Deal or no deal?


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  • Hi all,

    Just got a seller call me wanting to sell. Would like to get your opinion.

    Vacant house in good shape. Seller doesn?t want to be a landlord. Not much equity.

    FMV 175K
    Owes 156K
    Monthly payment 1K including escrow.
    ARM about to adjust (these I hate?)

    Is there any deal here or just walk away?

    Thanks in advance.
    Rafael

    Forgot to add that they want to get some of the equity…they don’t want to sell it for what they owe at this point.

    I was thinking about a master lease for a few years but with the ARM, it will probably not cash flow much.

    Rafael

    Anonymous

    PASS —

    what equity?

    master lease won’t work unless they want to pay you the difference between what you can rent it for and the mortgage payment.

    I would pass and look for greener pastures.

    Jackie

    i agree with jackie

    but just for fun lets take a look and see if we can make a deal

    i would explain to the sellers that they will be selling for the loan balance anyway if they sell
    $175,000 sale price
    -$5000 5 months holding costs
    -$10,500 real estate commision
    -$1750 1% transfer tax (check your state)
    -$2000 lawyers fees, recording fees, more fees.

    net $155,750

    oh by the way mr and mrs seller dont forget to bring your check book to closing if you want to sell this house. why dont you just let me buy it for the loan balance and i will save you all that time and money.

    buy subject to (use caution due on sale clause) and sell on a 2yr lease/option(caution check state laws) for $179

    $10,000 down from buyer
    $4,800 $200 passive income 24 months (check rents)
    $13,000+ back end profit 179-10down-156-amortization

    profit $27,800 hmmm?!

    if buyer doesnt buy in 2yr house may have appreciated, loan balance reduced and you can raise the price and do it again.

    just some food for thought

    Anonymous

    In a perfect world, there appears to be a little bit of equity, but the HUGE problem with this property is that is has a REALLY bad loan.

    $1000 a month including escrow ( I’m guessing that means PLUS esrow) and the payment is going up up up becaue it is an ARM
    Escrow could be as much as $500 a month depending on where you live. Can you get $1500 a month with a lease option? It will really take $1800 a month for you to have a decent safety zone. Can you get $1800 a month?

    So, you can’t sell for a fixed price to your lease option buyer – their payment needs to rise with the underlying payment.

    another big problem is the scrow. Taxes are due soon. Who will pay them? Insurance is probably due soon. who will pay that?

    The thing that you are leaving out in the equation is the holding cost. It will probably take at least 60 days to get this property occupied. Someone has to make those payments. There’s a 50/50 chance the L/O buyer will move out instead of exercising their option and that means more vacant days plus the potential for repair costs.

    Unless you have a buyer waiting in the wings who can get a load asap, then I pass on all ARM deals.

    Jackie

    I have to agree that a deal using Northern Residential breakdown and technique would be possible but as Jackie says, holding costs can come back to hunt me and these days 60 days holding costs is good thing. In my market 4-5 month holding costs is not out of the ordinary.

    Hate these adjusting ARMs …:-)

    Rafael

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