Posted by Nate(DC) on November 08, 2002 at 23:51:36:
I think the trick in Italy is to become a billionare. 
Or how about Turkey?? The current exchange rate with Turkish lira is about 1.6 million to a dollar. So in Turkey you could get a McDonalds hamburger for only about a million or soâŚ
NT
Would like some critisism about my idea please - Posted by Stu-Canada
Posted by Stu-Canada on November 07, 2002 at 14:47:47:
I can easily find out who has owned properties in my area for over 30+ years making them 60 or older. Most of these people would be on a fixed income and would have no mortgage to speak of.
I am thinking of putting together a list and doing a mailer to see if anyone would be interested in my proposal.
An investor gives me $20,000 cash. I find a home worth $120,000 but offer $100,000 with the investorâs $20,000 cash as a down payment if the owner would hold the remainder of the mortgage. On a fixed income it might be nice to take a trip south or visit the kids or fix the car, whatever.
The owner of the home would stay in the house but the mortgage payments would offset the rent payments to me, essentially allowing the home-owner to live ârent-freeâ while paying down my mortgage.
The invester would immediately see a 20% return on investment, ($20,000 for 20% ownership with the home valued at $120,000).
I would gain $16,000 equity and be paying down a mortgage for putting the deal together.
I realize that taxes, insurance etc. need to be factored into the equation. and I was hoping that the $20,000 in cash would be incentive enough to ask the owners to continue making these payments.
I would love to know your opinions about this idea.
Thanks
Stu-Canada
Exit Strategy - Posted by Sean
Posted by Sean on November 08, 2002 at 10:41:17:
No purchase of real estate should be contemplated without an understanding of your âexit strategy.â Thatâs the main problem I envision with your scenario. How exactly do you plan to cash-convert the deal?
Re: Would like some critisism about my idea please - Posted by JD
Posted by JD on November 07, 2002 at 22:43:03:
I think you would have better luck attracting investors if you offer them a $20,000 2nd TD position, at 16% interest only. Of course this would cause a cash flow problem if the terms on the 1st TD were not sub 7.5%.
Re: Would like some critisism about my idea please - Posted by Nate(DC)
Posted by Nate(DC) on November 07, 2002 at 20:20:50:
Problem:
Home worth $120,000
You buy for $100,000 which consists of $20,000 down payment (from investor) and $80,000 seller held mortgage.
At this point you and investor dude have $40,000 equity in the property ($120,000 value minus $80,000 debt). If you only give him 20% of that, he has traded his $20,000 for ($40,000*.2=$8,000). Not a good deal for him! Even if you gave him 50% of the equity he is still just trading $20,000 in cash for $20,000 in equity, which unless he expects the property to appreciate substantially is not that great of an investment.
Besides, if you are paying the owner a mortgage payment and the owner is paying you an equal amount of rent, how is either of you making any money? And whatâs in it for the owner? All they get is, essentially, a $20K loan against their property in exchange for giving up all future appreciation. As someone else said, if they needed $20K that badly they would go to a bank or finance company.
Interesting idea, but I think you would probably have to find some very unsophisticated parties to pull it off.
NT
NT
Re: Would like some critisism about my idea please - Posted by James Strange
Posted by James Strange on November 07, 2002 at 19:51:48:
Good luck finding an investor to go for this.
If I was to tie up $20,000 in cash I would want to see at least $200/month coming my way. Does your situation take that into account?
Re: Would like some critisism about my idea please - Posted by Frank
Posted by Frank on November 07, 2002 at 15:32:53:
Hi Stu,
Good to see people storming for ideas.
Couple thoughtsâŚ
First, be careful that these people that are âover 60â are mentally compitent and understand the deal, or you could run into major problems. Judges have no mercy on investors that they have construed to be scam artists because some of the scumbag old lady chasers that exist out there that give investors in general a bad name. Thatâs just a general thing with old people and not specific to your idea.
Specific to your idea, you may be able to sell that â20%â gain to an investor who isnât that savvy, but most investors will be asking what the cash on cash return will be. You didnât go into that. If I put 20k in, I better be getting a cash on cash return. His 20k is an unrealized gain.
I also donât see how you are gaining 16k in equity. Please elaborate.
Some older people donât really know what their options are but they do have a couple. If they are very old, banks donât want to deal with them for obvious reasons related with their age. If they are not that old, they could go put a $20,000 mortgage on their property with no problem. They would then have a small payment on their $20k and not lose their asset. If the owner wants to move out, it wonât be as hard for them to accept a certain payment on the 80k note, but if they want to stay it will be a little more difficult but not impossible. The reason is that you will have to get them to pay you a certain amount per month to cover your expenses and necessary improvements that will be needed as you are the landlord. Unless of course you or you investor are willing to swallow that expense. Thatâs not a good idea as a general plan as your cash flow gets worse and worse with each one you do.
Re: Would like some critisism about my idea please - Posted by Stu-Canada
Posted by Stu-Canada on November 07, 2002 at 22:10:47:
Thank you. That is exactly the kind of criticism I was looking for. Would you do this if you had $20,000 of your own, to double your net worth?
Stuart
Re: Would like some critisism about my idea please - Posted by Stu-Canada
Posted by Stu-Canada on November 07, 2002 at 17:52:07:
I mentioned $16,000 in equity as the home is worth $120,000. My investor gets 20% or $24,000 less the $80,000 mortgage with the owners leaving $16,000 on the table. Is this right?
Thank you for the follow-up. I havenât worked with an investor yet and that is the kind of information that i am hoping to learn.
Many Thanks
Stuart
Re: Would like some critisism about my idea please - Posted by Nate(DC)
Posted by Nate(DC) on November 08, 2002 at 10:23:59:
I wouldnât trade $20,000 in cash for $40,000 in equity, particularly in a property that was being rented out for zero positive cash flow, unless I thought it was about to appreciate substantially.
NT
double your net worth? - Posted by James Strange
Posted by James Strange on November 08, 2002 at 24:23:28:
It is only doubled on paper. What if something comes up and you need your money back? Are you going to kick grandma out so that you can sale the property?
I hear that Canada gets cold in the winter.
But you do have some great beer up that way.
Fuzzy Math - Posted by Sean
Posted by Sean on November 08, 2002 at 10:37:37:
You buy a property, allegedly worth $120k for $100k with $20k down and a note for $80k.
According your equity is $40k. Now if your investor only gets 20% of this deal then his equity is 20% of $40k or $8,000. So heâs traded $20k cash for $8k equity?
No good. Redo your math.
Re: double your net worth? - Posted by wpage
Posted by wpage on November 08, 2002 at 11:31:26:
James You should come up and visit Canada. It is a beautiful country and for you Americans what we have the best of is that $1.00 American is worth $1.60 Canadian.That should be incentive enough for a vacation. wpage
Re: double your net worth? - Posted by michaela-ATL
Posted by michaela-ATL on November 08, 2002 at 11:54:53:
now that would be a real incentive to visit italy then, wouldnât it?
easy to be a millionaire there
michaela