For when I’m ready to do sub2, I want to make sure I understand the process.
Let’s say the owner owes $6,000 in back payments. This means that I must have $6,000 in cash to make the deal happen, which would cut into my profits of the down payment I receive when selling the house owner financing.
Also, is a large bank like Bank of America going to let me resell their loan unless I’m some millionaire? Are you sure that will work?
Yes, you’ll need to somehow come up with the $6K, which often times does come out of the down payment. Depending on the deal, this may or may not be that big of a deal. If it’s a home with no equity and you can only get $10K down, it’s probably a no go. If it’s a house with 10%+ of equity, I’d sell it for 10% above market and get as big of a down payment possible.
You aren’t reselling Bank of Americas loan, you are leaving he loan in place and reselling the house with a lease option or some other creative financing tool.
Would I need that $6k up front or would it directly come from the down payment?
Is my purchase contract void if I can’t find a buyer?
All of your contracts should be written so that if you don’t get a buyer your contract goes void. You need that exit plan so you don’t get stuck with the house.
You need to know how fast houses are selling in the neighborhood of the house you’re buying.
If it’s taking six months to unload houses conventionally, like the one you’ve got a contract on, you need to know that, because it’s likely you’ll spend the same time finding a retail buyer, especially if you’re anticipating a cash-out. Less time if you’re offering financing.
So, if you’re not prepared to cough up the arrears, and carry the payments for at least three or four months, and/or expect a back-end, seller-financing profits that will make up the deficits, then this is not your deal.
Sales velocity makes a huge difference. So does age and condition. I stay away from obsolete, fugly houses from the '90’s or older, because those aren’t where the fast and easy money comes from.
Meantime, Lease/Options are last resort exit strategies. You hardly get anything up front. The tenant/buyer remains a tenant in every sense of the word. The seller remains a landlord just the same. The tenant feels quite compelled to call the seller and have them ‘repair crap in the middle of the night.’ I mean, why offer a Lease/Option if you can just finance a person for real, and pawn off the liabilities for repairs, and get MUCH more money up front?
Lease/Optionors are notorious for trying to unload over-leveraged turds with the promise of eventual ownership.
I’m not saying there’s no place for Lease/Options. I’m only saying that if you want to sell a house, sell it. Finance the buyer and be done with it. There’s little sense in offering a lease/option, if you can finance the deal instead. And there’s fewer, better ways to make sure a buyer commits to the deal, then sifting for buyers with a 10% down payment.
Of course again, if you’re trying to flip an old turd, the lease/option may be your only ‘option.’
It doesn’t sound like sub2 is for me due to the long wait to see the money.
Wholesaling it is.