Seller Financing?
Hi everyone, I am not sure this is the appropriate forum for this question - but since I have mostly posted here I figured it would be a good place to start. If not, I am sure you all will direct me to the right place. My question is fairly straightfoward. I have a duplex for sale here in NC/Raleigh area, and I am potentially considering an offer part of which would require seller financing. I dont absolutely need to have my equity in this property now so was hoping since I am inexperience in this area someone can offer some insight into the process...risks, benefits, any particulars I need to be aware of, and possibly even share some personal experience. Thank you in advance for any input.
Who’s on first but YOU are in second place. I did it once but NEVER again. I haven’t lost the property yet but it’s getting close. Like you it didn’t make much difference to me if I lost it or not as the deal at the time did me mucho good. But now me thinks it would be nice to have a better position. Look down the road a good distance.
I think the bottom line is, be prepared for the buyer to default and you get the property back.
Is there enough equity for you to still make money if you get it back.
Ok, so if I am understanding correctly if he defaulted I would get an opportunity to buy it back at the loan amount of the first?. Is that the norm? Second lien holder gets to buy it from first lien holder? Or will I be competing with others to buy it? If so then I think this may be something worthwhile. The property is worth between 165k-172k. I have about 40k in equity. He is planning to put down 40K and finance 95k-100k. The rest I would do owner financing. So if he defaulted I would get to buy it back at 95K-100k and resell at a handsome profit I would think. I am also a realtor so I would save on commisions if I had to resell. Would you do this deal?
[ Edited by ITBInvestor on Date 02/13/2010 ]
The amazing thing about real estate is that there are so many niches. I know people (companies) who only look at entry level property. I also know companies that only rent to students. Personally, I only look at financially viable projects. 3/2, 3/1+conversion, 1/1, 2/2, ... there are lots of answers. The key is to see if this model fits your marketing plan and overall portfolio strategy. Nothing wrong with 1BR if they are cash cows, especially if the 8 are grouped together. Just my 2 cents....
Thanks ITB. So you have not found 1-BR Units to be any morw work that other units all else being equal.
What bout your rent per SF? How does it compare over different units?
JS.
Everything else being equal, it really is just a numbers game. There are quite a few variables in the equation but mostly it boils down to does it meet cash flow goals or not? We account for "the market" for 1 vs. 2 BR only indirectly. Same goes for rent per square foot. These are metrics that are not as important to our business model.
We do know a 1/1 is easier to "move" than a 2/1 although there are fewer 1/1 opportunities around here. More "work"? All properties carry (more or less) the same burden rate. Our 1/1 rent rates are not that far off from 2/2 (we usually avoid 2/1 unless we get the property <<50% retail) so historically the margins on our 1/1s are not too bad.
I think it really boils down to do 1BR units fit your business model and fulfill financial goals?
Does anyone know of a way to get an IMMEDIATE hearing? Rather than the 3-day, 5-day, 20-day response, etc. The only way I know of is when the home is being severely damaged or if something illegal is occurring. Since neither apply and I just have freeloaders - is there any other way? financial distress?
do you have any other ideas?
something CREATIVE? Please....? anything....
I have been in a similar situation here is Virginia. This is what I have learned: get them to move out as nicely as you can as soon as possible. Take them to court for damages exceeding your security deposit (unpaid rent, damages, late fees, court costs and attorney fees etc..) even after they are gone. You will get your judgement and depending on how aggressive you collection attorney is, you will damage their credit. You may even get some money.
You need to move on and realize this is the "cost of doing business". Focus on making money. Landlording can be very profitable and rewarding. Do not let yourself burn out over the small stuff like this.
I have had the same situation over and over with one particular house. Last time I realized I was not going to get any more rent, even thought the lease was not up. I told her Ok, move...when are you moving, I want to be there. I then had her sign a release saying in lieu of the rent for the month, I would release her from the lease, she would have all her stuff our by a certain date and forgo the security deoposit.
This was fairly amicable, but she did leave a huge mess which I had to clean up, but little damage to property, which is most important and now I am getting a very good tenant even though, yes, I was out the rent for a month.
Shop around - rates vary by area as you know. However, be sure to stay with a top rated company. You want to make sure that if you have a claim they will pay it.