Creative Deal Structure Game – HUGE House on 5 Acreas


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  • The seller owes $250,000 for an $800,000 six-bedroom 8 bath house on 5 beautiful acres. She has previously run the property as a bed and breakfast but after her husband died two years ago, the property and the Bed and breakfast business is just too much for her to take care of.

    It’s in very good condition. No repairs are needed. There is a detached barn where tractors and tools are kept.

    She’d like to get $250,000 cash then you can just take over the payments on her mortgage.
    The purchase includes all the furnishings and tractors/tools for the yard.
    She’ll keep her car and very few things from the house.

    What would you do?

    The seller already created a creative structure by offering to do subject-to.
    The plan works out well for an investor. Following is “a” probable calculations based on the limited information.
    Assumption:
    Market rent: $5000/mo

    Payment on $250K loan at 6%, 30 year amortization : $1498/mo.; Taxes: $1000/mo, Insurance $150/mo.
    PITI: $2,650/mo.
    Vacacncy: $500
    Maint: $500
    Mgmt Fee: $500
    Total Expense: $4,150/mo
    Available for the investor: $5,000 – $4,150 = $850.
    If self managed, he gets $ $1350 Plus principal pay down.
    Principal paydown will be significant, since she owned the property for some years.
    COC would be 7%+ and $300K equity at the beginning.

    I would do this deal.

    Then I would look into subdivide the land and sell parcels to build new homes.

    • This reply was modified 2 weeks, 1 day ago by Imran Sohrab.

    Should we assume the mortgage is less than value? Or, in this situation, does it not matter since you can get into the deal with $250k on $800k value?

    Since all the furnishings and equipment come with it, I would take over running it as an Airbnb.

    How do you solidify ownership when you take over loan payments – with a Wrap Around Loan?

    Most of the time when a seller calls, they will have limited information. It’s a good idea to have a list of seller questions of information you need to get to make a good decision about a property.

    What are some important things you need to find out to know if this is a go or no go deal??

    Kori, with $250k cash going to the seller, plus taking over payments on the $250k loan, you’d be into the deal for $500k for an $800,000 property which includes all the furnishings and needs no repairs.

    Listen to the replay of the coaching call with international investor Gary A Scott about how to add value to any real estate

    Spotting Real Estate Value – Gary Scott

    In this Creative Deal Structure opportunity, you could move into the house, you could run it as an airbnb like the owner had previously done.

    But what ELSE could you do??

    What would add more value and perhaps more cash flow too?

    What about using the home for a residential assisted living facility? You could probably rent each room for at least $8.000. Assuming that 50% of that rate is needed for mortgage payments, hiring nurses, cooks, and groundskeepers.. That still leaves a really nice monthly income.

    You could build additional residential assisted living or independent living homes on the 5 acres

    When you get a deal, whatever the current use is, does not mean that is the future use. Always be thinking of ways you can add value and increase cash flow.

    Can you think of any other uses for this property??

    Nice thought Jackie

    I think the current and future market would be best served with a senior living like Jackie said (Boomers) If the revenue can support it, she can take a down payment and payment over time. Two mortgages can work to save your money for converting the house and as backup.
    There are area that like single room “professional” rentals too, for employees commuting from out of town.

    Perhaps the 5 acres be turned into an RV park then use the main house as a guest house and community center?

    Always be thinking of the BEST use to maximize cash flow and future value.

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