Posted by SandyFL on May 09, 2001 at 05:33:19:
Hi Charlie,
Thanks for that explanation! I have a couple questions:
Do you happen to notice an average amount of time that your subject-to buyers (the drive-up customers, grin)take to get their own new loan on the property? How long do you get to “be the bank”? Is it similar to lease option buyers who often do not “exercise their option”? Also, do you mention a specific period of time to the subject-to sellers? Such as “I will get the loan out of your name is 5 years”?
Thanks in advance-
SandyFL
Charlie France - Posted by Tom
Posted by Tom on May 08, 2001 at 09:02:34:
You have stated that you get the seller to pay you on a subject to deal. How do you convince the seller to do this?
Also you have stated that the average subject to deal is worth 30K. What price range are you dealing with?
Thanks,
Tom
Re: Charlie France - Posted by Charlie from getthedeed
Posted by Charlie from getthedeed on May 08, 2001 at 21:57:53:
Hi Tom, Because we are offering seller financing when we sell a home with a lease option, we can charge more. It is just like getting a coke at the drive through for $1.00 when you can buy a whole 2 liter for less. We are willing to pay more because we can’t get to the grocery store. Well our people can’t go to the mortgage company because of credit, time on job, etc. So it is very easy to “create” equity in a home.
Therefore let’s say I have someone call me with a home that is worth $100,000 and the owe $90,000. Firstly I tell them they would not very likely get an offer for the full asking amount. (I ask, wouldn’t YOU ask someone to sell it to you for less?) So let’s assume they sell for $97,000. Then I explain that a Realtor would cost them 7% and closing costs are roughly 3% which is 10% of the selling price or $9700. That would leave them $87,300 when they close. I need a reason to get involved. My profit. (Everyone works for a paycheck, the profit is my paycheck) But there are also holding costs. I factor in 5% for profit and holding costs. I figure this on the asking price of $100,000 because I am going to have to market the home for the $100,000. That is another $5,000. Are you with me so far. This can be confusing. I have a regular worksheet we use in our course. Anyway That puts the amount I can pay for the home at $82,300. They owe $90,000 there fore they will need to pay me $7700 to take their house. Sometimes they cannot pay the whole amount I am asking for. So what if I settle on $5,000. But remember the coke. I will lease option this home for $119,000. That alone gives me $29,000 in profit not counting the money from the seller, and the monthly cash flow I will get. We deal in homes from $100,000 up. Now remember that couple. If they sold that home with a realtor they would need to bring about $3,000 to the table. I can buy it now. They won’t have to make 6 months worth of housepayments waiting for someone to get financed. Time is a great motivator. If they want to build or buy now or need to move now, they will give up something. That “something” usually goes into my pocket! Charlie