Owners want to deed a 4.5 million dollar house

General Real Estate Investing
1

Owners have a 3.5 million dollar loan on a 4.9 million estate. They wanted to downsize and purchased another house out of state and are paying around $35,000 per month for both. They need to get out of this property. They want to deed the property to me for 4.1 million. I want to be as close to the 3.5 million loan as possible. I already asked would they sell the property for what they owe. (answer no). They won’t go lower than 3.95 million. Should I buy it at the higher price and do a 1031 exchange for a money producing apartment building?

2

Hi,

Ok, let's look at this from my position! I look at this and quite frankly I am not sure why you would even ask?

You say house is worth $4.9m now if this were the first day these folks had this for sale they probable would not tell you they would except $4.1m, which tells me the property is probable only worth around $4.1m to resell. (Reguardless of asking price you have to have a buyer and close to accurately determine real market value)

Now as an investor if FMV is around $4.1m you should be buying this as a pristine property for $2.6 range, which would mean you should be doing a short sale.

Even if the property were worth $4.9m and you bought for $3.5m you would still be paying 71.5% of FMV which is not enough discount to take on the risk of utilities, care, maintence, landscaping maintence, insurance, taxes, and principle for what could be years.

If they can’t sell it in a couple of months for $4.9m it’s over priced and the fact they have offered to except $4.1m tells me the property is not worth anywhere near $4.9m!

This is no deal, and unless you can pay cash I would stay away from high end homes as this market is barely moving these days!

                 GR
3

GR, the lender wouldn’t really approve a short sale at 2.6 when the FMV for the estate is actually higher than the outstanding loan principle, right?

4

Hi,

That's absolutely right, the point I make as investors we want to buy residential properties at an average of 30% below FMV right now as to have room to resell!

       GR
5

I don’t understand why you would buy it and swap it for an apartment building. Just use your money to go and buy that apartment building and not mess around with that house, which, by the way, is going to be extremely difficult to sell.

6

Doesn’t he think that he’s capturing discounted equity that he can trade for a free and clear apartment?