Flip Property With No Money Out Of Pocket
Hello,
I have been reading this forum for about a week now and it has been very informative! I have a few questions for you all here:
My parents own (no mortgage) a ~$1.5M home and a ~$800k rental property that has a small mortgage on it from when they bought it n years ago for $300k. Now, there is a house for sale in our neighborhood for $2.3M, which is actually very low, but the seller owns many homes (he does not live in this one) and just wants to get rid it. I bet the property tax is killing him. Anyways, I was thinking that my parents could buy the home at this low price and then turn around and sell it for nearly $3M. What is the best approach to doing this? Is there any way to use the equity in either home as leverage to secure the home and then find a buyer at the new, higher price? I really want my parents to take advantage of this but they do not want to be paying out the #$$ until they can resell the property.
Essentially I would wholesale the property but want the best advice for doing this.
[ Edited by ckoenig on Date 03/25/2004 ]
Your parents can likely pledge the assets of both homes to obtain 100% financing. I'm nearly confident this can be done with such equity available. They can probably borrow more than they need to cover the montly payments for the few months they will be holding on the property.
HOWEVER...if you can get the property under contract you can immediately start marketing it. If the seller isn't in a hurry and willing to work with you, you can simply wait until you find a buyer and do a double closing. Basically here you will take the buyers money and it is used to pay off everyone involved. There is a deed prepared to you (or your company) and then onto the new buyer. You walk away with a check at closing.
This is the preferable way to do things if you can swing it. If you must act quickly and you don't think you can find a buyer that quickly, you may consider purchasing it.
GOOD LUCK
I guess my problem with a double close is that the seller may think, "Why don't I just cut the middle man (i.e. me) out and sell at that higher price?" Does this happen? If they are motivated to sell then they want the cash now and do not want to wait until I can find a buyer. So maybe buying makes sense, then flip it.
Well, you are locked in a legally binding contract once you have a purchase and sales. So unless you breach the contract, the seller cannont just "walk away" It can be fought and they can be sued.
[addsig]
Usaly in a double close you already have a closing date with the buyer say 2 months from time you did the contract .you and seller set date this gives you time to find somebody. if you have somebody already than when you lock up the seller you can do a quick close. if I dont have somebody I'll go the couple months. closing dates can always be changed which is not aproblem everybody gets there money sooner. Don't let double closings scare you they happen all the time. Title cos. are very good with these. Your parents can get finacing starting at 1.25% which will free up alot of cash. Thatway you can do more than one deal but several. do some more quick flips and pat off the loans if you chose or refi those and invest some more. this creates the proverbal golden egg. And realy jump start your investor buisness