What To Do With Pre-foreclosure With 100K Equity
I am a fairly knowledgable newbie and I partner with another real estate investor (She has the cash, I have the knowledge). I found an owner that is about 8K past due (since Aug., Lis Pendens since end of Jan.) and owes about 45K after that on a house that is worth 130K-150K. I am trying to figure out the best way to structure this so that everyone wins. He does not want me to talk to his bank and he wants to sell his house. We could bring him current and then sell it together and take a portion of the profits or buy it from him well below FMV. My investor could use another rental but may rather have the capital instead.
Any advice on what would be the best moneymaker in this situation? All replies welcome and appreciated.
Thank you,
Curtis
subj 2
Thank you jjetts4 for your reply.
I am mostly familiar with Subject To's but if the owner wants to sell so he can get the equity out of it and my investor does not want to give him a bundle of money, how do we structure it so we both win?
Thank you,
Curtis
Sell it and do an "Equity Share". Write contract so that there will be a sale and that you will split the equity by SOME formula.
50%-50% may be doable, maybe not.
Do Whatever you can get him to agree with.
He may want more 50% if he is very strong.
Face it, if he recognizes the situation, he can cut a deal with many more people than you.
gl
Neill
What about this?
What will the house appraise for, as is? Get a new loan for fair market value. Use that loan to pay off the original debt, and you will now have close to $100k cash to share. Offer the seller $5k at closing. Then let him stay (IF he is NOW able to make the payments) or L/O, get a down payment, have someone else make the payments and when they buy or move out, you sell and make more money on the back end.
Sound Good?
Cash out REFI if you can. Most lenders will give you 80-90 % C/O up to 150K in hand.
Rates are good enough to allow you and your partner to get 130K cash @ Prime +.375 and if he stays he makes the payments. If not your Partner has her Capitol you have the Property and he is out of a tight situation with up to 20 K for his other bills.
Prang,You have the advantage since he probably only has a month until he loses his house. You have to convince him that time is of the essence. If you buy the house do not give him any money until he moves out and gives you the keys.
I would try to tie it up on contract and flip it for a big profit. Which state are you in?
Curtis,
All the above postings are listing the items at your disposal. You must make the selection of which method or combinations of method to use. It is all there.
Now your job begins you are the Negotiator. You are the one that talks to this Property Owner.
You must evaluate what he will take and be happy. You are of course saving him from the bank, but you are saving him from his inability to make the prior payments. Explore the reason for this default. Is it a temporary thing or is it a permanent thing. Can he afford to stay in the house if brought current. Or is the situation such that now is the time to make changes. Is it in his interest to get out now and move to smaller cheaper quarters. Perhaps a double up with a relative.
When you have all of that imput you then know what to do. Move him out with a small sum of money at the time of moving. A participation in a future sale, after you advance to the mortgage holder to cure the foreclosure and spend time and money on fixing up the house for sale. A little landscape, paint, repairs etc. etc.
These variables must be explored and that is your job. Get back to him. Then come back on line if you do not know which path to take. We will all help you.
Soooo Once more dear friend, into the battle. Get the info you need it to decide.
Cheers Lucius
I like the equity split idea. Take it sub2, offer an equity split (don't get greedy man...the guy has worked pretty hard to get that 100K in equity). Try for a 60/40 or 70/30. Either way, you still make a crap load of money (especially if you can hold it for a year or two). Someone said that if the guys realizes the situation he can cut a deal with anyone, and that is what he will do. Your job now is to make him believe that if he doesn't deal with you he IS going to lose his house. He's got to believe in his heart that YOU are the only one that can help him. That'll get easier to do as it comes closer and closer to the sale date.
I say sub2 with an equity split and try to get him to agree to let you hold it for a year or so, find a buyer for say 165K or 170K and have them cash out in two years. You get money up front, monthly cash, and a very, very nice back end, even if you only walked away with 30% of the equity. Not bad if you ask me, but hell, what do I know.
Wow! I would have never expected such a huge response. Thank you everybody for your wonderful ideas. They have definitely got the gears turning.
I am going to see the house and the owner today and once I see the condition of the house and talk more with the owner about hit situation, then I will be able to better determine the best move. I am thinking that an equity share would be best for everyone in this deal since he does have a lot of equity and wants to sell.
Thank you again everyone. Your time and ideas are always appreciated.
P.S. For the person who wanted to know I am in FL.