Posted by Patrick-NY on April 04, 2003 at 09:05:27:
Thanks for the replies!
I do not want to stay in the middle of the deal at this point in time. Also, I want to “deal in volume” by collecting relatively smaller fees from many deals.
I’m sure that when I have built up my resources I will stay in the middle of the sandwich L/O, but for now the quick, small profit is my strategy.
Thanks a lot guys!
patrick-NY
L/O at 100% of value? - Posted by Patrick-NY
Posted by Patrick-NY on April 03, 2003 at 11:22:56:
Hi all-
Had a crazy idea and just wanted feedback from the CREONLINE gang…
What if I L/O a property at 100% of FMV, then assign the L/O contract to a T/B with half of the fee going to the seller as option consideration?
For example, let’s say FMV is 100k. I have a L/O contract for 3 years signed with the seller with a strike price of 100k, monthly payments equal to PITI, consideration=$1, with the upfront understanding that I will spend my time and money marketing for a T/B with 5k to put toward their new home (up to 30 days to find T/B).
$2500 goes to the seller as option consideration, $2500 goes to me for an assignment fee. (Obviously I will get assignment forms and liability releases signed by both seller and T/B).
Who wins? Seller wins by getting full current market value for their property, keeps tax advantages of ownership, and $2500 upfront cash.
T/B wins by locking in price for their new home regardless of what future market conditions are, gaining the time necessary to get their credit and finances in order so they could qualify for mortgage financing in 2-3 years, and potentially building equity through any rent credit written into the L/O contract.
I win by collecting $2500 and having no further liability in the deal.
Any thoughts? What potential liability problems might I face using this strategy?
Thanks much for any and all feedback!!!
Patrick-NY
Re: L/O at 100% of value? - Posted by ae_trading
Posted by ae_trading on April 03, 2003 at 18:03:11:
What your proposing happens a lot. But, I don’t see why there is a need to assign the contract. Why not just do a sandwich L/O. That way you collect the spread on the 2 leases monthly, you get the option consideration money, and you get the spread between your purchase price and your selling price. If the L/O is for 2-3 years you could easily sell the property at 120%+ of FMV since it will appreciate in that time and you are offering financing.
Oh, and technically the seller gets FMV, but once you actually give them the cash it will not be FMV. Plus, they will also have lost out due to the time value of money.
-AE
Re: L/O at 100% of value? - Posted by A Guy
Posted by A Guy on April 03, 2003 at 13:03:44:
Why would you want to stop with $2500 profit when you could get 4 or 5 times that easily and still get $2500 or more up front?