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My landlord whom I’ve rented from for about 4 years now wants to sell! His fantasy is to sell to a tenant…
He owns the house free and clear, and basically wants cash so that he can pay off another house. I didn’t think that I could pull off getting the cash until a seasoned investor at the local REI group suggested that my landlord could take out an equity loan which I make payments on (my landlord said: “Hmmm, I didn’t think of that!”).
I guess he could only get 70-80% of the house value from his loan, and I’d rather not make a down payment so that I have more reserves, but here’s part of his last email to me:
I’m wondering if you can send me an outline of your proposal. What kind of down payment? How much can you afford in monthly payments? Any outside source of funds? etc.
The maximum downpay I could do is 25k (which is half of what I have in the stock market). The house value on Zillow is 578k and it barely breaks even PITI on this amount with a rent increase to $2900 on the six bedroom upstairs from the current $2300 ($2900 is still below market rent), and I’ll be paying $800 which is $150 more than I’m paying now for my studio (which is about at the market). I make $2k per month, but am working on getting some additional streams of income flowing soon.
What do you advise?
Jackie,
I’m not sure what other offers I could make. I feel like my possibilities are rather limited.
The situation that he brought up today involves me making monthly payments on both the bank loan and his carry back which involves my maxing out the rent on the house and me living in a trailer in the driveway! Both of which I’d rather not do…
So, I suggested that he could do the carry back with an equity interest in the property where I give him half the upside in ten years (when his loan to me would be due) payable in five years after that. I’m just not sure if this would work??? I mean, could I pull that equity out at that time?
I’d be banking on equity buildup from appreciation and paydown, my ability to build up reserves from rental income, and my work at increasing my personal income to be successful.
Mark
Mark
You need to come up with THREE offers that will work with your budget and present them to the owner.
Randy Grigg in Bakersfield California first taught me about making 3 offers and it has serverd both him and me well for many many years.
If you make one offer, he will say yes or no.
If you make 3 offers, he is much more likely to pick one.
But only you knows what those offers can be so you’ll need to come up with 3 scenarios that will work for you financially.
If the landlord gets a cash out refi and walks away with a 75-80% of the value of the property in cash then carries back financing for to other 20% I would think he would be thrilled.
Let us know how it turns out
Jackie
Mark
You should nver ever count on appreciation. It might not happen, especially in this market. and 5 years is way too soon to expect a turn around I think.
tell him how much you can afford to pay for the property each month and see what he can do.
will he do no payments on the OF?
instead of bank financing, can you create 2 seller finance notes and he sells off part of one to get the money he needs?
the price of the house is not as important as the terms
offer him more than he is asking for zero interst and low low monthly payments.
you just have to know what the house can afford and work the numbers around that.
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