Possible simo note deal? - Posted by Jason (AL)

Real Estate Investing
1

Posted by Michael Morrongiello on June 25, 2007 at 19:41:08:

Jason:
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;
Michael Morrongiello
Author of Paper into Cash- the convertible currency- how to create marketable Real Estate Notes

2

Possible simo note deal? - Posted by Jason (AL)

Posted by Jason (AL) on June 19, 2007 at 17:21:17:

Michael,

This is the continuation of the house we talked about
briefly the other day.

I had the seller supply more information @ my
website in regards to
the subject property.
Here is how it reads:

Why are you selling? My health is deteriorating and I need to move closer to my family, my child’s school, and our church. I also need to move to a smaller home without stairs so that I can better navigate and better care for our home. We just lowered the price from $167,000 to $149,900 in hopes of selling sooner. This is a beautiful, peaceful place that we love. The pictures on FSBO.com do not do it justice. There is more to the property than just the house. The view is breathtaking and the additional buildings are a definite plus.
How long have you lived in/owned the house? 12+ years
How soon do you need to close? ASAP

of bedrooms: 2/3

of bathrooms: 2 1/2

Approx. square footage: 2200
Types of repairs (if needed): needs new carpet upstairs & new kitchen countertops
What is your asking price? 149,900
Last Appraisal: 167,500
Loan balances (if any): 132,000
Total Monthly Payments: 1260
Can you sell the house for the total balance(s) of your loan(s)?: No
What are you going to do if the house DOESN’T sell? Not sure. We are almost to a desparate time.

Just wondering some possible financing solutions.
It would seem that this seller would, perhaps, have to
shave some more off their asking price.

Look forward to the feedback.
Thanks.

3

Consider an Option - Posted by Michael Morrongiello

Posted by Michael Morrongiello on June 24, 2007 at 21:59:56:

Jason:
What are the monthly payments on their bank loan ? and what type of Bank loan is it? (fixed, at what interest rate, or ARM, etc.)

I am thinking you might be able to give them a full years prepaid rent up front in return for their agreeing to give you a long term option to buy the property at any time over the next 10 years at their $149,900.00 asking price.

If the home will rent to cover debt service this might not be a bad deal to consider making.

Michael Morrongiello

4

Re: Consider an Option - Posted by Jason (AL)

Posted by Jason (AL) on June 25, 2007 at 18:37:13:

Thanks Michael,

Are you meaning JUST an option to purchase? …and
then should I find a buyer, just assign the deal to
a owner occupant?

I know I left out the interest rate, but the monthly payments are $1230 (per the seller).
Also, seeing that there’s not yet a potential owner finance buyer, are there any “ingredients” here to
sift out to structure a simo/note transaction?

I’m sure the sellers are willing to do anything to
get this thing sold.

Thanks again.