Question on a L/O Deal - Posted by Ryan Brown

Real Estate Investing
1

Posted by Boru on July 29, 2001 at 15:44:46:

Ed did make a good point about needing a RE license to do the deal as you have it structured. However, I think he was wrong to assume you could not sell the house for 130k. The house didn’t sell previously because it was listed with a Realtor or did not provide any help with the financing such as a L/O. I would not give up on this deal necessarily. Why not do a L/O sandwich. Buy w/ a L/O for 115-119K and resell for L/O @ $130k. You can collect 5k from new T/B on front end and collect 5k on back end

Brian

2

Question on a L/O Deal - Posted by Ryan Brown

Posted by Ryan Brown on July 29, 2001 at 08:01:05:

I sent out about 200 emails to people who had their house up for sale on various F.S.B.O. sites. I have been talking to one lady who is living in Muncie, Indiana and she has been driving 1 1/2 hours to work every day, and is sick of the drive. They owe $115,000 on the home ($81,000 first & $34,000 second). The realtor said he would only put it up for $115,900, 1 year ago they go a home equity loan and the apprasial came out to $116,000(They got the loan to add on a 4th Bed room, Which is added on now), They were told this fall the house was worth $126,000.

I told them there was not enough room for me to do a Sandwich L/O with them. I recommended that we do a Coopertive Assignment: I Market for T/B’s, Run Credit Checks, Display all Qualified T/B’s to Owners who will approve the T/B, The Owners Sign Papers with the T/B and We split the Option money.

I plan on marketing the house with the following terms:

Option to Purchase Price $130,000
Option Period 2Years
Option Money 3-5% (The owner and I Split)
Monthly Rent $1100 (The owners Payment is $1078)
Lease 2 Years

I have been studying real estate for years now and have taken Claude Diamond’s & Bronchick’s Courses on L/O’s. This would be my first deal with L/O’s. I am kind of nevous about this and don’t want to get into a deal that is going to be hard to push. My question is do you more experienced investors think this is worth doing or should I keep looking for something with more profit.

I am only 21 years old and plan on making a Killing in this business and then turn around and teach it to others. I am also looking for investors to flip to in Marion, Muncie, Indianapolis, Indiana area. Please let me know what you think. I can’t tell you how much of a help this site has been!

Thanks,
Ryan Brown
Marion, IN

3

An example of a deal I did last month - Posted by Tarun_MD

Posted by Tarun_MD on July 29, 2001 at 16:53:25:

Ryan,
If you can create some cash flow and some front end profit for yourself, why assign the contract. I have also taken Claude’s mentoring and I know how much he loves those assigments. However, I prefer to stay in the deal just to protect my seller.
Here what I did on a deal that had no equity.
House is 1 year old. Owners got transferred.
FMV is 145k
Mtg balance is 145k
PITI is 1295/mo
I have an option to buy for mtg balance within 5 years with a monthly payment of 1295/mo.
I found a tenant buyer who was willing to pay me $1545/mo with 11k(eleven thousand) option consideration with a purchase price of 159,900 for a one year option.
As you can see, there is absolutely no back end profit for me on this deal. However, look at the cashflow I have created by staying in the middle…Almost $250/mo.
I used to do assigments before, but now if I can create cashflow, I will stay in the deal.
You beat me by a couple of years in getting started in this business…lol. I was 24 when I did my first deal.
Now I am 26.
Good luck!
Tarun

4

Re: Your marketing plan - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on July 29, 2001 at 10:54:50:

requires a REAL ESTATE BROKERS LICENSE, in my state which is Ohio and most likely the same is true in your state.

When yo do it “for another, and for a fee” you have just obligated yourself to needing to be licensed.

If you are planning on making a killing (and this is good) be sure that you are not the one who gets killed.

Now observe the deal. If they cant sell at $115K what makes you think that you can sell at $126K? Even if “someone” did say it was worth it…

If the realtor did not think that there was a commission available in the deal, it apears that this would be a very tight deal, and your profit could go up in smoke. I would look for something with a better margin for profit.

Just an added note, you can skirt the broker requirement by taking an option. You then are acting as the seller (of your option), and not as a broker (for another and for a fee).

5

Re: An example of a deal I did last month - Posted by Wayne_VA

Posted by Wayne_VA on July 30, 2001 at 10:56:56:

Tarun,

Good deal. Where in MD are you?

Wayne

6

Re: An example of a deal I did last month - Posted by Ryan Brown

Posted by Ryan Brown on July 29, 2001 at 20:05:31:

Thanks for the response! How many deals have you done since you have started? What do you think was your biggest obstical was when it came to dealing with distressed owners?