You must be logged in to reply to this topic.
-
Posts
-
Hi all –
I have a potential motivated seller who doesn’t want to have to pay 2 mortgages, and needs to get rid of their old house ASAP.
Seller owes $260k on the property, and will sell AS-IS for the amount he owes on the note.
I have not visited the property but according to the seller’s daughter (my co-worker), the repairs needed are:
1. Removal of Underground oil tank, soil remediation TBD until removed.
2. Finish attic and basement
3. Refinish Flooring
4. Update kitchen appliancesThe problem – Seller owes ($260k). Comparable sales are going for $260k-$310k). Due to oil tank, I think $310k is a far reach.
I don’t see wholesale flip potential (correct me if I am wrong) but, I was thinking of proposing debt relief through a Master Lease, with Option to Purchase 3 -10 years down the road.
Questions:
Is it possible to have the tenant I sublease to, be responsible for repairs, if I offer it to them as Rent-to-own?
If tenant were to make repairs, can I use the repairs as credit towards purchase price?
What happens if tenant begins repairs and realizes they cannot finish because they ran out of money?What do you recommend? What other solutions can you think of?
Thanks,
Allen.
I’m only addressing the buried oil tank matter. This article from New Jersey experience does a pretty good job of describing the uncertainties that a thorough professional inspection would need to explore, and some of the remedies and their costs — including possible existing sources of insurance coverage:And this is without any knowledge of whether your target property is in a rural area or in a city-regulated area, and what that regulatory environment might be.
It seems that you need some major unknowns revealed or ruled out (with some effort and expense to learn that), along with their costs, before you can draw up a list of deal approaches you can be comfortable with.
–Dee
.
Everything sounded great about this property until you mentioned the underground tanks. That’s a potential EPA problem.. and you sure don’t want to go there. You don’t want to be anywhere in the chain of title for EPA problems because the EPA will come after everyone and anyone. You don’t even want to be a tenant.
But all is not lost.
You can get an option to buy this property subject to the mortgages. Then advertise it for sale with seller financing. Or even do a Highest Bidder Sale to get buyers fighting over who will pay the most down payment. Your option should be for the mortgage balance. Your profit will be anything you can sell it for over the option strike price.
You don’t want to stay in this deal because of potential EPA problems. But you should be able to make a quick $15,000 to $25,000 — even though there is no equity. You can always sell for more when you sell with seller financing.
Your option should state that once a buyer is found, you will be release your option for payment of the down payment generated. Then the seller and the buyer can go to contract and you stay off title. You do not want to do a simultaneous close on this one. If the seller balks at that, then your option could state that you get the first $10,000 and you and the seller split everything over that. Or what ever you can agree to.
Be sure to check the notes. These should be fixed interest rates and no balloons.
You could put a 5 or 10 year balloon on the BUYER’s note. They would have to refinance later.
You must be logged in to reply to this topic.