Looking for an opinion... - Posted by MikeT (SWFLA)

Posted by MikeT (SWFLA) on November 02, 2001 at 01:08:28:


Looking for an opinion… - Posted by MikeT (SWFLA)

Posted by MikeT (SWFLA) on November 01, 2001 at 23:38:56:

I just spoke with a gentleman tonight who has a house and is wanting to do a L/O with it. Let me give you some info. on the property first, then explain what we discussed…

Bedrooms: 3
Baths: 1
Sq. Footage: 1,326 (includes garage)
Lot size: 80x130
Built: 1992
Appliances: Stove and Fridge
Appraised (CMA): 69,900
Asking: 64,900
Down Payment: 3,000
Monthly Rent: $650 ($150 of which towards purchase) for 12-months, end of 12-months = $4,800 towards purchase. Roughly leaving $60,000 balance.


Questions I asked him:

Any existing financing? No (paid for)

Do you “NEED” cash at closing? Absolutely $3,000

Would you be willing to spread the $3,000 down payment over a period of time: No

Property has been on the market for 3 Days

The guy wants too get rid of the property asap. He is an investor and has other property he wants to focus on. I haven’t seen the inside of the house yet, but the exterior looks in good condition and is in a semi-nice neighborhood.

My Question:

I am very interested in the property, but I cannot cough up $3,000 cash for a down payment.

What are my options here?

Find a renter and offer the L/O too him and have him pay the $3,000 down and $700 a month with $150 towards purchase price to me, while I pay the seller the $3,000 down and $650 a month with $150 going toward purchase = $50/month for me…

I don’t know…I am not understanding this concept for some reason. I know it’s not rocket science, but right now it is too me…

How do I become the middle man here?

Any opinion would be appreciated…



Re: Looking for an opinion… - Posted by JohnBoy

Posted by JohnBoy on November 02, 2001 at 24:25:12:

More than likely you don’t with this deal! If this is an investor doing this deal then he will more than likely have a clause in his contracts that won’t allow you to sublease the property.

Also, doing deals like this for only $50 per month profit is NOT a deal! This is a sure way to land yourself in BK city!

You need $3k and you only get $3k from your tenant to pay the $3k you need. That leaves you with ZIP on the front end. You only get $50 per month cash flow, which is nothing for a deal of this type and the risks involved. What happens if your tenant stops paying? You’ll need money to evict, money to clean up the property and cover any repairs needed, money to advertise for another tenant, and possibly a few months go by before finding someone to place in property. That could easily run you $3k - $5k in expenses! With getting no profit up front and only $50 per month in cash flow, that could take you the next 60 - 100 months just to break even with getting your money back at $50 per month cash flow! That’s assuming you have no problems with future tenants!

You need to get a decent amount up front and at least $100 cash flow, preferably $200+. So if you had to pay out $3k to get the deal, you should get at least $5k or more from your buyer. That way you have a few thousand to put into a reserve fund to cover the unexpected!

Don’t get all caught up into just doing a deal because you can. You’re in this to make a PROFIT! That means you need to consider the risks involved and be able to get enough up front and cash flow to justify those risks. Otherwise, don’t do the deal!

Re: Looking for an opinion… - Posted by MikeT (SWFLA)

Posted by MikeT (SWFLA) on November 02, 2001 at 24:48:02:

Thanks for your opinion… Like I said I haven’t done a L/O before, but I am sick and tired of sitting here listening to everyone else do them. I can’t make any profitable cash flow if I continue sitting on the sidelines if you will…

Answer me this if you will: humor me…

IF I did pursue this property, how would I go about finding a tenant for this property and find one before he does? Newspaper perhaps…thing is he is also using that as advertising.

IF I did find someone before him, how would I get them to pay me the $5K down payment when I don’t hold title?

I understand what you said in your reply 100%. That’s why I asked because making $50/month is wasting my time considering the risks you spoke of, I knew it wouldn’t work and I asked such a ridiculous question to spark a response.



Re: Looking for an opinion… - Posted by JohnBoy

Posted by JohnBoy on November 02, 2001 at 01:02:23:

Like I said, in all likely hood you wouldn’t be able to make a deal from this because it’s another investor doing the same thing you are trying to do.

But assuming you were to get a deal like this, you would get the $5k up front as “non-refundable option consideration”. You don’t need to hold title to do this. You only need to have “control” of the property. If you have an option to buy, then you could give an option to someone else. If the person you gave an option to decides to exercise their option with you, then you in turn exercise your option with the seller. The money coming from your optionee’s loan would be used to pay off your option with the seller. The difference would go to you as your profit.