Re: Question for the EXPERTS regarding short sales and collecting rent from a homeowner who deeds you the house. - Posted by Ben in Ohio
Posted by Ben in Ohio on March 09, 2000 at 08:11:34:
TCB-- CAVEAT!! BEFORE you read the following please take note I am NO EXPERT, but a work in progress–and learning the CRE strategies every day.
In my experience there are a number of ways investors are exploring these types of deals. And from what I have gathered, very often success depends on the amount of equity in the home (of course, condition of property and the like must be taken into consideration).
We have a guy in town who finds an imminent foreclosure. As long as there is equity and the property can be repaired for a price that allows for an equity of about 80% market price, he will advertise to investors the deal. In his case, a new loan must be brought to the table. The existing loan in arrears is paid off. He is paid on a small portion of the 20% spread. The homeowner becomes a L/O tenant to re-purchase the property two years down the road at a price of about 115% ABOVE today’s price. If the homeowner/LO tenant cannot perform on the rent payments they are booted.
On the other hand if there is little or no equity a possible short sale with the note holder is a possibility. I am working on one now. The after repaired value is aboout $100K. The existing lien, first and only lien is in the amount of $40K + 5-6K in accrued late fees, atty fees, etc. The noteholder has agreed to let me negotiate on the owners behalf, by submitting a letter signed by the owner that discusses my intentions, i.e., to negotiate with the noteholder.
My deal is butressed by the fact that the banks appraiser submitted a PV of $19K! I had offerd $22 BEFORE the appraisal. Though I have not completed the deal, and as we all know it ain’t over til it’s over, the rep at the bank has given every indication they will go through with the deal on my behalf, pending approval from the appropriate department/persons.
Now, this is not necessarily a NO money down deal, but it can be. My offer gives me 60 days to close, and I may flip to an investor. If I hold, it is a cash deal. OR, a hard money on this would bring in about $65 for rehab AND purchase.
There is another investor in town that uses a legal leverage with the note holder by obtaing all the necessary loan docs and looks for possible errors and ommissions, such as violations of RESPA, or something. But, other than that I have no idea how it works.
If you like I can get more details on the first technique maybe I can track down the guy. I met him a few times, three years ago and I still see him out and about, so he must be successful. Let me know if I can help