I have an appointment to meet this woman friday to talk about purchasing her home. The last time we talked, which was about 2-3 weeks ago, she had told me that she had signed a contract with an investor and was going to call me back if it didn’t work out.
This is the situation:
Her and her husband are moving, they had planned to move on June 7, and now they feel that they don’t know what they are going to do. They want to move this weekend. She can’t make the double payments if she moves. The payment for her mortgage is $690.00 a month. I would like to do the L/O Purchase but the house is only a 2 bed/2 bath and $690 a month is quite high even for rent to own. Just renting this house would go for around $400 to $525 a month If she could pay the $90 and leave me with the $600 to get for the rent, that would work.
She doesn’t have much equity in they house. So I’m thinking that as motivated as she is (boy, if you could hear her over the phone) then maybe she will not even care about what little equity she has.
I really just need a little feedback on this. Maybe some “If it was me then I’d do this” kind of advise.
Thank you for any who reply
I don’t quite understand… I’m doing it so that I can work my way into RE investing. Since she has little equity and doesn’t really care about getting it back, then that would be more of a profit for me when it comes time for my tenant buyer to purchase. The less I have to pay her the more I can keep. Right?
Of course she is motivated! She has no equity, and just needs a “grater fool” to buy her money loser! Remember you make money when you buy, not when you sell. If you buy this thing too high and the rents are less than your mortgage. Why are you bothering? Just to “get in” is one of the dumbest reasons I have heard so far. It is about as dumb as “Real Estate never goes down”.
O.K. I see your point…but just to get in isn’t my motivation. Aren’t rents a little higher when you rent to own anyway. The first year I could charge the $600 for rent and the following year the rent would go up and the next year it would be the same way. Of course I would put that in the agreement with my tenant buyer. The woman selling to me would make up the difference of the mortgage payment and pay the $90 a month…how does that sound? Creativity right?
What do they owe, and what is it worth? Never count on future appreciation in your figures, you have to figure what is it worth now. Remember their is always a risk when renting, vacancy, repairs, evictions, trashing and such can easily turn your lil profit into a big loss.
The property is worth about 70k now and she owes about 66k. I understand all the negatives of renting but it would be an agreement that they (my tenant buyer) keep the property in good condition. Honestly, do you think that I’m wasting my time with this?
4 Grand is not a very good upside, you should be looking for at least 8 grand if not 10. You have to factor closing costs, holding costs, taxes, any improvements (even it is just painting and minor repairs).The upside is not that great. If you rent you run the risk of bad tennets, so if you have a “good condition” clause, they don’t care either way. Than you would have to evict them, usually for not paying rent, clean the place up, may cost a lot if they let the dog urinate on everything, the kids draw on the walls, steal the fridge, knock holes in the walls to put a satellite dish in, break windows, damage doors, oil and grease all over the floors. Some people are pigs, and most of them are renters! Than you will have to go out and sue them because their $600 deposit didn’t cover everything. I would pass, just like the first investor did.
Thanks for giving me some advise on this situation. It really has helped me decide. I will take your advise and pass on this deal. My wife has also brought up some very good points per our current situation and she feels the same way you do.
I commend you on listening and being real about your so called deal. Breaking into this business is the hardest thing. I was once a “motivated buyer” trying to just get the first deal DONE. I did, didn’t make a whole lot of money on it, and wasted a TON of time.
With this business you must find motivated sellers and be able to recognize when there is a deal and what kind of deal. That all comes with time and experience. I wish you all the luck in the world!!
Lets see…to answer you, Mark, I can’t get my own mortgage on the property because of my credit and I don’t qualify for FHA/VA loans because I’m self-employed and I don’t have two years of W2’s to show my income. So that’s out of the question. I have been contacted by some hard money lenders but it’s for 70% of after repair and the owners of the property have already made some repairs on the house.
To you, Jared, I would like to thank you for your words and for sharing your experience of your first deal. You are absolutely right about it being hard breaking into this business. It’s been a few months now since we (my wife and I) started collecting information and learning about so many different ways to do real estate. Nothing will stand in our way, though. We’re serious about making RE investing our career.Best of luck to you as well!!
I am in the same boat as you and your wife. Only my brother is along with me. We have just finished incorporating and are soo new to this.
There is no way we can let anything stop us. I guess we have ran up to the same wall when it comes to experience and financing.
DON’T LET ANYTHING STOP YOU!! Anything worth having doesn’t come easy. Especially RE investing. The world meets nobody half way. So don’t give up! There are going to be lots of brick walls, just climb over them and keep on keepin’ on. Just some words of encouragement.