Typically I rehab houses but I was recently approached by a retired member of the Military and would like me to take over his VA Loan on his house. He purchased it for $80,000 2.5 years ago and he would like what he paid for it. According to appriciation rates in our area the house should be worth $95,000 to $105,000. It does need the basics like paint and some repairs to the garage at about $3,000. My thought is to do a lease option to buy and then flip it.
He is well aware that he could spend the 3k and pay a realtor and he will probably still come close to breaking even. If I have to pay for a closing it will not be worth the trouble. Does anyone have any good ideas on how to handle this situation and make the most out of it? Our market is very strong right now and it won’t be on the market long.
I have never done a flip before, so it’s a little bit different for me, I realize there is less risk than a rehab but there is also less profit.
When you said take over I assume you mean a sub2 deal and not an assumption. The best way I have found on a lean deal is to avoid all closing costs and just get the deed and have it recorded. Do a title search some inexpensive way. Some title companies will do them free every now and then if you do many deals with them. Once you have the deed then you can sell as is with owner financing or you can paint etc and get a few more dollars more. You can probably make some money be getting a little more down than you will have in the deal and make a monthly difference on the note payments with the equity you will have in the note and maybe even a higher rate than the VA note. It may sell faster and for top dollar if you do the repairs but more risk since you have more money invested. This is about the only way to do a deal like this. No room to pay cash to pay off the loan and then pay closing costs buying and selling and hard money points and high interest too.
I am just learning the lingo of this type of deal. Some people recommend that you put the property in some sort of land trust before doing the wrap around mortgage. I have not had a opportunity to read much on these types of transactions but I will start reading more and I have followed the topic when it’s on this website… What is the best source for documents or do you recommend having an attorney draw up the documents?
If the market wasn’t so hot I would probably pass on this.
I would get an attorney this being new to you. All you really need is a blank deed and the legal description and the owners signature and a notary but there may be some title issues and an attorney can be helpful. They can also help you set up the land trust or LLC or Corp or partnership depending on your situation and desires for forming anything at all. They all come with some costs and headaches that you may not even need.