Posted by lyal on July 09, 2001 at 06:55:28:
Bob,
Sounds to me like the seller is controlling the deal instead of you. It’s your deal! Figure out how you can make money with it and offer that. Otherwise give him a business card and tell him to call you back if he can’t sell it.
Just my opinion, Lyal
Where’s the Deal? (LONG) - Posted by UtahBob
Posted by UtahBob on July 09, 2001 at 02:55:16:
Seller has a 1yr old house to sell for 160K. This is fair market value of the house, so no deal on price. Has a conventional 1st mtg of 100K, he has to move back East in August (job transfer). He has a 10% interest loan (Ouch!) with a prepayment penalty that will cost him 4K if he pays off the loan within the next year (so no refinancing )He is willing to carry loan and sell as follows:
I have to pay one year’s mortgage payments in advance to lender - about 12K up front, which I can do with no problem (and then have no payments for the next 12 months) so he can be sure the mortgage payments are all made so that if he gets the house back, he can refi without penalty in a year.
The rest of his equity he will take out at 20K a year for each of 3 consecutive years, beginning a year from now. No interest on the 60K.
I don’t want to do a contract of sale because lenders have been calling loans due on sale where there is lots of equity in the property. I also prefer not to do L/O because there is no write-off for me that way.
Can someone convince me this could be a good deal and suggest some other way of doing it - maybe a land trust?
I plan on using property as a rental. Rent on house should be about $1400/month, so it will cash flow for the first year. At the end of the year I will need to come up with 20K which I can do (but don’t want to come out of pocket if it can be avoided) but would like to also dump the 10% loan. I don’t want to refi the loan myself next year.
Any thoughts on if this is a deal and if so, how to turn it into reality?
$1,400/mo? - Posted by John J.
Posted by John J. on July 10, 2001 at 24:21:09:
I do this sort of business along the Wasatch Front in Utah. I have many contracts of sale - both as buyer and seller - some with lots of equity and I have never had an underlying mortgage called. If a bank is getting 10% interest it would not be a good business practice to call the loan due if the payments are current.
I have found that around here it is very difficult to rent out something for more than $1,000 per month. Lots of houses available but few renters. My last one like that stood empty for just over one year. I have not paid more than 70% of FMV for any of my properties, but I specialize in purchasing from distressed situations - not always distresssed properties. With the amount of cash that you have you will be able to do much better than pay FMV for a house.
Re: Where’s the Deal? (LONG) - Posted by SueC
Posted by SueC on July 09, 2001 at 07:28:41:
There isn’t any. You pay $20K up front? You pay market price for the house (you’re actually paying MORE than market price b/c you’re LOSING the use of your $20K for the year). The only way there is anything in this for you is what little you’ll make on cash flow, and otherwise you’re speculating that the value of the house will go up before you have to sell, which is a big risk. OK, so he’s carrying the $20K each year, but so what? No interest but you’re paying market price!! Seller finance all by itself doesn’t make it a deal.
I mean, did you write down where you see profit here and how much, and how much you’re paying? It’s pretty clear there’s no deal here, are you just unsure of your own analysis? Remember to make your profit going in - which isn’t happening here.