Exotic Opportunity, But How To Profit From It??
I got a call from a guy today who it the trustee for his mothers estate. He is facing $400k in estate taxes due in July.
The estate owns free and clear a 2800sf house in THE exclusive part of Portland, Lake Oswego.
He wants to sell this property. A very like property accross the street sold for $433k last year. Within .25mi, $1.25M sales have occurred.
He wants $250k. I may offer him $200k.
The kicker is, part of his mothers will stipulates that her husband gets a life estate on this property. In other words he can live here just paying taxes and maintenace until he dies. He is 89 and evidently vigorus.
So, a $200-$250k investment should return $425k if exercised this year or who knows how much in who knows how long, but odds are that a return should occur within 10years.
I want to get a P&S agreement and assign it. I have contacted the heavy hitters in my CREI club without interest. Need someone willing to park that kind of money for awhile. Any ideas how I can find that kind of investor? Any other ways I can make profit from this opportunity?
Thanks for any Ideas, I can usually rely on you guys to provoke thought in my modest brain..
John
OK, maybe this is a tough one. Too much profit potential to not give it some kind of shot. I am thinking I will try and get an option to purchase for as low as I can, maybe $200k. Then advertise in the paper for an investor. I would attempt to keep 10% of purchase price as my compensation. Sound reasonable? Hmmm? Anybody???
Interesting challenge. Be careful how you market your option or you may go over the 'Realtor without a license' line. You're probably on the right track though, unless they're bound and determined to cash out now, or before the old bugger kicks it. If so, you may be in a good position for the exact reason you stated, who wants to wait for him to die to get the payoff?
You could talk to the family and husband about him relocating to sunnier climes, esp. if he understood the estate settlement may hinge on it. He could Quit claim deed his interest to you in exchange for steady payments, if the estate can find another way to pay taxes (they probably just want to find the simplest route to the $400k). Who knows, maybe he wants out, but feels beholded to his dearly departed, or feels he wouldn't have the income to relocate (with this size estate?!). You could structure a buyout that would give him a good income for 5 or 10 years (obtained, hopefully, from your own sale of the property). Or go way out on a limb and just promise him an annuity, til death, one that makes sense. That would save estate issues when he dies.
Make sure you examine premises carefully; older folks have been known to let maintenance slip, could have rehab expenses to factor in.
Here's another hare-brained scheme that just came to mind. If estate executors are worried about estate taxes, how about arranging a way to take responsibility for, say, 200k of them until he dies and you can pay it off, pledged possibly against your own assets? That would be a low/no money down way to finesse it. Possibly impractical or illegal, but the right atty could tell you what's possible and how far out you could go without excessive risk. At some level, time is on your side. And it sounds like you're dealing with motivated estate executors, which helps.
The idea about seeing if the husband wants to relocate is a good one. He may not want to stay in the old house w/o his wife.
Here's another idea:
My parents moved in Mary's Woods, a retirement community next to Marylhurst College in Lake Oswego. It is very nice, though pricey. The husband may want to consider that if he wants to stay in the area. As they grow older and health deteriorates, the people there can move from their villas/condos into assisted living, then to the full care buildings.
Good luck..
Peter
Well there are a lot of options here because the seller is willing, essentially to sell for .50 on the dollar.
Hows your credit?
How much cash do you have to work with?
What are your invesment objectives?
I wonder if there is some kind of reverse mortgage that could come into play here? YOu might be able to set something up with the father or son as his representative where you would pay the 200K out and then collect a reverse mortage on the property through the old fellow that would pay your monthly payments and maybe give him some cash.
I wouldn't worry about crossing the "realtor" line at all, this is not an issue in any state (first offense a slap and don't do that any more..). As you will have an interest in the property it doesn't matter anyway..
Good Luck. I gre up there in Oswego and loved it!
Yeah, Stockpro that something like what I was thinking. Have them sell you the house for $300,000 subject to the life estate. Escrow the extra $100,000 to make a rental payment equal to the mortgage payment until the husband dies or move out of the house. At that point the escrow account becomes yours and the life estate expires.
You're still taking a risk that in fact the old man will live 20 or 30 years but you've delayed the day of recogning for a long time. Invest the $100,000 wisely (ie get 10-12% ROI) and you've put the day when you get to start making the mortgage payments yourself out there something like 10 to 15 years). Thre aren't many 105 year olds still living in their own houses.
Thanks for the suggestions. I find the reverse mortgage/300k purchase price intriguing and will explore it. Thanks again, this was what I was hoping I would get from you guys.
John
I jsut want to know how you got this guy to contact you in the first place?
Hope the deal goes well,
James