Posted by Randall Porter on June 22, 2001 at 15:08:38:
I hate to burst your bubble, but there is no deal here at all. The seller is asking at least $50k more than you say they are worth. Not a motivated seller at all. Also, you say that one of the houses sold in 1997 for $35K and now its worth $140-150k in only 4 years? How could this house appreciate that much in such a short period of time? I think you need I would move on to greener pastures.
Possibly a sweet deal need some ideas - Posted by Luis Robles
Posted by Luis Robles on June 22, 2001 at 12:23:04:
Please give me some guidance regarding this situation.
The seller ownes 2 houses that are side by side. He is interested in selling them together. One house is a 2 family and the other is a single family that he lives in. He is open to selling me the properties and then paying me rent while he looks for another house. I took a trip to the tax assessors office and got this data about the houses.
House 1
2 family
Built in 1897
Last sale in 1991 price 64000
Current monthly rent 1650
House 2
Single family
Built in 1905
Last sale in 1997 price 35000
Potential monthly rent is 1800
The houses have been refurbished and are now modern. He is asking 175,000 for each. My gut feeling for the each house is that they are worth 140 to 150K a piece. Lets assume that both houses are paid off.
What creative ways are there to get these houses.
What would a typical offer that used owner financing look like for a situation such as this?
The seller has a lot of money in the bank so I don?t think he needs the money from this sale to buy his next house. If he sells now he will have to deal with capital gains right? So is there a deal structure that could prevent this for him?
In my area it is a seller?s market. So most sellers shy away from ultra creative ownership ideas such as PAC Trusts. So I cant present something that is too extravagant.
My ultimate goal is this. I need to get into this deal such that the financing won?t force me to raise rents too much. The 2 family that is rented is at market prices. And the other house will probably be vacant soon after the deal. In my town renting apartments is much easier than renting a whole house so if I rely on the house income I will probably have a problem when he moves out.
Thanks for your ideas.
Luis
Cough, cough! Choke! - Posted by Bill Gatten
Posted by Bill Gatten on June 23, 2001 at 17:19:38:
Luis, I agree with the others about this not sounding like much of a motivated seller. There are thee categories of sellers: 1) motivated sellers, 2) not-motivated sellers and 3) opportunists looking for a dummy. I’d suggest trying to avoid #2 and #3 (unless, of course, you?re a dummy).
HOWEVER…what ever do you mean: ?The PACTrust is “too ?extravagant”? Hey!!
Louis, PLEASE UNDERSTAND that the only thing "extravagant about the PT is the way you must be perceiving of it yourself. What’s “extravagant” about suggesting that a seller hold his property in a living trust for his own protection without a transfer of title until you can sell it or refinance it later?
If the deal you posted about had been any good: here is exactly how I’d approach that seller (You tell me how extravagant this presentation is):
Hi Bob, what I’d like to propose is having you stay on the loan for a few years, while I come in and handle 100% of all payments and responsibilities: paying you all of what you’re asking at the end of that time.
“Yeah but I don’t know you. How do I know you’ll perform.”
Well, the way we handle that, is by having you simply hold the property in a trust in your own name. That way you don’t have to put me on title, and you don’t have to show a sale and pay all those capital gains taxes…until such time as I pay off your loan. And that can be as far in the future as you want, and when it happens you can use a 1031 Eschange to further avoid those pesky taxes…
Louis, does this still sound extravagant?
Let me show you extravagant:
?Hi Bob, So you want to sell me your house? No problemo. Here?s all you have to do:
Open an Escrow with a title company that we mutually agree on. Then they order a preliminary title report and title insurance. You then have to have the property appraised at your expense and review and accept my DLFL14 Purchase offer and Receipt for deposit…assuming of course that you’ve listed the property with a licensed agent…who belongs to the local and national Association of Realtors. If not, there may be additional pepr work required. And at that point, I will try to select a mortgage lender out of thousands available, and complete the Form 1003 Mortgage Loan Application. Then I will have to wait for the loan processor to arrange my file and handle the paper work; then I have to wait for Underwriting to approve the loan, based upon verifications of employment, bank accounts and credit references and the ability to pay. Then if my FICO score can cut it, they?ll still have to ascertain my front-end and back end Debt to Income ratios and verify the source of my down payment money (if it is new money, they?ll presume its drug money and may turn me down). Then upon ?preliminary? approval, the lender will likely have to appraise the property again and if it doesn?t appraise high eough they?ll ask for more down payment, and I don?t have any more. Then they?ll try to find some problems and charge you for any refurbishments that have to be done to bring it to maximal market condition (it?s the lender?s only security you know). Then, too, you have the Escrow Instructions, Escrow amendments and the Settlement statement to review and approve. Not to mention all the required transfer documentation and disclosures, and vesting of the property to me via a Warranty deed that must be recorded along with the requisite Change of Ownership notifications…following the approval of my application (if that happens), etc., etc, etc., and so on…?
Now, Louis, do you think that presentation was “extravagant”? Yes…of course because you tried to give the seller waaay to much information. You tried to tell him everything YOU know rather than what he needed to know.
When someone accepts a simple PACTrust offer, everything flows, as it should. There is no reason to try to give someone a college course on trusts in order to acquire a property. When the paperwork becomes necessary, it just appears with a line to sign on.
Now?go get ?em.
Bill Gatten
Whats so sweet about that deal? - Posted by BuddyV
Posted by BuddyV on June 22, 2001 at 21:04:28:
I hate to burst your bubble, but I really do not see anything in the deal you are busting your brains to figure out. He wants full retail for the property. If your rents will create negative cash flow, why bother. He is obviously not a motivated seller. YOU NEED TO FIND MOTIVATED SELLERS! Keep looking, they are out there
Re: Possibly a sweet deal need some ideas - Posted by Ronald * Starr
Posted by Ronald * Starr on June 22, 2001 at 19:40:17:
Luis Robles---------
Gee, I was just going to say about the same as Randall Porter.
Why rack your head trying to make offers on a no-go property? Get out and find something that is a decent deal.
Good Investing*******Ron Starr********