Not sure if I should be posting this. It has elements of various topics and I didn’t want to cross-post, so I’ll post it here.
My first deal may have just fallen in my lap. My primary interest is to buy, rent and hold. Here are the details:
1969 3 bedroom 2 bath house in So Cal. Owner currently owes ~$90,000. ARV ~$425,000. Owner wants $275,000: $90,000 to pay off the mortgage $110,000 to pay off a motorhome and $25,000 to give to each of his three children. Current rents for the area are $2,200 - $2,400. I get the impression that he may be willing to take a second, however he doesn’t want to be bothered with having to write out a check to each of his three children every month.
From talking with the seller, he currently lives in Penn, is 71 and owns 3 houses: One he lives in; the other is currently in escrow with no renters; and this rental. He says he is “property rich and money poor” and is motivated to sell by the spring.
Rental history: Current renters are the owner’s daughter and family with no written lease. They moved-in in mid October and were suppose to start paying rent (in the amount of the mortgage) on November 1st but still haven’t paid as of today. They plan on moving out in June. The previous renters were the owner’s step-daughter and family who were consistent with the rent. They rented it for 9 years. I got the impression that the rent was once again just enough to cover the mortgage. Previous to this, the renters were the same daughter and family who just moved in. The lived there rent free for two years before the owner kicked them out. Because of this, I can assume there will be a lot of deferred maintenance and there may be some trouble getting rid of the daughter.
I will be taking a brief look at the house this weekend. If I make an offer, I was going to use standard due dilegence, inspection, contingent on the property being delivered without renters, closing by the end of June. I would be willing to take on the headache of “with renters before June” as a part of negotiations. Other terms:
New Loan: $100,000, 30 year, 7% interest, payment approx $665.30
2nd (Carried by the Seller): $100,000, principal reduction, payment approx $277.78
3rd (Carried by the Seller’s Children): $75,000, principal reduction, payment approx $208.33
Total monthly payment: $1,151.41
Owner Carry First (subject to?) 200,000, 30 year, 3.9% fixed, $943.34
2nd (Carried by the Seller’s Children): $75,000, principal reduction, payment approx $208.33
Total monthly payment: $1,151.67
The owner carried subject to would allow me some finagle room with the $$$ amount and interest rate depending on repairs. I understand the basics of “subject to” although I would have do do more research. Can I offer an owner carried subject to? I anticipate the owner having some concerns with regard to me not making the payment and the effect on his credit rating. If I go this route and he brings this up, I figure I can alleviate some of this by telling him that I would be making the payments directly to him, and him to his mortgage company. Is this the right technique? Is there another way to make the owner more comfortable with “subject to”? This is an area I need to do more research on.
Looks like I will have to get creative for this to work. Options may be an option (another area I’ll need to get familiar with). Bird-dogging, flipping, and wholesaling may not be palatable (but do-able as a last resort).