would you buy this ....

General Real Estate Investing
1

a home in a new subdivision with building still going on.

Owner bought home last year @130k so no equity, but a 8% interest rate. Payment is $953 per month.

Shes getting divorced & says she cant keep up payment, & she cant afford to pay me to take the home.

I am thinking of writing up a contract on it sub 2 me finding a tenant, with her covering the mortgage until i do.

then i will try to l/o it at 110% of FMV [143k] with 3% down[$4,290] financed at 12% interest [$1426 per month]

According to my calculations, the cash flow will be $348. With a backend profit of $9512 if they refi in 12 months.

Multiplying the monthly cashflow by 12 gives me $4,187 for a total of 18k profit.

This is before closing costs when buying and selling, taxes, insurance, etc.

Going off what i have read from others on this site has brought me to these conclusions, but are they right?

Or am I stupid for trying to do this no equity deal?

seeking the knowledge of the wise,

Verbatim

2

A lot of investors are doing these deals vbecause they can not do anything else. A lot are doing them on a lease purchase option thyp deal. Some just love the leverage and the low cost to get in. The great benefit I see here is the owner is willing to carry the loan until you find a tenant/buyer. The only drawback is that the 12% is a bit greedy. At 10% you will find more buyers which is still high with todays interest rate. Of course there is always the problem that your buyer will not make the payments and you have to evict and replace them. This will cost $2000 at least in lost income. See if she will escrow a few grand for this too. It is a buyers market and if she is willing to make the negative at first she may be willing to do it again incase of trouble. Only use in case of emergency to cover a vacancy. That may be asking too much but you never know. If you have the funds or income to cover it then you may want to risk it. It is a thin deal but it could be a good return.

Happy Hollidays and Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737

512-301-9171 home
512-587-6177 mobile

3

Thanks Ted,
I never thought of having money escrowed. Were you suggesting the buyer escrow thee money or the seller?

4

Ask the seller to contribute some more to the deal. Sounds like she wants to save her credit and keep the payments on the house current. If she does not have the cash she may have the future income to cover 3 or 4 payments of it becomes vacant. If she knows you are trying to protect her she may help you cover any negative income until you can sell it for cash. The worst case is you may have to cover it. Make sure you can before risking the deal. That is a large payment. I could buy a lot of hamburgers at MacDonalds with that much cheese.

Happy Hollidays and Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737

512-301-9171 home
512-587-6177 mobile

5

Rather than debate whether or not it is theoretically possible to profit from such a deal. I will simply answer your question: NO! I would not buy it. The risk vs. reward is far to great.

Merc67

6

I would jump right on this with a Lease Purchase agreement. I would ask for 36 months, Sublet it out 12 months at a time. Getting 2-5 percent of the purchase price up front, with at least $100.00 cashflow each month. Sell at 145k and make 15k or so backend profit. Of course there are a lot of details to check into before knowing if this would work, but This type deal are the type I run into all the time.
Cruz