I think this seller is motivated, but she is out of the city (in a small town). The property is good 2 and half hour drive away.
The lady bought the place 8 months ago, she says for 303k, appraised at 309k, just divorced with 2 kids, she got a job in another town, so she has to sell. She is selling for 300k. She has 2 mortgages on the house so she needs $1700 + utility to cover her payment.
She seems really motivated, didn’t question anything about down payment or market value fluctuation, i told her it’s not guaranteed to sell, and she was ok with that too. I wasn’t really interested on the phone because i realized how far the property was. but before i hang up she says you know, even if i have to take a couple hundred dollars loss per months, that’s ok too.
i am going to check the numbers tomorrow, but if everything she says is true, Is there anyway I can help her? That place is just too far and i am very busy.any tricks advertising remotely? (I want to do a cooperative L/O)
Find out how much the property would rent for in the area. If let’s say the property would rent for $1,400 a month. Tell her you can buy the property for what she owes and that the loan will have to stay in her name for at least 2 years and the most you can pay is $1,200 a month.
If she agrees to this, out of the $1,700 she will still need to pay $500 and you cover the $1,200. This will be a Land Contract or Subject to deal.
You then sell the house on a lease with Option to for say $309k, ask for $2,500 option consideration and lease the house for $1,500 with $100 credit to the buyer for on time payments.
So what you just did is create a $300 monthly cash flow plus $2,500 in upfront cash. If it takes the buyer 2 years to finance you out, you will walk away with some cash because the lady’s mortgage pay down. If the mortgage balance after two years is down to $285k, your buyer is buying it for $309k - $2,500 option fee - $2,400 rental credit = $304,100. Minus $285k mortgage balance = $19,100 profit to you.
Plus you made $7,200 from 2 years of rent.
Thanks for the input, I was looking for a CA, you offered a sandwich deal solution, still works.
So, the owner just emailed me, the property was sold to the first buyer that looked at it last weekend, I didn’t get to sign the deal because I was still trying to work out numbers.
Turns out the deal was good because it was as she said, appraised at 309 without needing any repairs, she was selling at 299. Oh well, I will follow up with her, if the deal doesn’t close, I can jump in.
Don’t worry about the house being sold. There are many deals out there and with a much better cash flow and in an area that is closer to you. As an investor, that does not seem like it was a great margin.
Do you deal in foreclosures and short sales? You will be able to buy much cheaper than this deal. As investors always say, “love the deal, not the house.”