Any Ideas How I Can Handle This?
Hi gang, maybe somebody out there has an idea for a newbie trying to find his way.
My newspaper ad generated a call from a fellow who is 70 and wants to retire. He has a property adjacent to his home. It has two homes and a large shop on it.
4br-1b 1350sf rents for $900
2br-1b 950sf rents for $750
1700sf shop with apt that is currently being rented by a mechanic who pays $1100 rent. owner states houses can be raised by $50 and shop to $1250.
Property about 1/2 acre.
Homes built around 1940 and could use some updating.
Now he is a kindly old gentlemen whom i feel is quite honest. He owns the property free and clear. It has mixed use zoning given by the state (grandfather rights) that is transferable to the seller much to the chagrin of the city of portland. He has been living on the rents. He would like to cash the property in and go play. I talked with him tonight and this is what his initial desires are:
-$220k price (county appraises at 236k and realtors say 250K).
-$60k down and he carries back 160k at 9% amoritized over 30yrs with a balloon in 5yr.
He signed a note giving me exclusive option to buy his property. Note last for about 10days but if something is brewing i think he would extend it.
So if i could finance this whole deal i figure payments to be total around $1700
Income currently is $2750. So nice initial cash flow.
But i don't have even 20k equity in my home (only place i have an assett). My intent in starting in this business was to wholesale to investors and try to build up my cash while learning the biz.
so probably best to try to pass this on. But i would like to get a finders fee for this deal. How much should i reasonably ask for? What is the quickest way to find investors who may be interested in this?
If i had the courage, assets, to tackle this myself, what would be some options to find the $60k using OPM?
Any input would be greatly appreciated as the clock is ticking here. thanks. 
Greeting rainforrester,
If you want it, don’t give up so quick!
But don’t just look at coming up with 60 k. Maybe instead of him carrying a 1st at 9% (which is high), put a new loan on it – then he gets it all. If you check the lenders on this site, you’ll see a variety NOO programs -- some of which go 90-95% LTV without having to do Full Docs. I don’t know how the "shop" would be viewed with some of these programs. But if he owns it free and clear, there’s seems to be a lot of room to work.
If you really put some thought into it, I’m sure you could come up with something where you do it with little to none of your own money. Maybe with him carrying a sizable second. Maybe an allowance for the "updating" you mentioned, which comes back to you as cash at close of escrow. Maybe separating the shop from the other property and write two deals (but that could affect zoning). Maybe get an "after repairs" appraisal to get more LTV margin, and look for a different type of loan.
I’ll give it some more thought (it’s early for me right now ) And I’m sure some of the other folks on this site will have a lot of good ideas for you.
Just make sure when your figuring your cash flow you don’t forget taxes, insurance, vacancy, repairs, etc.
Good luck!
Sounds like you need to hit the books, there are so many ways you could do this deal its pitiful. Here are some right off the top of my head.
Have him do a seller wrap around and have his note bought by a note buyer.
Have him carry a second for whatever you cant get financed.
Set up your own note and sell your note at closing.
Find him a buyer and and make your fees by the down payment and secondary loans on the property.
Find a lease option candidate and use there down payment for your own to buy it.
Have him add you to the title and refinance to pay him off.
Have him pay your down payment and offer an increase on the price to do so.
Have him originate a note for you and sell his note for him, have him take a second for anything he doesnt make.
If all else fails sell it for a 1-2% bird dog fee to an investor that will do one of these.
Hope that helps,
Kyle
Thanks mcole and kyle. You guys have given me ideas to investigate, not to mention motivation/courage to envision this as MY property. This site gives me such a warm fuzzy that if i need some help i can count on getting it here. Thanks again..
Fellow Oregonian!
SOunds like a nice deal over on the wet side. I am not as experienced with the notes as Kyle.
Why not rent/sell your current home and try and get financing on the property much lower than 9% If he was asking 9% then the price would have to go down significantly. If you could come in at 5-6%then that would increase your cash flow significantly.. I think that with the carry back on the owner's part you would be able to get conventional financing not to mention "hard money".
Now as my parents live in Beavercreek outside of Oregon City I know that the taxes there are outrageous and that 1K a month positive cash flow would evaporate to very little if taxes were not included. I hope you figured in the taxes with the payment (as well as the insurance etc.
The reason I say sell your house and take the profit is that on the home exemption it would be tax free. 100K tax free is equal to 220K taxed. You could scale down live in this one and in a couple of years do it again and have a nice nest egg. Just a thought
Hey just thought i'd update everyone who might be interested what i did here. As i am currently strapped for cash, i decided to flip this to an investor. I went to my local investor club "roundtable deal" meeting. My first one. about 75 grizzled looking vetrans. (stomache knots)..
I grabbed the mike and let go with the details of my deal. Four guys escorted me out to talk about it. I've just agreed with one of them to accept a $7500 finders fee to assign property to him
this may not sound like much to you vetrans, but for me it is the shot in the arm my bank account needed. Now i can throw more money at marketing and continue to build my cash position where i can feel confident about aquiring a property like this instead of flipping.
thanks for all the suggestions. I have just made an offer on a fixer in a highly appreciating part of town. I feel like i've taken my first giant step on my way to getting out of the RACE and to financial independence. I know that sounds corny, but i'm smiling tonight!
Nice work!
It is sort of funny reading this post. I had not been checking for a while so I am catching up.
I was actually at the meeting where rainforest made the offer to the group. The room was impressed with the deal and he had two people follow him out to the break out area to do a deal.
WELL DONE is certainly deserved!
John