Possible Deal! - Posted by Michael

Posted by Michael on July 08, 2001 at 17:07:26:


Possible Deal! - Posted by Michael

Posted by Michael on July 07, 2001 at 11:24:05:

Hi all,

I posted this early but no response so I’ll try again. I found a guy who has been living in his home for 5 years. Two years ago went through a divorce and almost lost his home to bankruptcy. Found aout recently he may be loossing his job and won’t be able to keep up his mortgage payment of $1018 a month. Wants to sell fast and he said if he couldn’t sell it, he would let it go to bankruptcy, can you smell the motivation?

4br/3bath home

no repairs needed

two mortgages totalling 114,000

$1018 PITI

Apprasied value 125,000

I was thinking of offering a Subject to deal to the owner and try to sell on a lease option its just that high mortgage payment has me a little worried. Do you all think this is too skinny of a deal? It would seem to me hard to get more than 1100 a month rent for that area. Give me your thoughts, maybe I’m overthinking this a little.

Thanks for any ideas!

Michael, KY.

Re: Possible Deal! - Posted by Bud Branstetter

Posted by Bud Branstetter on July 07, 2001 at 22:32:10:

Most people seem to be buying subject to deals with a land trust and then selling on a contract for deed. By doing this unrecorded contract for deed they can get closer to the monthly income that a mortgage would command for the sales price. In your example you would get 5K down and had a contract for 1200/mo for a 125K mortgage. For a L/O you would get closer to rental value. Some are calling this an uncompleted sale so they can report the gain over basis as they get it.

Others would L/O this property and ask for 129K sales price with generous rent credits if they buy in one year.

I would control through a Pactrust where I can sell the tax write off to the buyers for extra a month or more down. I would ask(and probably get) half the appreciation because they never have enough down. They would occupy on a lease basis so there is not a problem with getting them out if there is a default. There is no violation of the DOS and no problem with the IRS doing it as a flip.Nor would there be a problem if the seller decided to file that bankruptcy afterwards.

The deal should be negotiated with as long as you can before you make a payment. Or have him subsidize some for allowing him to get the depreciation. When he starts asking you to make the payment right after he moves, get cash, or a lot of what he thinks is his equity, then he isn’t yet feeling the pain.

The other thing you need to consider is if there is any make ready required(paint, carpet, etc.)