T he current owner is the owner.The bank and former owner simply hold mortgages.You have an option to purchase which means you have the right to purchase it but you do not have to.You are trying to sell the option which will then give the purchaser of the option the right to buy the property which they should then exercise the option and purchase the property.You need to get the paperwork from the seller and be careful about just passing it around to anybody you really want to make sure they are serious and have the ability to purchase before running them through.You need a decent relationship with the seller and let her know what you are going to do how upset can she be if she knew you were doing this to make a profit? The biggest issue you will have is you will need a buyer with cash or you will need to get creative with the seller if the buyer is looking for a bank loan
I spend most of my time in the mobile home forum but feel this is more appropriate for this forum so I decided to ask the experts here about my find. I’m hoping someone can help me.
I found an assisted living home I am thinking of buying. Eight bedrooms, motivated seller big time. I’ve done Lonnie deals and tax liens but have never done an option and am a little confused how it works. Here is what I’m looking on doing:
Get the home on an option and turn/flip it asap by marketing it much better than it has been. The part I don’t understand about all this is how it actually works. Here are the details:
Current owner has a bank loan ($180,000) and is paying a second to the ORIGINAL owner/seller ($40,000 I think). Can I do this option thing under this scenario? If/when I find a buyer, THEN what? Am I the owner? Is the current owner the owner? OR, is the ORIGINAL seller/owner holding the $40,000 note the owner?
Can I really tie this thing up with an option 100% and just start bringing buyers through the home? The current owner LIVES there and cares for the 10 elderly folks living there. I doubt she’ll be happy with me paying her $250,000 (sales price) while running folks through with a $395,000 sales price right under her nose and within a week of us signing the option. Not only that, the original owner pretty much has to be involved in this sale because she will be the one showing her expenses,income,maintenance,etc.etc to anybody interested. I’m just confused on if this can work or am I missing something. Is it easier than I’m making it? Harder?
Any ideas/help/insight would be greatly appreciated. This is happening as we speak.
First of all what you apparently are trying to do is buy and sell a business with real estate included. So you need to break it down as such.
What is the value of the real estate without the business?
What is the value of the physical non-real estate assets?
What is the true net income of the business, that means deducting the income that is really the owner-operators real salary. Most buyers will just be buying an income, and that is what your really selling.
How did you come up with a $395,000 value for this business, and can you prove it is worth that much?
I have found most people that operate these kind of places are pretty sharp, and like most small business sellers are most likely hoping you will find a greater fool to take their place, and at $145,000 more than she wants, you may need to place an ad in the fools wanted section of the Arizona Republic.