Possible Deal --- Need Input From a Pro - Posted by Vince

Real Estate Investing
#1

Posted by TRandle on January 08, 2001 at 24:13:17:

Vince,
What is the FMV of the property? I didn’t really study your note sale proposition because that seems too complicated for this. If you can pick it up for less than 50% of value and tie it up for 90 days, why not just sell it outright to a retail buyer?

Even if the area is too bad for most folks, I would think many investors would be happy to own it at 75k. Have you considered looking at ways of keeping it, or is that not in the game plan? What am I missing here?

My opinion is that it’s best to keep the complicated strategies for exits B, C, D, etc. and look for the simple answers first. You should post where you’re located and you’ll probably receive plenty of responses, both public and private. Hope that helps…

#2

Possible Deal — Need Input From a Pro - Posted by Vince

Posted by Vince on January 07, 2001 at 17:53:00:

Hello again everyone!

Thank you so much for your answers to my earlier posts. They were extremely enlightening. I plan to someday have the experience to give as much help and hopefully experience the joy you all must get from changing so many lives in such a positive way!

Here is a deal I have discovered and I would love your input on what you think my options are under the circumstances. I work better in a mentoring environment.

Scenario:
Seller has income property for sale (4 plex)
Income is 1200 per month total.
Good neighborhood.
Seller has moved out of town (2500 miles away) and wants to sell.
Property has been “income appraised” at $75,000
RE Agent says I should be able to get about $55k realistically.
Seller wants $35K Cash because he got such a great deal on it when he picked it up 5 years ago and has made good money on it ever since.
Tenants have long history in building
100% occupied

So providing all the above turns out to be reality, here’s the financials recap:
Appraised value (based on income): $75k
Realistic selling value: $55k (should move within 3 mos.)
Seller asking: $35k
Seller wants all cash and a fast close.

In this scenario, what are some of my options? I know there are several but maybe some are better than the others and I want to get this right the first time.

Any thoughts would be much appreciated. When this deal is done I’ll be sure to share the outcome with the group and maybe my story will spark others to action.

Looking forward to your input.

Thanks in advance,

Vince

#3

Re: Possible Deal — Need Input From a Pro - Posted by IB (NJ)

Posted by IB (NJ) on January 07, 2001 at 22:05:15:

Vince - Is this Vince (NJ)? If so, you’re making moves and I’m impressed. How’d you find this property? Definitely keep us posted. There seems to be a few ways you could go with this. To come up with the $35k cash you could get a private investor or go ‘hard money’. Whatever you do, do as TRandle suggests and get it under contract now! Let us know how you make out.

God Luck

#4

Re: Possible Deal — Need Input From a Pro - Posted by TRandle

Posted by TRandle on January 07, 2001 at 20:45:40:

Vince,
What do you want to do with it? Do you have any cash? How’s your credit? If the numbers are as presented, the options are endless. In fact, with these numbers, you don’t even need an exit strategy. Get it under contract now! Please provide more details and specific questions and perhaps you’ll get more responses. Thanks…

#5

Re: Possible Deal — Need Input From a Pro - Posted by vince

Posted by vince on January 07, 2001 at 22:43:18:

Thanks for the follow-ups! I thought I’d answer your questions so that you get a better picture of where I’m thinking of going with this deal. PLEASE stop me if I’m headed for a cliff (smile).

I don’t have any cash.
My credit is not so good.

So I’ve come up with the following brainstorm:
Here’s a scenario I think might work:

Property Value: $75k
Property Income: $1200 per month
Seller’s Asking: $35k Cash (thus the discount)

My idea:
1.) Tie up property ASAP
2.) Offer the $35k cash
3.) Get 90 days to close
4.) Put property on market to investors immediately for $66k with the following terms (with mortgage I create at closing):
a.) $10k down payment from new buyer
b.) Create a mortgage of $56k amortized over 30 years at 9-11% with a 5-7 year balloon.
5.) Locate new buyer (investor) with decent fico (or whatever a note buyer would need) and the $10k down.
6.) Sell Note at closing discounted to 80% LTV (56k x 80% = $44,800)
7.) Give seller their $35k at closing from note sale proceeds (leaves $9800 on the table)

Result: $10k down (to me) + $9800 (to me) = $19,800 less any RE broker’s fees for quick listing and sale (unless I find an investor through other means)

Does this sound like a doable deal? (barring any hidden skeletons, of course). And did I figure the down payment right? Does that $10k go to me at closing or does it go to the note buyer? Are there other alternative ways of doing this deal that might go smoother and quicker?

I have learned enough from lurking on this board for 3 years to finally be ready to make some moves and I owe it all to the selfless attitude of the people who frequent this board. If this deal goes down, I will be yet another living testimony to the reality of creative real estate.

By the way, my return on investment will be “infinity!”

I still have to figure out where the earnest money is coming from and how much to offer! UGH!!! (smile)

Thank you all soooooooooo much!!!

Vince