? For The Pros
Does it make sense to buy REO properties for umv and resale the property to a person who cannot get normal financing at a higher interest rate. For example say I was to buy a REO that has $85,000 fmv for $70,000 with only $5000 down at 6% and then resale it for $85000 no money down at 8%.
Sounds like a great idea if you had unlimited funding and perfect buyers who were always going to pay. Unfortunately problems tend to arise and that's when the fun begins. Also, you may run into a problem with seasoning of the titile. Some mortgage companies may want to know why someone bought a house at 70k is turning around and selling for 85k. They may want to see what you did to raise the value. You can get around this by finding a good mortgage broker who understands what you are doing. I'm still a little confused from your original post. Are you personally going to give them a mortgage as in you are going to sell it with owner financing?
Ryan J. Schnabel
Your not going to run into seasoning issues, if you owner finance which it looks like you are so I wouldn't worry about that. If my math is correct your outgoing money is $389.71 plus taxes and insurance, incoming money $623.70
Your looking at about $100-125 return each month which is pretty good. You might want to play with the numbers a little bit to get where your comfortable with your return. Just remember not to price yourself out the existing market the prop is in. Also look into L/O where you can ask for some money down to make up for your initial investment in the property and use it towards other deals. Let me know how it all works out for ya.
Quote:
On 2004-01-25 22:40, dajackhammer wrote:
Your not going to run into seasoning issues, if you owner finance which it looks like you are so I wouldn't worry about that. If my math is correct your outgoing money is $389.71 plus taxes and insurance, incoming money $623.70
Your looking at about $100-125 return each month which is pretty good. You might want to play with the numbers a little bit to get where your comfortable with your return. Just remember not to price yourself out the existing market the prop is in. Also look into L/O where you can ask for some money down to make up for your initial investment in the property and use it towards other deals. Let me know how it all works out for ya. <IMG SRC="images/forum/smilies/icon_biggrin.gif">
??? isn't that $233.99 per mo. The taxes & insurance will be paid by the buyer...or am I just tired?
Cwal, you could be right. I'm not 100% sure of what the laws and regulations are in their state. So I kinda left it up to them to figure. They might want to have some kind of backup insurance to cover theirselves or have a good solid contract that protects them in case the buyer has a lapse in insurance. And god forbid anything happens to their property.And it's not covered at the time. If anyone has a good solid contract or has some good advice on this ,Please share.Sorry for any misunderstanding. Checks and Balances thats what I love about this site.
Hi checks, where is balance?
Everything seems to be covered except one item. I strongly suggest you swing to lease option and try to get a little recovery on your initial investment by a payment on the option. You can even if necessary take the option payment over a period of time, or what I sometimes do is take a side note for the option amount and secure it with some other little trinket of value, like the pinky on a car, whatever. I hate to surrender an option position without some form of payment. Also it helps fixate the deal. You know a little more glue.
Cheers Lucius
Progress,
The process you are describing is similar to what I have done several times. I had ahouse last year that I was showing to two different couples. Of course I could only sell it to one of them, but I mentioned to them a REO we had just picked up and planned to rehab. It did not need alot of work, but we wanted to make it top market. We showed the couple this house and they wanted it as is. We had just paid $52,000 for the house 3 weeks earlier. They signed up for $65,000 with $3,000 down. We have a loan we make payments of about $450 on. They send us $675 each month. It is a 1 year land contract with the option to extend one more year. We pay insurance and taxes so we know they are being paid. They get to deduct interest payments to us on their taxes. They don't get title until they refinance and cash us out. We go one step further and have them meet with a loan broker who looks at their credit and tells us if he can finance them in a year. If he has doubts, we don't let them have the house. To sum up this is a good way to make a small monthly spread and a lump sum in a year or two, but there are risks and the banks will eventually cut you off. I have alot of debt in homes like this and I don't like owing people money, even if someone else is making the payments.
What it looks to me is that you are interested in learning the "Short Sell" ropes.
For more great info on this technique, check the "Short Sell" forum on TCI as well.
great advice thnx guys. I have a few more questions about this type of transaction.
1. Do I loose all rights to the equity of house when I owner finance it like this
2. Can I get my $5000 back by asking for a carpet allowance and pocketing the cash without fixing up the place ( I have a freind who does this) is this legal? ethical?
Quote:
On 2004-01-25 22:12, rjs9352 wrote:
Sounds like a great idea if you had unlimited funding and perfect buyers who were always going to pay. Unfortunately problems tend to arise and that's when the fun begins. Also, you may run into a problem with seasoning of the titile. Some mortgage companies may want to know why someone bought a house at 70k is turning around and selling for 85k. They may want to see what you did to raise the value. You can get around this by finding a good mortgage broker who understands what you are doing. I'm still a little confused from your original post. Are you personally going to give them a mortgage as in you are going to sell it with owner financing?
to answer some of your questions yes I am personally going to give them a mortgage using owner financing. i don't beleive I raised the value at all I purchased the house for $70k it appraises for $85K I would have bought it with $15K equity already in it. And lastly to explain my situation I currently have 1ft and 1pt job pulling in about $50,000 yr. I am only 21yrs old so I still live with my parents. I have no bills except for $50 mo phone bill. So yes I thank if I budget properly i will have some cash to work with
Ryan J. Schnabel