So here’s the situation, an out of town homeowner called me about needing help to sell her home. She owes 118k on the house and she does’nt want much profit, she’s more concerned about selling the place. The house is currently rented out and its in pretty good condition, no repairs are needed. I did a little research and I believe the house could sell anywhere between 130 and 150k (I will have more accurate numbers later today after I do some additional research).
She wants to sell the house out right, she does’nt want a rent to own situation. So my question is how I can quickly get this house sold for the top dollar. Also I need to probably draw up an agreement between the homeowner and myself before someone else comes along. I would appreciate any advice on how to proceed.
I typically work with rehabs so a situation like this is a bit unique to me, I would appreciate any and all input.
If the value is 130, your margin is 10%. That's a pretty thin deal for an investor. If it's really 150, then the margin is 27%, which is better, especially if you have a good plan, which it sounds like you still need.
One way to work this is to try to obtain financing for 0-5% down, 5% of 118 is 6K down, hold for one year, then sell through a 1031 exchange. Since you held it for a year, you can avoid capital gains tax and go with the tax deferral through the 1031. A subsequent sale, even with giving an agent a 6% commission, now you have about 29k to stick into another deal after one year, and you have a 23k return on your 6k investment.
You could also try to cash flow this deal, if someone would be willing to sign a lease option to buy for (optimally) $2,360/month with a downpayment of earnest money. In this instance, you could avoid an agent's commission, but you would need to pay an attorney to set up the option.
thanks for the replies guys. I had a chance to do a little more investigating into the home and unfortuantely my initial numbers were far to generous. The house is actually in one of the less desirable areas of the suburb, furthermore past sales indicate that most homes in that area are selling for the mid 90’s to the low 100’s. I’m guessing that the owner bought the home and later took out an equity loan, the bank probably loaned out slightly more money than they should have on this house. Basically I don’t think there’s much equity in the place if any and it’s going to be a struggle to sell the place for much more than 118k. I could potentially blow any profit to be made on advertising alone.
I’m not sure if this is worth pursuing. I promised the owner I would call her this evening, should I just recommend she speak with a realtor? Or maybe I should suggest she try to get the current tenants to take over the mortgage? I would like to help her out since she is a friend of a family member, but I’m not sure what options are available. It definitely does’nt seem like there’s any money to be made, but I would be willing to help her sell the place just out of goodwill and a chance to gain some experience.
The owner is upside-down. There is no deal here and things are probably not going to work out well for the owner. I’d just say “no thanks” and move-on. You’re not in business to help upside-down owners. You’re in business to make money.
There is 118k on loan (Make 100000% sure this amount is correct and she’s not trying to play you). The home itself is worth around 100k. Find out how much her payments are and how much the renters are paying. If your getting more from renters then this could be a good cash flow opportunity.
With this in mind…
If I was getting cash flow each month then I would work this deal for the biggest discount I could get then buy the home for cash flow. Then after a year, re-examine the property. Get it appraised and find out if now you can make some money. If you still can’t make any money I would put addon’s to the house and increase it’s value until I got what I wanted out of the place.