Remember The 30+ Unit We All Talked About?
Well, here's the update...
Sat down and really figured out that one this guy does like taxes at all and pockets most of his rent in his hand...
Second, his is very motivated and is NOT cash strapped at all.
So, with this all in mind, my partner and I cam up with this scenario to propose, tell me what you think:
We are pretty sure the guy will take the offer of $250,000 we are proposing. The only glitch is the lending portion because of the scenario. Private Investors would love this, but not sure if lenders would go for this.
He would LOVE to have his payments broken up into 3's. Meaning, one year $83K, next year $83K, 3rd year $83K for tax purposes. If we can do this, obviously this not only helps our negotiating position but cash flow from the start, plus if we do end using a private investor, it would make the investment easier (in my mind)
Since there are two plots, one with both 4 plexes and the other with the 23 unit, we want to put the properties under land contract. Then take out a small rehab loan for the two 4 plexes, fix them up quickly, raise rents, and then at the end of the year or sooner, refi the plexes, take out cash, pay him first year payment, then use extra refi cash to fix up big building. Fix big building up, raise rents, end of year refi that building or both properties, take cash out, cash him out second payment, etc.
After this point, we would have the buildings fixed up, rents raised, people happy, great cash flow and would have increased the buildings value more than $400,000 easily.
Okay, so that's our thoughts...so looking for advice, different way to struture it, etc. We do not want to put any of our cash out up front at all so that is not an option.
Look forward to hearing from all of you,
Christian "The Solutions Kid" Beebe
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No one remembers
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I remember, I remember
You said he would LOVE 3 pmts, offer to make 5 pmts. That way you can do all that you said in the last post, but if there are delays you will not be hurried. If you are on schedule with rehab and increase of rents, then you get icing on your cake. Great deal.
Rick
Thought...you mentioned that you want to get the property using a land contract. If our terminology meanings agree this means that the seller holds the deed. I think you would have a much better advantage if any type of bank is involved if you purchase subject2. I am never buying on land contract again!
Basically, the land contract was thought up to keep the property in our control but have seller financing, etc. If there is any other way to put the property under contract for a certain amount with the seller carrying payments to be cashed at a later date, I'd love to know about it.
Chris
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SUBJECT-TO!!!
You can buy the property subject to an existing mortgage on the property. Here's an example:
Your building cost: $250,000
Existing mortgage in sellers name from XYZ mortgage company: $150,000
Difference: $100,000
You ask the seller to take back a second mortgage in the amount of $100,000 and you have yourself a deal.
Tell me you've heard of this already!
Yeah, I have heard of sub2, but I have never used it yet. I always thought the subject to was used to purchase a property for the leftover mortgage, not purchasing something more than what is left.
Understanding that, so here is a twist, what happens when the property is free and clear...which this one probably is.
Chris
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It took me 27 years to realize that every time I was picked on, called names, tormented, and lauged at, it was all because I was one-of-kind and unique. Through all my torment, I never noticed that no one ever picked on the "normal" kids...no one.[ Edited by SolutionsKid on Date 11/20/2003 ]
Be careful of what is called an installment sale. In an installment sale, the seller retains title until completely paid off. He could then back out and you would be unable to borrow against it for his "payments".
BethE and Christian are both K-Rekt!!!
MyFrogger(aka My Fellow Ames-IOAn):
GO CYCLONES!!! 1987
YOU WROTE:
Quote:"I'll Never Land Contract again..."
Well this deal could fly SAFELY through both a CFD or Installment Sale w/o much ado over loss of control, nor breach of contract issues...
NOR 'untoward' actions of other parties to the deal that could cause a loss of interest or present difficulty with receiving future bank financing...
(As a matter of fact---It a PLUS for dealing with BANKS!)
WHAT IS IT DERRICK ---You All May Be Asking???
IT IS A
LAND TRUST --- with a Properly Structured BENEFICIARY AGREEMENT.
It can do all the aformentioned CFD, INSTALLMENT SALE, SUBJ-2 AND still protect ALL PARTIES INVOLVED in the DEAL!!!
Christian Once you have a contract agreed to SECURE the arrangement by placing the Title to the property inside of a Living Trust Agreement.
The All-Important BENEFICIARY AGREEMENT for the TRUST hammers out the many varied details and terms the parties agreed to...
EXAMPLE:
Within a Trust T ax Benefits can be resold to a Beneficiary holding at least 10% Bene. Int. and the Taxable Gains on the Sell can be DEFERRED bytheSELLER!!!
And the BEST THING OF ALL is that Title to the Property is HELD by the TRUSTEE for the exclusive Interest of the BENEFICIARIES until the Property is completely Refinanced or SOLD!
NOTE: The BA cannot be changed nor altered w/o the unanimous agreemnent ofALL BENEFICIARIES!
NO Surprise Backing out of a Deal by the Installment Seller,
No Surprise addl. Liens nor Lines of Credit without the Beneficiaries being notified by the Trustee first.
No IRS, BK, Criminal or Divorce Issues to CLOUD the Title!!!
Justeveryone getti ng what they originally agreed to!!
Oh I almost forgot ---NO Hard Feelings, Resement nor BLOODSHED just a nice and tidy clean closing deal!
If you need any more tips on structuring this with your deals PM me!
Hope it Helps!
Derrick [ Edited by DerrickAli on Date 11/20/2003 ]
Get 66% LTV financing on a first and have him carry a second of $83K. Create another note for $83K with a one year balloon.
At close give him $83K. Hold on to the second $83K for a year (flip some houses or something...I'm sure you'll be able to find something to do with it) and then pay off that note.
Do a cash out refi for the third year and give him the third $83K.