Re: Still waiting for a good answer. . . - Posted by Jim IL
Posted by Jim IL on September 13, 2000 at 23:52:52:
I’ll admit, the home prices in my area are not as high as yours.
But, we also have a wide variety of price ranges here if you are willing to drive a few miles. (like 50+)
Bottom line is, forget the numbers for a minute.
It seems to me by your post that you are making the same mistake that many “Newbies” make.
You are looking for “Properties” and not sellers.
Take this example:
A seller calls you and says, “Metra, I have a home that I cannot make the payments on any longer and I’m broke.”
This home is in good shape in a nice area.
The seller simply wants out from under his payments.
He owes 95% of the value on it.
Can you make a solution for this guy?
Sure you can.
The payments are current, and the seller says, “I only have enough money to cover three more payments.”
So, you offer to take the property “Subject to” his existing financing.
He will make the next two payments, and after that, you pay.
But, you get possession now.
You can keep this home and rent it out, because now you own it, but in your market, the rents are at least 20% lower than the mortgage payments on this home.
So, what do you do as an exit strategy?
You sell the home on terms, rather than rent it out.
You can either L/O this home, which will give you some upfront money, a “premium rent” which will cover the payments, and a nice backend, since your price to the buyer is higher than FMV.
You can go higher than FM rent and FMV for price, because you are offering easy terms.
And, if you cannot get a payment from your buyer to cover the payments on the loan, then you make that up on the front end.
you have the buyer pay you enough to cover the differenc, and you do not have to come out of pocket.
It would not matter if this were a $1,000,000 home or a $10k home.
The numbers are irrelevant.
The only difference I see is that you may have to market this home a little longer if it is a high priced home.
That is why you had the seller pay for 60 days AFTER you got the deed.
Prices of homes does not matter, Metra, it is the sellers motivation that matters.
Heck in my area, I could buy homes all day long for $50k-$60k, but they’d need a lot of work, and be in bad declining areas.
The average SFH here in my town goes for $175k.
The rent on such a home would only be $1300/mo, and as you can see, renting it out would be a negative cash flow.
So, instead, I sell the home to a T/B’er and get my payments covered and create cash flow.
Also, the cost of living is all relative.
If homes sold for $50k here, on average, than the average income would also be lower.
Same applies on the upper end as well.
Higher home prices usually mean higher pay.
Forget the numbers, and look for the sellers.