Any way of structuring this deal?

mulhern · September 6, 2013, 7:02pm

i have a seller who wants out of 2 houses. both are rented. there both conventional 30 year mortgage with about 19 years left to pay, both 6%. The problem is one home is worth 110k and she owes $123k other home she owes $103k and worth $70k . both monthly payments are at around what they would rent for so theres no positive cash flow…Seller is up for anything. Anybody have any good ideas? Im in Florida if that matters

javipa · September 6, 2013, 10:10pm

These are ‘really’ negatively cash flowing properties.

However, the upside here is the fast pay down of the existing mortgages.

In 19 years, you’ll have two free and clear rentals simply for babysitting them.

If you can get in ‘for nothing’ or close to it, and you can afford to bridge the gaps in maintenance and management for a long while, I would recommend ‘investing’ in these over-leveraged units.

If you don’t already own some rentals, this would be a great way to get an instant ‘portfolio’ to show on your financial statement.

Just having a couple of rentals on your financial statement gives you credibility with everyone you deal with.

You could make an offer to take over the seller’s loan in return for the deed, and call it a day.

I’m betting both these properties will be worth twice as much in 10 years.

My exit strategy would be to offer no-qualifying owner financing to the renters first, and if they don’t bite, offer it to someone else.

That sounds scary, but I can find buyers that just want to live in their own home, and they don’t care about the price. They just care about the payments and the money required to get in.

I advertise for those types of buyers.

Then I might pull a “Ron Le Grand” on the down payment, where whatever the buyer says he’s got for a down payment, I ask, “What else you got?”

Are these houses “rental looking” or do they present themselves well?

Meanwhile, I build in a slight payment spread to cover my administrative costs.

The great thing is that I’ve got an owner in the house, who’s taking care of everything. I’ll never get repair calls. I just capture several thousand dollars up front, and wait for the rest of my money when the buyer pays off the original loan.

You will likely resell these houses more than once. So it’s conceivable to capture two, or more, down payments on each these houses before all is said and done.

Why would that happen? Because the types of buyer that would buy an upside down house, are the types that will also want to move in five years and buy ‘something else’ without paying much attention to price.

Owning a home they like is more important than “investing” in a place to live. So, they’re likely to bail on you.

Then, you get to sell these houses again.

The lure is your “No Qualifying,” seller financing. I has big appeal for large percentage of buyers. And I’m not talking ‘deadbeats’ either.

Some buyers find this so attractive, they will dig til their fingers are bloody to give you the down payment you want.

Of course my qualifying procedure goes, “If you’ve got the down, you qualify.”

The key here is to get in with nothing. Otherwise, anything you give to the seller just make the purchase price ‘that much more upside down.’

Forget that.

One last thing, you’ll need to show the seller how reliable and trustworthy you are. Who wants to give their house away, gratis, to someone they don’t trust with their credit and loan repayments?

So be prepared to demonstrate how much like Mother Theresa you are, and how you’ve healed several lame children simply by waving a blue Bic pen over their foreheads. I prefer to brag on the 40 lepers I’ve healed, and that I can’t swim, because my feet won’t go under the water.
:halo

mulhern · September 7, 2013, 1:22pm

thanks buddy, that helps a lot. was actually thinking the same thing, there good loans so i know there something to be done here! I appreciate it!

Bill_H · September 7, 2013, 6:13pm

As Javipa said…“Get into them for NOTHING”

Had a similar situation up in WA state years back…got in for nothing, waited a bit and made out like a bandit.

One other thing…how long are the tenant in for…month to month…year…?

You may be able to get in, get them out, do some minor upgrades, up the rent and come out nice.

GOOD used appliances, paint changes the world, these can make a big difference.

Good Luck,

mrflippahouse · September 11, 2013, 11:48pm

javipa post:2:

mulhern post:1:

i have a seller who wants out of 2 houses. both are rented. there both conventional 30 year mortgage with about 19 years left to pay, both 6%. The problem is one home is worth 110k and she owes $123k other home she owes $103k and worth $70k . both monthly payments are at around what they would rent for so theres no positive cash flow…Seller is up for anything. Anybody have any good ideas? Im in Florida if that matters

These are ‘really’ negatively cash flowing properties.

However, the upside here is the fast pay down of the existing mortgages.

In 19 years, you’ll have two free and clear rentals simply for babysitting them.

If you can get in ‘for nothing’ or close to it, and you can afford to bridge the gaps in maintenance and management for a long while, I would recommend ‘investing’ in these over-leveraged units.

If you don’t already own some rentals, this would be a great way to get an instant ‘portfolio’ to show on your financial statement.

Just having a couple of rentals on your financial statement gives you credibility with everyone you deal with.

You could make an offer to take over the seller’s loan in return for the deed, and call it a day.

I’m betting both these properties will be worth twice as much in 10 years.

My exit strategy would be to offer no-qualifying owner financing to the renters first, and if they don’t bite, offer it to someone else.

That sounds scary, but I can find buyers that just want to live in their own home, and they don’t care about the price. They just care about the payments and the money required to get in.

I advertise for those types of buyers.

Then I might pull a “Ron Le Grand” on the down payment, where whatever the buyer says he’s got for a down payment, I ask, “What else you got?”

Are these houses “rental looking” or do they present themselves well?

Meanwhile, I build in a slight payment spread to cover my administrative costs.

The great thing is that I’ve got an owner in the house, who’s taking care of everything. I’ll never get repair calls. I just capture several thousand dollars up front, and wait for the rest of my money when the buyer pays off the original loan.

You will likely resell these houses more than once. So it’s conceivable to capture two, or more, down payments on each these houses before all is said and done.

Why would that happen? Because the types of buyer that would buy an upside down house, are the types that will also want to move in five years and buy ‘something else’ without paying much attention to price.

Owning a home they like is more important than “investing” in a place to live. So, they’re likely to bail on you.

Then, you get to sell these houses again.

The lure is your “No Qualifying,” seller financing. I has big appeal for large percentage of buyers. And I’m not talking ‘deadbeats’ either.

Some buyers find this so attractive, they will dig til their fingers are bloody to give you the down payment you want.

Of course my qualifying procedure goes, “If you’ve got the down, you qualify.”

The key here is to get in with nothing. Otherwise, anything you give to the seller just make the purchase price ‘that much more upside down.’

Forget that.

One last thing, you’ll need to show the seller how reliable and trustworthy you are. Who wants to give their house away, gratis, to someone they don’t trust with their credit and loan repayments?

So be prepared to demonstrate how much like Mother Theresa you are, and how you’ve healed several lame children simply by waving a blue Bic pen over their foreheads. I prefer to brag on the 40 lepers I’ve healed, and that I can’t swim, because my feet won’t go under the water.
:halo

Great Answer Javipa