With A Little Twist… - Posted by Sheik
Posted by Sheik on April 15, 1999 at 08:41:32:
I would appreciate some comments on the foll.
I am familiar with the simultaneous closing technique where the investor contracts the property at about 80% of FMV and sells the property for 100% FMV w/ owner financing. The investor will create a 1st mortgage for 80% of FMV, a 2nd for 10% of FMV and the new buyer comes in with 10% down payment. The investor will sell the 1st (most likely at a discount) and together with the down payment from the new buyer will cash out the original seller. The investor will hold the 2nd as income.
Nice technique, but it requires the investor to purchase the property for not more than about 83% of appraisal (if he/she wants some cash at closing). With my market being so hot, buying for 83% of FMV CONSISTENTLY is not easy.
Now for the twist…
With money so available…
Why not have your end buyer go through a local mortgage broker for financing! I have spoken to a local mortgage broker who can fund loans for buyers with as low as 580 FICO score and all they need is 3% down. By doing it this way I can contract to buy as high as 90% of FMV and still make a decent profit.
FMV ---- $100K
My purchase price — $90K
My sell price ---- $105K (The Mtg Broker said that it’s not a problem to up the price by 5%…the appraisal will usually come in at the sell price if it’s not outrageous)
Buyer puts 3% down and qualifies for a new mortgage. Potential profit - $15K minus administrative costs.
Even if I have to offer some seller concession to aid the buyer, I am still coming out way ahead. I will even be happy to get $2K-$3K at closing and hold a 2nd for income.
Stacking up a bunch of these 2nds can make quite a difference.
My goal is not to make a killing on every deal (which will probably come once every few months), but to create some kind of CONSISTENT albeit low profit business.
So what do you think…
Your comments are most appreciated