How To Work This $200k Deal?
Hello Investors,
I've currently come across a deal w/ $200k of equity, but I need a lil guidance on how to do the deal.
Here's the scenerio, Owner wants $300k for a home worth about $320k, he only owes $100k on the note, should I go ahead and put the prop. under contract and try to assign it, or should I wait til he's exercised all his options and can't sell it, then he said he will be willing to do a L/O. If & when I put it under contract how will I write up the contract as a subject to, or owner financing or how, please advise.
This deal is time sensitive, so I would appreciate a immediate response.
Thanks and have a nice day.
Do you want to L/O this property because it's not a wholesale opp?
The owner wants $300k and it's worth $320k, right?
I do not want to do a L/O deal unless it is my last alternative. This is definetely a wholesale deal. I've already got other investors waiting for me to give them the specifics on the deal.
But thats the problem, I need a little advice on how to structure this deal, once again please advise. Thanks
:-?
I guess what 205JUNKERS meant was he was assuming that the Seller who not budge off of 300k. If that is true and the seller will not budge off 300k and the house is only worth 320k, then NO WAY JOSE, NOT IN A MILLION YEARS would I take this deal and wholesale it or even L/O it. There is too much liability, and not enough profit.
Now, if you are referring to offering the seller LESS, then great. Structure and set the deal up properly depending on his situation. I would make an offer of 250k MAX on this deal. Leave room to play with for your exit strategy. It's easy for Investors to max out equity and have a mediocre investment opportunity turn real ugly real quick.
So, be careful. It sounds like you haven't done a lot of these deals so.........if you do get into this.......take it from experience and don't pay more than 250k.
Good Luck
Take the advise given above, don't pay too much. A rehabber/invester is NOT going to have room if you buy at 300K and its only worth 320.
I would agree that you would need to offer much lower than his asking price to make this a wholesale deal.
However, you didn't mention the seller's needs: does he need his asking price right now? You could tell him to take a cash-out refinance and then take that mortgage subject to. He would get the cash, you would get the deed and then could market it any way you wanted for sale, lease/option, rent, etc.
If he can wait for his money, you could give him some money now, with a note for the balance over time or a balloon when you resell.
Of course, all of this will depend on your exit strategy and how that property fits into the surrounding area as far as saleability, rental ability, etc.
Andy
This is DEFINITLY not a wholesale deal. If he's having a hard time selling at 300K, then it may be an overpriced retail deal.
He's got some equity. Use that to your advantage. Tell him you'll take the house, assume the financing that's in place, and give him his $100K cash within 5 years (5 yr note, no payments, no interest). Suddenly it may be a deal worth doing, but he doesn't sound like he's got the motivation right now.
I am surprised that I haven't heard anyone recommend an option to purchase. Whereby you put a 30-day option on the house for 300k. You, in turn, find a buyer for 320k and assign you contract or do a double closing. If for whatever reason you don't find a buyer within the 30-day time period, oh well. You aren't obligated to purchase, and if it is a nonexclusive option, the seller is not obligated to sell it to you giving him more flexibility and peace of mind.
Any opposing opinions??
And if you can get the property under an option for below 300k, that's all the more better for you.
Here is a little more info about the deal so you can better understand. The owner is definitely motivated, he told me he is willing to do whatever it takes to do the deal. He just wants to sell so he can move out west. He's not in any kind of distress he just wants to liquidate A.S.A.P. The house doesn't need any work at all (perfect). I am the first person he has talked to about the house, so he is not having a hard time selling at $300k.
What is a cash-out refinance and then taking the mortgage subject to deal. Please guide me through this.
Thanks for your responses, they are greatly appreciated. I still have the owner on hold, he's waiting for me to make a move.
Thanks again
I might be missing something but for that amount of money tied up, it just doesnt sound like a deal.
If it were me I guess I'd give him 3 options.
If you know investor/retailers ready to buy cash from you or your seller offer him a cash deal for way under value. 250k? That leaves enough room for you to net 15k and leave the rest of the profit to your investor. (quick close)
Second option I'd give him is like someone mentioned above. A 30 day lease option for as low as possible. Maybe 275k and try to sell it within 30 days.
Last option... Offer to do his payments for him through lease option with option to sub-lease. You can get a tenant in the house and make a profit on the non-refundable down payment, monthly spread and the final sale at the end of the lease.
It would help a lot if you bought Ron LeGrand's course, that's where I got all this info from.
Another really good idea is to make sure that 320k is really what houses are worth in his area. Try to find out what houses in his neighborhood have sold for lately and it'll get you a better picture of what it would someone would actually pay for.
You have heard many wonderful options. Let me share w/ you one of my favorites not listed yet.
) Some deals just keep on giving 
If you another piece of property worth $200k or more, then you can pay $300k for this house.
I did this type of transaction recently let me explain. We will use your numbers in my transaction to make things less confusing.
I found a house that the seller wanted $300k for. I said ok. However I took over the payment on the $100k and gave the sell a note and mortgage for the balance of $200k. He needed some $40,000 of that $200k right now. So I refinaced the property. However when I refinanced I did not have to give him his balance due of $160k. During negotiations I explained to him that if we ever paid off the house we would simply move the debt to another property we have in our portfolio that has at least the amount still due to him. We Investor are suppsed to call this 'Substution of Collateral'.
So what happened here? Well I acquired a property. I gave the seller a note for his money. I took the equity out of the property and moved the sellers note to a different property. Took the cash and bought more property. Lease Optioned the subject property in order to pay back the loan.
(ps the note i gave the seller was a 7 year not interest no payment loan.