Posted by Michael Morrongiello on June 25, 2007 at 19:41:08:
I don’t see this as a strong pontential seller financed deal for you at this time because these sellers have limited equity in this home. However IF you can get them to agree to SELL you the home for the price they are asking or $149,900.00 by optioning the their existing EQUITY today that might fly.
I forget exactly what they owe but lets assume its $120,000.00 - thus they equity today is $29,900.00 (the difference between what they owe or $120K and your agreed purchase price of $149,900.00)
If the home will rent for enough to cover the $1,230.00 in debt service payments and additional expenses for taxes, insurance, maintenance, etc. here is the deal I would try to strike with these folks;
I will agree to prepay them up front $5,000.00 (or whatever you can agree to)as a non refundable option deposit. They will agree to sell me this home at any time over the next 10 years for their existing equity of $29,900.00 that we determined above. (minus the $5,000.00 given to them up front as an option deposit)
In return I will agree to lease their home from them with rights to sub-lease and take care of making their monthly installments for them on their loan.
This gets them on their way and also gives them EXACTLY what they want for their equity. It just does not give it all to them today.
Now put GOOD tennants into this home and manage it properly. As time goes on, you will reap the benifits of increased rents, amortization of their existing debt, and any future appreication in the value of the property if and when it may return.
You also have set yourself for a better more favorable tax treatment and / or possible future exchange down the road WHEN you excercise your option to buy the home.
Hope this makes sense to you…
Best to your success;
Author of Paper into Cash- the convertible currency- how to create marketable Real Estate Notes