well i knew it had something to do with magic lol
I’m just sittin on the side lines… LEARNING… :bobble It is a lil funny though… :argue Thanks again guys. I’ll be sure to look you up for my next post…
Mr. Tony, could you explain why discharge fee belong to buyer, doesn’t mortgage belong to the 1st seller and you took over it so now it belong to you? Buyer will pay as closing cost? I don’t get it.
Mr. Chunk got a point where mort. bal. and comp. is the same amount. What if Mr. E can’t sell it right away and you got new comps that even lower (look at west coast 2006-now) “profit when you buy” always a good idea I think.
But if Mr. E got a buyer waiting already, Mr. T theory can be done too, add 10% for owner finance is normal.
Adj. mortgage, what if buyer can’t qualify to refinance before adjustment, your profit will be eaten, or worst it you may have to pay the difference! . Have detail about the mortgage is a good advice. I will stay away from that kind of mortgage.
Final 10% of 100k = 10k profit, I think risk/ reward ratio is not that attractive unless like I said Mr. E got a buyer line up already. (holding costs will eat 10k very quickly). I don’t know, I’m not expert too, but I’ll look for another deal.
Plain and simple, chunkoftheearth is right. This is not an attractive deal. Don’t put together shoddy, shaky, speculative deals. Don’t do tight deals based on appreciation. In real estate, you make your money when you buy. Remember?
There are too many deals that make sense without using the words “profit centers.” Sign excellent deals that are easy to understand while making sure the dollars aren’t idealized in future appreciation and you’ll make money.
Oh Yeah. Everyone’s aware that real estate is not appreciating, right? :rolleyes
If the underlying loan is an ARM or if the payment too high I wouldn’t do this deal. Also if the seller insists on selling for more than the loan balance OR getting anything more than moving money (I’m talking $1,000 bucks or less) then she can keep her house and her problem.
Aside from that, I agree with Tony. While not a killer deal by any stretch, there’s certainly nothing wrong with getting a virtually free deed on a pretty house with current payments, and then simply sell it with owner financing or on a lease purchase for a premium price while keeping the difference. Assuming a marketable house, you can EASILY sell it for more than the $100K ARV simply because you’re offering terms which makes it easier to buy, thus it’s worth more. I’m talking TODAY not down the line. Any appraiser will confirm this to be the truth.
Buyers will virtually knock your door down to get at this house at $110K if you make it easy to buy. Maybe even more. Hard as it is to get financing these days he won’t have a problem selling this house quickly for a premium if he offers terms. Don’t know about yall but I’d take $10K down and monthly cashflow on a house I don’t even have to fix up. Matter fact I’ll take as many of those as you can give me.
If the market continues to depreciate so what? Keep renting it! If you sold it with owner financing just keep collecting payments! What if, what if, what if…give me a break. What if you’re abducted by space aliens the day before closing? What if a plane falls out the sky on your head on the way to settlement?
Where exactly is Ervans’ risk here? Let’s take a look…
- He doesn’t have to make up back payments.
- If he negotiates getting the deed for moving money (no more) he’ll have no money in the deal other than that.
- His end-buyer or tenant/buyer will responsible for all maintenance & repairs.
- Loan is not in his name (I’d try to get the seller to make the next couple payments thus buying time to find an end-buyer).
- He will own the house.
Assuming a reasonable underlying payment his exit options are many. The only challenge here is getting the seller to agree to take moving money for the deed. That’s it.
Mr Ervans what is the underlying payment, I don’t think you ever told us.
Ron Legrand recently started a real estate investing reality show where he walks 3 new investors through their first deal. The most recent episode outlines a PERFECT example of what we’re discussing here - that is, buying a 100% financed pretty house sub2. Here’s the link to the video: http://www.thelearningplanet.com/watch.asp?video=17
now I tried to get this to make sense in my orig post but this post says it all! BTW if u offer the right terms u should be able to sell this house in less than 30 days, no sweat.
Yep…30 days or less no prob, even if he doesn’t have a buyers list. :smile
NSU says: Aside from that, I agree with Tony. While not a killer deal by any stretch, there’s certainly nothing wrong with getting a virtually free deed on a pretty house with current payments, and then simply sell it with owner financing or on a lease purchase for a premium price while keeping the difference. Assuming a marketable house, you can EASILY sell it for more than the $100K ARV simply because you’re offering terms which makes it easier to buy, thus it’s worth more. I’m talking TODAY not down the line. Any appraiser will confirm this to be the truth.
Chunk says: What a crock! Especially championing (is that even a word…lol) this for someone who is new like Mr E. Total bull. NSU and Tony seem fixated on making every lead a deal. The question shouldn’t be CAN the deal be done. The question is SHOULD the deal be done. I think we all know it SHOULDN’T. So NSU and Tony stop selling poo and callin’ it cake!
But weren’t you guys just saying there’s no deal here at all? :huh Suit yourself. This is a very doable deal for a properly trained newbie IMO. I know experienced investors who could do this deal with their eyes closed but there isn’t enough money in it for them. $10K to a newbie with hardly any risk is usually a Godsend.
A newbie can do this because there’s very little risk. Let’s see if it passes the 3-question creative real estate risk litmus test:
#1 Don’t write a big check. PASS…as long as he only gives the seller moving money for the deed. He could eliminate this risk altogether if he finds the end-buyer while in escrow, and closes them both at the same closing table!
#2 Don’t guarantee debt. PASS…he’ll be taking it over sub-2. Loan stays in seller’s name.
#3 Don’t make promises you can’t keep. PASS…just simply don’t make any.
NSU: This is a question that has come up more than once from more than one person and both you and Tony haven’t given an answer. In this scenerio, what would you advise Mr. E do if the market tanked another 10%? What would be your advice to him to somehow overcome that? Imagine this were a deal you had advised him to sign up back in 2008, then tell us what he should do. By the way, I wasn’t advising at any point doing this deal. We haven’t even dealved into whether or not this property needs repairs. What should he do if it does NSU, should he artificially hike it up another 30k without the comps to support it? Other question for you NSU. Since you sign BS deals like this one, tell us also of a deal in which you actually wouldn’t do. Curious in your opinion what would make a BS deal. I’m listening :bs
The market can always tank, but I already answered that. The answer is keep renting it to the tenant-buyer, or keep collecting payments from the new end-buyer. Just keep collecting payments. If the tenant-buyer moves out he can always just rent it assuming a reasonable underlying payment. Worst case scenario he could do a short sale, loan mod, or hell even deed it back to the seller.
Lots of people got caught with their pants down that bought at the top of the market. With many areas experiencing up to a 50% or more drop in values it sure wouldn’t have needed to be 100% financed at that point in order to be in trouble. But in any case that’s the business we’re in. We can what-if to death, the real investors will keep making money while the chicken littles keep worrying about the sky falling. In this particular scenario if he deeds it directly to the end-buyer via sub2/seller financing in exchange for $10K down as I suggested earlier he’s in and out. If the market tanks then too bad, not his problem.
He mentioned in the first post there are no repairs needed. Among other things, that’s key on dealing with a 100% financed house.
I wouldn’t hike it up $30K. Never said that. I would go $10K, maybe a lil bit more. It’s worth more because he’ll make it easy to buy.
IMO A BS deal is one where there is no realistic exit strategy. He’s got several here. I didn’t say it was an ideal, perfect deal. Just a doable one. Certainly a good starter deal for a well-trained newbie. Check that link I posted earlier and watch that video…may learn a thing or 2.
NSU: I appreciate the reply. And I am ok with you disagreeing with me. It’s cool. Just a case here where it’s about preferences for the individual investor. I don’t need to go to the link to see a deal of this sort be put together though because technically I already know what you guys are talking about. It’s just my preference not to do it. For me, the deal has be make sense from the outset, right in the begining and this one doesn’t unless you fudge the numbers. Anyway, it’s cool. A complete newbie or even one that’s well trained to strict to strategies that make sense though and not do what these other guys are doing because they obviously know what they are doing (shrugs shoulders). Newbies are better off sticking to quality deals and wholesale type deals and not this crap. So you mention possibility of getting into this kind of deal then if market tanks then do loan mod, short sale etc as possible exit. Ok, wow, this is eye-opening. No reason do even involve youself in a deal like this where the mort balance and valuation are the same. Not prudent.
chunky i thought u got hit by a bus :beer
I did, but then I recovered. I mean, I had to so that we can continue our debates! That, and I knew you missed me. Tony D, you have to admit, when we speak, the masses watch. Well over 600 views homey.
Tony and chunky, You are both making good points, but I’m still waiting for someone, besides you two, to address the questions above. Do these things apply or not?