Posted by John MI on March 28, 2000 at 11:31:15:
If it were only that easy…
Help me analyze this deal - Posted by osirus
Posted by osirus on March 28, 2000 at 01:06:44:
The house is a 3 bed 2.5 bath 2 story in a excellent subdivsion. Sellers are asking about $120000. House is worth about 126000. The seller is very motivated. There is an underlying mortgage of about $50000. Here is my intended offer:
I offer to buy for $100000 close in 45 days. I borrow about $60000 in hard money at 18% for 2 years of interest only payment of of $450. The seller uses the proceeds to pay off underlying mortgages and their closing cost and pocket whats left. The seller also gets a 2nd mortgage deed with no interest no payments and a balloon in about 3 to 5 years. I lease option to a tenant buyer at $138600. Collect an option consideration and lease the property to them for about $1000 bucks a month.
After two years I get the tenant buyer financed and cashed out.
rent spread:
(1000-450)*24 months equals $13200
option consideration (5% of $138600): $6930
cash out (138600-6930-100000): $31670
total:$51800
Did I miss anything in my analysis?
Re: Help me analyze this deal - Posted by Bob in Indy
Posted by Bob in Indy on March 28, 2000 at 08:21:48:
Boy have you miscalculated. My calculator shows that $60k at 18% goes for 900 per month, interest only. That makes this deal very poor. I also have trouble getting 5% from tenant buyers, more like 3-4%. Finally, somebody will have to pay some closing costs. In Indiana, that also includes one years taxes in arrears. If the home is $120k, taxes could be another $1,200. To say nothing about the time that the house sits awaiting its new tenant buyer. I would think long and hard before tying up $60k to make such a small return.
Experienced Investors’ Thoughts - Posted by Allen G
Posted by Allen G on March 28, 2000 at 06:30:30:
You missed a whole bunch!
It’s ok if all goes as planned, but let me tell you from experience (It never ever does)
I like doing deals like so: Give me my cash, take the title, next deal please!
I like seller carrybacks when I’m the buyer, otherwise I need CASH!
I’ve been burned once, but never again, don’t let it happen to you! Get your money
Re: Help me analyze this deal - Posted by osirus
Posted by osirus on March 28, 2000 at 08:35:50:
The hard money lenders terms are 2 years @ 18% interest only payments.
Here is how I came up with $450 per month interest only payments.
$60000*18%=$10800
$10800/24 (two year term instead of one year)=$450
Re: Experienced Investors’ Thoughts - Posted by osirus
Posted by osirus on March 28, 2000 at 07:20:15:
“You missed a whole bunch!”
Please eloborate. What have I missed?
“It’s ok if all goes as planned, but let me tell you from experience (It never ever does). I like doing deals like so: Give me my cash, take the title, next deal please!”
What are the typical things that go wrong? I would make sure that the seller deeded me the house.
Actually this is a seller carryback except I would be using a hard money lender to bring cash to the table. But I see the point you are trying to make though. I should ask the seller to carry back the first mortgage instead of going to the hard money lender. However, listing agent and seller might balk because of the DOS clause in the underlying mortgage. My thinking was that by going to a hard money lender I could pay of those underlying loans. Plus, it would be a easier sell to the listing agent and seller since I would be bringing cash to the table to pay for commisions.
“I like seller carrybacks when I’m the buyer, otherwise I need CASH!”
I am ok with not recieving cash up front. In fact I prefer it. Plus I feel confident in my ability to screen tenant buyers.
" I’ve been burned once, but never again, don’t let it happen to you! Get your money "
Would you mind sharing how you got burned?