Posted by ae_trading on April 04, 2003 at 19:10:44:
1.) Sure the strategy is realistic, but there seems to be many alternative ways that I at least think work better. Why would you L/O for $350K? Why not hold and collect on the rent? Also, if you were really stuck on the idea of a L/O, why would you only sell for $350K? At 20% appreciation a year, the property will be worth much more than that. What is your great need to give your buyer a deal?
This depends on the lender.
Have it appraised.
If you can qualify, why not just purchase the whole property with a mortgage from you lender?
If the seller is going to finance, why would you offer 14% interest and a 2 yr balloon? Those terms are terrible. You might as well go to a hard money lender. Your should negotiate with the seller.
I really need help putting together my first deal. Here are the numbers and my theoretical strategy:
2/2 SFH in area appreciating at 20-25% annually
market price: $300,000 asking: $300,000
my offer: $245K-$285K seller owes: $130,000
I will finance about $171,000 (60% of $285K appraisal), pay off the $130K loan, give seller $41K cash, and ask seller to carry back a 2nd for the rest of his equity ($74K-$114K)at 14% annual simple intrest to be paid in one balloon payment at the end of 2 yrs. My PITI will be approx $1500/mo. I would lease/option for $2000+/mo for 2 yrs with an option price of $350K which would give the buyer a great deal and facilitate his easy financing. This deal provides a nice positive cash flow and back end profit for me provided the tenant buyer is able to get the needed financing. Worst case scenario, he can’t and I have to refinance to pay off the seller.
My questions are:
Is this strategy realistic?
How do I specifically create the note/mortgage or both for the seller? I understand the theory, but where do I get the documents and how is it structured?
I have very good credit and a very secure $85K income. Will my lender of the $171K require me to put up some of my own money?
What is the best way to find out what the property will appraise for? Like I said, market value = $300K.
Thank any and all who respond and come to my rescue!