some “free” down payment.


#10

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by J.P. Vaughan

Posted by J.P. Vaughan on October 22, 1998 at 08:48:01:

Phillip,

There is no bank or other lender that I know of that
would make a 100% LTV loan. A 70% Second behind a 30%
First = 100% LTV. You have it backwards.

A 70% FIRST with a lender is possible with a 30% seller
carried Second. It is doubtful that a BANK would allow
100% financing, but other lenders may go for it.

Again, the scenario you present is NOT feasible.

JPV


#11

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by phil fernandez

Posted by phil fernandez on October 22, 1998 at 21:03:49:

Tom,

Very good point. You certainly could structure the owner financing within the lease option so if the option were excercised in the future the terms of the owner financing will already have been agreed on and already in place. Great thinking.


#12

Re: Owns FREE & CLEAR! Need Deal Advice! - Posted by Adam

Posted by Adam on October 22, 1998 at 13:24:57:

I talked with the owner, I offered $1000 down with a 25 year owner financing on the remaining balance at 6%, he said he would think about it and we are going to meet and discuss the deal in 1 week, any other ideas you have regarding a possible deal would be appreciated. Once he checks with his accountant and gets back to me I doubt he will go for the 6% at 25 years, I may have to go slightly higher.

taxes, maintenance, insurance, etc. = $3,233
gross operating income (after 5% vacancy) = $10,830
I figure the most I should pay for this place is $76,000 for a small cash flow.

Adam