The Seller As A Partner...bad Idea?
Trying to figure a deal on this fixer with a flesible seller. He owns house outright but it's been sitting needing work...probably 25k if contractor was into it. By my research it could sell for 132k. I want to live in it and fix it but not sure what would be a standard arrangement. I would like him (and he is open) to carry financing. But I need to make this attractive to him. Should I split the equity increase when we balloon out? What are some other ways to go at this. If it were a lease option, how do I make this look attractive to him without selling myself short. I could essentially get into this no money down if I work it right which is what I need to get started. Thanks 
I think you are too kind.
The seller is offering financing to get rid of the house. Pay him interest that is reasonable. The plus for him is that he is getting the house sold.
You are putting in the sweat equity, and repair money. I would not give him ANY increased equity from your work. He's getting interest and freedom.. that should be plenty.
rw02,
I am not sure what you are wanting to do. Do you plan to lease/option the property or do you just want to do the repairs while living in the unit? Who will purchase the materials? What is the asking price? How long will the project take to complete? How did you come to the appraised value? Where is the property located? These are just a few questions that would help us out with our comments.
Thanks for your responses so far. I was thinking of a couple of ways to go with this but not sure which is better.. but first more info. By the way I really appreciate being able to network with people like those of you on this forum to draw from your experience ...I hope I can give that back some day.
The house has sat in disrepair for at least the 6 mos. I have been aware and I'm sure much longer. My conversationwith the owner ..who lives out of town..yet not overly stressed about the house...reveals that he rented it for many years. He ended up pulling the carpets and some sheet rock in living room because of animal urine. The bathroom is ripped out the the dry rot has been repaired but no tub or toilet in place. It needs a roof..not leaking but some rotted facias ...needs vinyl windows..basically a decent amount of rehab. Like I said 20-25k. I have been scouting houses in this neighborhood for some time and have a good friend who lives blocks away. So the FMV is probably pretty close...127 to 132k.
Its 3/1 on a duplex lot. I want to put another bath where the utility room is and rent that end of the house as a room for rent..live in the rest and get it ready to turn...or maybe refi later and build the duplex out of it make it income property. I'm trying to get into this without much out of pocket...it would be my first home..I have bad credit which I'm repairing now. I threw some creative financing ideas at him to which he seemed open but I regret that I didn't get an asking price from him.
I emailed him some numbers of what I was thinking.
Land Sale contract...for deed
89,545 at 7.5 for 20years. Balloon at three years ..means I pay almost 103k.
its been a couple of days since I emailed him. The other thing I have been thinking and studying is L/O...350rent initially all credit for 4 months while I build the bath .. I can use friends bathroom...(and work for income) Then increase rent with him getting increasing amount as house becomes livable....After three years excercise my option.
one thing I have realized in all this...I have felt too emotionally attatched to an outcome...I need to just keep looking and not be too attatched to whether he really goes for any of this....
thoughts...ideas?
To me the land contract seems much more cut and dry.
Instead of emailing himdetails, and going back and forth. Why not just send him a written contract, with highlights for where he needs to sing, and an return FedEx envelope. If he doesn;t like the offer, then you can discuss on email, or instruct him to make change.s Having something in writing as a contract will get things going.
I think you hit on a very important point. REI is not about emotions, its about a bottom line and making money. If you have to push too hard to make it happen, let it go. It sounds like you have the perfect seller. Don't worry about being fair to the seller, the seller can worry about that.
Hello rw02,
I think you are willing to offer way more than the property is worth. I figure, 70k top offer (max 75k). If they go for the offer, you put in 20k rehab work (including sweat equity of $10 per hr). After three months of repair, the home should be ready of an appraisal. If the quality of work is good. The home should appraise for 135 to 140K. You secure another mortgage, pay off the seller. Now you have a no-money-down deal with 25% built in equity.
You can take that 25% equity and get a HELOC to make additional purchases.
Roger, this may sound a little underhanded, but.... . You can phone code enforcement to make a complaint about the home. Once code enforcement send them a few letter about making repairs ASAP. Well, this will make the out of town owner rethink the need to sell the property right away.
You will have the advantage at this point. They may very well re-initiate a deal with you. Just play it cool, they will not know that you know that they are under pressure to sell. You will be in the catbird sit. Work your magic. Good luck.