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I have been contacted by a seller who is motivated to some extent. He is out of state and has 8 rentals with 30 year fixed rate mortgages in my town. One of the properties has his friend as a tenant getting free rent in turns for managing and maintaining the 7 remaining properties. His friend has decided to retire at the end of the July and move out of state as well. The owner is now faced with either selling by end of July or signing up with a property manager however he prefers to get out of the game.
The properties were all purchased between 2005 and 2008 and then he refinanced in 2013 under HARP. Given that our area is back to property values around 2007/2008 he is essentially 100% financed on the mortgage with these properties. He is open to subject to, lease options whatever we want to do but he is currently asking to walk away with $118,000 in his pocket. This is obviously not an option given no equity however I want to be able to make him some time of offer to remove him from the daily management and put some $$ in my pocket.
The mortgage payments (including PITI) are all about $200-$300 below average rents but that cashflow gets gobbled up by vacancy, repairs and cap ex.
Does any one have any angles that can turn this into a deal or is this just a bad deal? I hate to pass up on a motivated seller with 8 properties so I thought I would put this one out there.
YOu need to see the properties, condition and location to make sure it is a good area. If these are low income housing types, … pass… too much headache
If it is, and you want cash flow, then Plan A is a performance master lease would be the only way to go. You only pay the seller when you collect payments. Much safer for you even if the cash flow is less.
Sounds like the seller already pulled cash out when he refinanced.
Plan B would be to sell the houses with seller financing that wraps the underlying loan using a Highest Bidder Sale. You could agree to split the downpayments with the seller… or not. If you advertised them Starting bid $1000 for the downpayment, you’d have a slew of potential buyers. The down payment would probably get bid up to an average of $6,000 per property x 8 houses is $48,000 profit!
Plan A — for cash flow
Plan B — to get cash then move on. ( if it were me, I’d do Plan
It just depends on what you are trying to accomplish, cash or cash flow.
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