Posted by Russ Sims on March 30, 2000 at 15:39:55:
You might nix the attitude…Doug just probably wanted to make sure he wasn’t missing something. And he DID teach you something, didn’t he? He tought you that the real selling price of a 45K home that is 6K in arrears is 51K. Very important lesson.
Why limit yourself to selling to investors? How many would-be owner occupants out there would love a home of their own where half of their mortgage is being paid by a tenant on the property? So you pay 6K to bring the property out of arrears, and you buy it for the loan balance of 45K subject to the existing loan.You then re-sell it owner financed for 75K and take 10% down, which gives you $7500 cash. Pay yourself back the initial 6K and pocket $1500. Create a spread on the monthly payments between what you must pay on the existing loan, and what you are charging your owner occupant buyer. You can probably easily pocket $200 per month for a very long time. As to where you get that initial 6K, it really doesn’t matter: credit card, mom, Uncle Lester, Your Local Loan Shark, etc.You will only be floated the loan for a month, if that, until you can line up your buyer. In fact you can probably line up your buyer before you have to pay the dough. It doesn’t get any better!
I have a friend of mine whose husband is incarcerated and his house is going into foreclosure. It is a 2 family house that has been appraised for $70k and he owes $45k on it. What can I do with something like this. I have no cash to bring the payments current. So what I thought about doing was getting the house under contract for the unpaid balance and then selling it to an investor. Now here is the problem, a lot of the investors in my area are looking to get properties for 10k-20k, they are not interested in properties of that sort(2family) in that particular price range of 45K.
Here is my idea, and please correct if I am way off base:
Price-$45k
Appraisal-$70k
Past due amt-$6k ?
get house under contract for the unpaid balance $6k to make payments current. Sell at $50k having double closing. Give bank what they are due and walk away from table with $4k? in pocket.
Posted by Bill (OH) on March 30, 2000 at 15:30:38:
Be real careful with this one as the math dosen’t add up.
When you think you’ve found a deal, ask yourself what are you planning to do with the property? You said that you want to sell to an investor, but investors in your area are buying doubles for 10 to 20K—so why would they buy this one for two to four times that amount? If I buy a double at twenty thousand—the mortgage payments (PITI) will be somewhere around $280. Each side rents for, say, $400—that’s 800 a month and a figure an investor can get a nice return on. But, if I have to pay $40,000 for the double, I’m having to pay about twice as much for my mortgage payments, and my profit goes down as well.
It seems to me that what you want to do is find some way to come up with the $6,000 in back payments and get a lease option on the property. That way you buy yourself some time to refinance IF what is owed on the property gives you some equity.
I’d also caution you to look at the appraisal—what was the reason for the appraisal? If it was for one of those 125% loans–forget about the appraisal working for a sale price. Also, does the owners family live here? Are you going to have to evict them? I’m always very reluctant to mix any kind of business and friendship. Anyway, I wanted to give you something to think about…
Oops! Like I said, if I’m way off base, let me know. What is your suggestion? Don’t just tell me I’m wrong, show me how I can make it work, if I can. This is a teaching forum.
This is what I would want to know. What are the monthly payments. Is it assumable? What are the terms of the mortgage? What kind of repairs are need? Where is the home located. How old is the property/maintenance? What are the operating expenses? What will the units rent for? etc. Do your homework.
So not knowing any of the above; but, you could flip the house quickly if the property didn’t require any repairs,was located in a good area, and if the rents would provided an income. You would be asking an investor to invest 8 to 10 thousand in the property and he would have to see return on investment.
Or, you could take title and sell full retail. Wrap, second mortgage, contract for deed. Collect a downpayment to cover your out of pocket expenses.
Or you could tie the property up with a contract, and sell it full retail using owner financing. You would have to find a note buyer who could help you set the terms up and buy the note and cash the existing mortgage out for a discount.
I would not do a lease option. Using $6000 to get in sort of defeats the purpose of a lease option (Low Down).
Buying and holding is a another option but do this after you made some money with Real Estate.
Which one would I do? Depends on the the answers above.