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Author Topic: What would you do?...  (Read 3233 times)

PositiveOutlook

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What would you do?...
« on: February 15, 2008, 02:31:26 pm »
I own a remodeling company and recently started doing rehabs/flips.  I have an opportunity that presented itself, and I would like to know how you would approach it...


ARV:   $130K
Repairs Needed:   $3-5K (depending on whether I replace the pool or rip out the deck instead)
Selling:   $89K

Estimated repair timeframe:  2 weeks

The seller is an investor.  I do not want to tie up anymore capital getting a mortgage or HML (I might end up losing this one while pushing the paperwork), until I sell our last flip, so what are my options?  I've got liquid capital for repairs, so I want to be able to get the house under contract, do the repairs, sell it, then pay the selling price upon closing.  How do I make sure then that I don't get the house sold under me after doing the repairs?  How would a Sub2 or L/O work here?  Or is there another option...

Any suggestions....  thanks for any input...

Offline kdhastedt

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Re: What would you do?...
« Reply #1 on: February 15, 2008, 02:44:46 pm »

Will the other investor let you assume or take Sub2?

Will he hold a note on it?

Do you have any captital partners?


Keith
I have CDO...it's like OCD but in alphabetical order - the way it should be!

Offline stevie-o

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Re: What would you do?...
« Reply #2 on: February 15, 2008, 02:48:37 pm »
As Keith said, I would ask him to let you take a Lease Option on it, let him know of your plans and tell him you'll be paying it off very soon.

PositiveOutlook

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Re: What would you do?...
« Reply #3 on: February 15, 2008, 03:15:26 pm »
Here's the rub, how do you structure/present a Sub2 deal to make it interesting for the seller, considering he is an investor himself?  I've never done one before and I'm not even sure it's the right way to go... what about a Lease / Option vs. Sub2?  How much cash should I offer when presenting the deal?

Thanks...

Offline kdhastedt

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Re: What would you do?...
« Reply #4 on: February 15, 2008, 03:31:25 pm »
Here's the rub, how do you structure/present a Sub2 deal to make it interesting for the seller, considering he is an investor himself?  I've never done one before and I'm not even sure it's the right way to go... what about a Lease / Option vs. Sub2?  How much cash should I offer when presenting the deal?

Thanks...

You give him some cash and take over his note subject to the terms that it has (payment, dates, interest reates, etc., etc.).  Make sure you get a copy of the nbote and mortgage beforehand so you don't find any unexpected surprises.

Keith
I have CDO...it's like OCD but in alphabetical order - the way it should be!

PositiveOutlook

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Re: What would you do?...
« Reply #5 on: February 15, 2008, 07:11:27 pm »
Thanks for the info... based upon the above scenario, how much cash would you present with the offer?  What's the difference between a Sub2 and a Lease Option in this scenario?  How much time is customary to ask for (to fix and sell) when presenting either option?

I guess I'm not clear on the best way to proceed with this... some more insight would be helpful?

Offline Dave T

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Re: What would you do?...
« Reply #6 on: February 16, 2008, 12:10:34 pm »
An experienced investor would never sell Subject To.

An experienced investor might sell on a Contract for Deed with balloon in 12 - 24 months.  Give the investor his full asking price, set the interest rate 2 points above his current mortgage rate with a 30-year amortization, negotiate for lowest down payment possible, and make minimum monthly payments for whatever he needs to cover his mortgage which means you will probably have a negative amortization loan.

Once you have a contract, get into the property to make your renovations, market to flip.  Pay off the seller and bank your profit.

The problem with a lease option, is that whatever renovations/improvements you make to the property while you are under lease are done at your expense and belong to the seller if you can't exercise your option to purchase.  Good deal for the seller, not so good for you if you have to walk away from the deal.

You mentioned a pool.  If it is an inground pool, your may be underestimating your repair budget.
« Last Edit: February 16, 2008, 12:13:21 pm by Dave T »

Offline JR_FL

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Re: What would you do?...
« Reply #7 on: February 17, 2008, 09:17:13 am »
Find out if he owes a loan.  If so then approach the sub2 thing.  But as David mentioned I doubt that is a viable offer.  But then again if you don't make it then I am sure he would not accept it.

As far as paperwork.  Depend on your state would dictate what is customary that you use.  I would steer clear of putting cash into a lease option for repairs.  That is my personal opinion.  I would do the Contract for Deed or Land Contract or even a simple wrap.

Now if I was in his shoes I would get a premium on providing financing.

As far as cash?  My top offer would be 66K if value is 130K

 




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