$75k in equity, seller needs $20k cash...what would you do with this deal?

General Real Estate Investing
1
  • ARV = $260k
  • Burned-out landlord seller is asking $185k (owes $125k, wants the $60k difference, will finance)
  • DC property
  • House in fairly good condition according to seller (I will see it this week)
  • Seller needs at least $20k now ASAP and will take a note for the remaining $40k @ no pmts no interest
  • Good sec8 tenant in place @ $1,500/mo
  • Underlying payment of $937/mo is 4 mos behind
  • The tenant doesn’t want to leave but will go if need be…I can help her find a new sec8 home no problem, voucher should transfer.

Need some flip exit strategies here. Ideally if I could leave the tenant in place I could just market it to landlords as a seller-financed turnkey rental deal, but I’d need to ask for somewhere in the ballpark of $40k down ($20 to seller, $4-5k to catch up payments/may be a possible reinstatement fee, $5-10k for my assignment, plus closing costs). My marketing angle would be you’re buying $75k worth of equity plus $500/mo cashflow for $40k cash, take over payments no bank qualifying. The seller financing is the key here, but is it reasonable to expect that much down from a landlord on a deal like this?

Also I’m considering getting an option for $185k then do a round-robin auction and sell it quick to an arms length owner occ buyer. This gets the seller his whole $60k and I’ll easily make $40k+ after costs. The tenant would have to leave and I’d likely have to wait til she’s out so I can clean/stage/market etc plus I’m not sure if the house even qualifies for this strategy til I actually see it.

The more I look at it the more I’m leaning toward the option/auction but what would you guys do with this deal?

2

Hi,

I know the perfect way to make this work!

First I think you should get this below a 30% discount, so something below $182k and then subtract any repairs and clean up for resale, my thoughts were around $177k if it’s pretty clean and only requires $3k to $5k in repairs!

Tell the seller in order to take over his property you need him to agree to carry back his note as a 2nd TD and subordinate to new financing, then go out and get a 65% to 70% new private money loan, I looked tonight and you have a lender who will loan this as interest only for 18 months at 9% interest with 3 to 6 points (Minimum $3k)!

This would be a $1,267 payment at 65% of value or $1,365 at 70% of value! Plus of course taxes and insurance!
The Washington DC market is very good right now, and you can sell this property for full retail with a little patience and TLC!
You have a renter who is paying $1500 per month on it and there is no reason you could not keep the tenant until it sells and closes, then offer to pay the tenants moving expenses and any expenses involved with moving and transfering the section 8 voucher!

So this looks like this:

$260,000 FMV
$177,000 Estimated Purchase Price
$182,000 New 1st TD @ 9%
$ 20,000 Down to seller
$ 32,000 New 2nd TD in favor of seller
$ 10,920 Worst case 6 points in favor of private money lender
$ 3,540 2% estimated closing cost’s for $177k purchase
$ 22,540 My buddy nsu1997’s Pocket for repairs and carrying cost’s over and above rent!
$ xxx Taking Gold River to dinner when he’s in Virginia (There’s a Ruth’s Chris Steak House at Tyson’s Corners)
$247,000 Actual selling price estimated (Sale within 5% of asking - Strong Market)
$ 6,175 2.5% estimated closing cost’s for $247k sale
$182,000 Underlying 1st TD
$ 32,000 Underlying 2nd TD original seller
$ 26,825 My buddy nsu1997’s Pocket for pure profit’s (Plus every left over dollar from loan net)

This is a no money down deal if you do it exactly as I have written here!

Now would you rather make $5k to $10k or would you rather make much more!

You will own it and control it and under the lenders terms you will have 18 months to make it look right, stage the tenants possessions, put what ever tenant does not need in storage at your expense and make it look sweet to sell!

I would make a deal with the tenant that if she stays right up until it closes, and works with you and pays the rent on time, and allows the house to be shown and keeps it clean that you will gift her a couple of thousand cash gift when it sells for working with you on top of paying her moving cost’s and expenses!

Your the Man!!!

                         GR
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Ahhhh subordination! Forgot all about that…touche’ my good buddy Gold River!

This strategy will be PERFECT, especially if the house is not completely pretty and ready to roll right now (if it is I’d probably just do the option/round robin auction and cut out the middleman) but if it needs a few grand to make it pretty (which I’m betting it does) then this strategy knocks it right out the park. You’re right, completely $0 down…matter fact I’d get paid at closing.

Now, who’s this private lender of yours?? :o)

Definitely let me know when you’re in town no matter how this deal goes, haven’t tried the ribeye at Ruth’s yet. :beer