Newbie Has Stumbled On Free And Clear Property...would Like Your Help!
Hello everyone! I've spent the last few months researching REI and have gained so much from this site...Thank you all for your posts and your genuine desire to help people like me!
I'm excited that I finally have a potential deal. A client of mine has recently moved out of her home, which she owns free and clear. She's flexible and would prefer not to have to deal with a real estate agent to sell the property. Plus, she would like the next owner to care for it as she did (her husband recently passed away and they had built the home and had lived there for 52 years). She told me that she wants to wait until she has her estate sale and clears out the home before deciding on what to do (beginning to mid Jan). Her and I have a great rapport, and I think we could agree on a win-win situation.
I would like to hear some suggestions on what you all see as my options/best way to handle this. The house has 3BR/1BA, 1490 sq ft. It is immaculate, and would only need new interior paint, as she is partial to the color pink (it's everywhere!) It is in an older, but clean and well maintained neighborhood. FMV is $173,980. I haven't confirmed fair market rents yet (in fact does anyone have a quick and reliable way to do this besides contacting Property Mgmt companies and REA?), but have been told that rents in that area are about $700.
I don't have money for a down payment, and my credit is being worked on as we speak!
Thank you in advance for your input! 
I have invested in Free & Clear properties before. See if you the Seller will give you an Option. What you need is time. For instance if you and the Seller do a 3 month Option...that will give you time to find a Buyer and put property under contract. Once you find the Buyer do a double closing. The Buyer will cash the Seller and you out. It seems like you have a couple of advantages already since the Seller has stated that she doesn't want to sell through a Realtor and that you and her have a good rapport. Blessed Investing!
Sounds like you would not take advantage of her. If she is willing to finance 100% at a low rate then that would be good. Rent you quoted for a $170,000 house seems cheap should be twice that amount at least here in Austin. If you can not rent it or lease purchase and cover your payments plus a few hundred profit then it would not be a good deal to keep and rent. You may just want to get the option to buy at a good price and resell for a profit. You do not have to own it to make a profit on it. Be fare though. A 15 to 20 grand profit would be a great deal for you and help her get some cash too
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
Thanks for your insight! I was reading Conti and Finkel, and they mention a Seller Refi-Lease Option. Has anyone done one of this? If so, can the seller refinance out as much of their equity from the property as she may want, and then I buy the house on a lease option covering the payments for the balance? I want to have several options. I know she's flexible, but not sure if she'll want a lot of money up front or will be willing to spread it out over 5-7 years.
Thanks again, and Happy Holidays!
That is rather prevelant in these parts. So many people in the Picture Business go thru lean times their credit is kaput and their savings all gone. Then along comes a series, or a picture or two and they have money but their credit is impared. Soo.
I find the house they want and love. I then talk to the owner. I have the owner increase (refinance)the mortgage/Trust Deed up as far as ever it will go. About 80% in most instances. Then we scrounge up a 10% downpayment. Cards, pink slips, wife's social favors whatever. The remaining amount the Broker, takes in a 6% five year due date note. Payments are on a 15 year schedule. If I the friendly Broker does not take the note, sometimes I can talk the Seller into taking the note back and of course I give him a full recourse. If the payments are not made or if there is a default I pay him off. Everybody is happy and we go out to dinner. I wear the lampshade and it is a win win. The Seller sells his house at the proper price, well maybe a little under market cause the broker did the set and escrow. The Buyer has the house that he should never have, lousy credit, limited savings, but he got it. The broker made some money. even If it is all in a note secured by a second Trust Deed, that is ok. After all there are always deals going on and this is sort of like an enforced www.savings.I also monitor the deal for awhile just in case the first gets itchy. I stand by ready to tender to them a small fee an assumption fee if they get antsy. Besides it can be used as a downpayment on some other piece of property. Also it beefs up your statement because like most of us you gather so much real estate and so little straight income the bank starts to penalize you when you need a 90 day roll over for that very special foreclosure. You know the one on the Cathedral downtown. Here is your chance to start a whole new religion. Talk about cash flow. Oops sorry Ron Hubbard, I was just kidding.
Irreverant Lucius.
Ok this work great if your the broker, but what if you don't have an RE lic?
How much would you like to get out of this transaction?
omega1-
Since this would be my first deal, part of me would be happy just making small profit $5K(?). But the bigger part of me (and the reason I posted) is to get several options so when I get more info from the seller, I can maximize my profits while making sure the seller's needs are addressed too.
An investor friend of mine just did a deal like yours (free and clear).
Property worth on lease Op basis 118000
Needed about 7-8 k worth of updating (carpet, paint etc.).
The owner wanted 80 k for the property.
He offered her 80k if he could take the property on a "subject to" existing mortgage basis AND if she would get a mortage for 80k and give him 15k out of the proceeds to update the property, when the lease to own person cashs out she gets her 15 back and her mortgage paid off. He pays the mortgage payments and will have a tidy 400 mo cash flow from it. Sweet deal, everybody wins. I know this works - i saw the 15 k check give it a try if you don't know how to do the "subject to" deal you can learn about it on a site called****Must Reach Freshman Investor status before posting URL's***. best of luck Mark