Need Advise On A Very Rare Opportunity
Here is the situation:
I have a very close friend who owns a house with an existing mortgage of 68K. The house has been appraised at about 130K about a year ago. It's a 3 BR 1 1/2 BA and needs some repair (i.e.: roof, garage etc.). He is willing to quit claim deed the house over to me and my partner and just wants his name taken off the property. Our initial thinking was since this would be our first transaction ever, would be to flip it and use the profit to invest into other properties. Now, what would you all recommend our very first step should be? Would we have to get a realtor and lawyer involved in this situation and if so, for what purposes and advantages? The house is also occupied by a tennant right now, and is paying about $500/month.
Please be patient with me, I am in the very early stages of "crawling" in this business.
[ Edited by Fugazi on Date 12/10/2003 ][ Edited by Fugazi on Date 12/16/2003 ]
Fugazi,
The opportunity isn't that rare, these types of deals happen all the time. First let me just point out some drawbacks. The deal is with a friend- I don't do deals with friends and family. If something doesn't work out well, you may lose a friend.
Now your friend wants their name off of the house and they probably want their name off of the note.
Gettting their name off of the house is easy, you can do the quit claim deed that you mentioned. But getting their name off of the mortgage is a different story. You would have to pay it off by refinancing or selling the property if you don't have the cash.
The numbers are good, the rent is terrible. If you can get the tenant out, you should easily be able to wholesale the house and get a cash buyer into the picture.
I'd recommend asking your friend to work on getting the tenant out while you work on getting his name off the property. You can sign a contract with them and then market the home to other investors. You need to make sure that there is only $68k owed on the home.
[addsig]
Tell your friend that you will do the deal.
Dont do a quit claim deed or you called it a quit deed, get a warranty deed. I am not an attorney and I am not giving legal advice. Buuuuuut, a warranty deed is what you really want.
Tell your friend that you will take over the house and will get him off the loan in a couple of months max.
Getting the tenant out would be very very very very beneficial. Market the property to an all cash investor/rehabber. I would NOT involve a realtor, go to a title company or attorney who can do the closing. Since they will be making some money in the transaction they should be willing to help out and answer questions.
Quote:
On 2003-12-10 11:46, rickpozos wrote:
Tell your friend that you will do the deal.
Dont do a quit claim deed or you called it a quit deed, get a warranty deed. I am not an attorney and I am not giving legal advice. Buuuuuut, a warranty deed is what you really want.
Tell your friend that you will take
over the house and will get him off the loan in a couple of months max.
Getting the tenant out would be very very very very beneficial. Market the property to an all cash investor/rehabber. I would NOT involve a realtor, go to a title company or attorney who can do the closing. Since they will be making some money in the transaction they should be willing to help out and answer questions.
Can you elaborate on a quit claim deed vs a warranty deed? Pro's / Cons in this example?
Thanks[ Edited by Jeff_S on Date 12/10/2003 ]
My understanding of the difference between the two is as follows;
A Quit Claim Deed is designed to relinquish your position on a deed when there are two or more people/entities on the deed. This allows one person already on the deed to gain more ownership than previously held.
A Warranty Deed is set up specifically set-up to convey or transfer ownership of a property to another party.
It's not really a situation of pro's and cons, it's a matter of doing it correctly.
Please forgive the layman terminology lacking in legal-eeze. But that's the way I understand it.
Jeff [ Edited by jeff12002 on Date 12/10/2003 ]
Be careful because maybe he wants his name off the house because he can't raise the rents or boot the tenant out. Maybe it’s rent controlled. Then you would be stuck holding. My question is; why does he just want to get his name off the deed and loan. Maybe he thinks by getting his name off the deed he isn't responsible for the loan. WRONG! Why didn't he try to sell it? I always have the seller evict the tenant before I buy, or the alternative is I always have the seller raise the rents before we close and provide a lease.
I had a deal where a guy was paying $800 a month for 8 years. I had the seller evict him and then bought and rented it out for $1170
Quote:
On 2003-12-10 11:46, rickpozos wrote:
Tell your friend that you will do the deal.
Dont do a quit claim deed or you called it a quit deed, get a warranty deed. I am not an attorney and I am not giving legal advice. Buuuuuut, a warranty deed is what you really want.
Tell your friend that you will take over the house and will get him off the loan in a couple of months max.
Getting the tenant out would be very very very very beneficial. Market the property to an all cash investor/rehabber. I would NOT involve a realtor, go to a title company or attorney who can do the closing. Since they will be making some money in the transaction they should be willing to help out and answer questions.
I would be very careful about telling my friend that I will have them off the loan in a couple of months max. He doesn't know that it will take place. You can't make guarantees like that, especially not to a friend. You could ruin a friendship over trying to make a buck. Wouldn't be worth it in my book.
Be honest and tell your friend that you will do your best, but make no promises if you decide to go forward with this.
[addsig]
Here are more accurate definitions than previously stated:
WARRANTY DEED – in real estate, a warranty deed is a deed that provides that the person granting the deed (the seller) agrees to defend the title from claims of others.
QUITCLAIM DEED - A deed that transfers the owner's interest to a buyer but does not guarantee that there are no other claims against the property.null
Thank you all, your input is much appreciated. I will post about the outcome. Thanks, again.
Thank you all!
Well, the property was finally quit claim deeded to us and we put it on the market last week. We already have a few offers on it and hope to close beginning April. Thanks for all your help!