How would you buy this property, be as creative as you can:
FMV and comps at 179,000
an underlying mortgage of 179,000
1500 PITI
no prepayment penalty, needs no repairs.
Good Luck
I wouldn’t buy that one.
Most people wouldn’t, but there is a deal in it. Get creative.
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Are you saying you would buy it sub 2 and lease option it to an end buyer for 190?
Maybe take 3% non refundable down? Maybe charge 1700 a month for a 3 year lease term? End up with 7200 in payments over 3yrs and 10,000 deposit for gross profit of 17,200?
Or would you pay cash at 100%?
Might be tough, the high end of the comps are 180?
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Here’s the real question. Why would anyone in their right mind pay full market price for a property? You can buy ANY house on the market for full market value. Do even the slightest amount of work and you could buy one below market!!!
That’s the real answer!
Mike
Mike, it’s just an exercise. Do you not have any ideas? At the very least, why leave money on the table? If you can make a buck, then why not?
Swirlaze, you would get a purchase option? Not a bad idea, you’d only have marketing costs.
ctguy,
Yes, I do have an idea. My idea is that it is foolish to pay market price when with any effort at all, you could do better. So, why would you throw away money by paying more than necessary? That’s the real question!
Mike
How would you do better with this property? Do you think the bank would do a short sale, or maybe sell the note? Assuming, of course that the loan was never delinquent.
How could you get a better price?
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Swirlaze,
It doesn’t matter whether you’re holding the property for a rental, doing a flip, rehabbing and then selling retail or what you’re doing. If you want to buy retail, you could pin the real estate section of the newspaper on the wall and throw a dart at it. Any listing that the dart hit would be a retail deal, like this one. Why take a bad deal and try to turn it into something (which has a high probability of failure), when there are plenty of real deals out there?
Mike
Its a hypathetical question guys. How do you buy retail and still make money?
I’ve done it with free and clear houses, I’ve done it where there’s equity, but how would you do it at 100% financed? If you don’t have any ideas, that’s fine. But it doesn’t mean it can’t be done.
I don’t think of this deal as retail, I think of it as over leveraged.
Imagine if you could throw a dart at the real estate section ad make 30-60 grand with each throw?
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Hey mike how do you buy your properties?
That’s my problem too.
If it was free and clear, I’d do full price, principle only payments for 5 yrs, balloon at term. I’d then lease option it out for 3 yrs and make my money over the term on payments and deposit.
You can do just about the same thing if it is sub 2 with some equity. I’d get the seller to hold a note for the equity with no payments on a three year contract, five if I could get it.
What I was wondering about is two things:
First, if you could get the bank to sell or short the note, you would increase the equity in the house, and thereby increase your profit. But I don’t know if they would, on a performing note.
Second, could you have a private investor buy the house with his perfect credit at a much lower monthly payment. Then buy from your investor sub 2, and sell to a lease option buyer for a higher payment. Once again making your money over time on deposit and cash flow.
Then maybe sell off the note in two parts to note buyers for cash?
I still think there is something that I am missing, But its fun to think about. Thanks for playing along.
First, if you could get the bank to sell or short the note, you would increase the equity in the house, and thereby increase your profit. But I don't know if they would, on a performing note.Second, could you have a private investor buy the house with his perfect credit at a much lower monthly payment. Then buy from your investor sub 2, and sell to a lease option buyer for a higher payment. Once again making your money over time on deposit and cash flow.
Then maybe sell off the note in two parts to note buyers for cash?I still think there is something that I am missing, But its fun to think about. Thanks for playing along.
Yes, there is a LOT that you’re missing. I would suggest doing an archive search on short sales, lease option, and sub 2. You’ve got them all confused.
Banks do not do short sales on performing loans.
No competent investor is going to use his good credit to buy a house and then sell it to you sub2. When you do a sub 2 deal, the buyer gets the deed and the seller keeps the note. That is VERY risky for the seller and no competent investor with good credit is going to do that. Desperate sellers sell sub 2.
Lease options are not the great deal that the gurus would have you believe. Very few tenants “lease option buyers” have money for a significant option premium and they don’t have good credit or they would just buy a house. While you’re waiting for the lease option buyer to come along with his big pile of money, you’re losing rent during the period that the house is vacant. I could write 3 or 4 pages on the reality of lease options, but you can find some of it in the archives.
Mike
Hey mike how do you buy your properties?
jb_bak,
I buy my properties in many different ways, but I ALWAYS buy at a big discount. When I first started, I looked for deals through my realtor (and no I didn’t and don’t mind paying her commission), with a small ad in the newspaper, through networking at my local REIA, etc. Now, people offer me deals all the time. My realtor calls when she knows of someone desperate enough to sell at a big discount. Disgruntled landlords call when they need desperately to get rid of their deals. I hear of deals at my REIA, etc. I have also bought properties at foreclosure sales, estate auctions and estate sales. I have bought a bunch of REOs (again through my realtor).
As far as purchasing techniques. I have paid cash for many properties and then refinanced them into blanket mortgages. I have bought sub 2, using lease options, with bank financing, and with owner financing. Whatever it takes to get a great deal. However, no matter the method, I ALWAYS and ONLY but at a BIG discount. I would never pay retail - it just does not make sense.
Mike
Maybe the second investor idea is not a good one, it’s something I just thought of.
As for Lease option people, I market to them consistently anyway. I also have a credit repair business. It usually takes less than a month to get my houses sold that way.
Today I spoke to my local short sale specialist about this question. His first thought was obviously that it couldn’t be done. But then he proposed that this is essentially pre-pre-forclusure. He suggested to create equity by gettting the bank to reduce the mortgage by the cost of the realtors commission the bank would have to pay to sell the house after a forclosure.
Still thinking
Thanks very much mike. The more I read your posts the more I realize what you do is what I want to do someday.
Thanks again
John