Advice Needed On A Possible Deal
Greetings,
I have been approached by a home owner who would like to sell. I have been managing this property for a couple years and it is in great shape with great tenants who are in along term lease at $1575 a month. No worries there. Ok, so on to the numbers. The house is worth about 220k. The owners have a 129k mortgage and a 33k HELOC. So total amount owed is 162k and about 58k in equity. Here is the main issue: They recieved 47k in a grant when they bought the house. The have only owned it 3 years and would have to refund the money if they sell it before 15 yrs. Now I can buy it in a sub2 structure and I am ok with holding onto it for 12 more years as a rental. But is it smart? How much of discount should I be pushing for? Any insight would be greatly appreciated.
How come the owner wants to sell? Sounds like you do all the property management hassles, they get a check each month. The only way selling helps them out is if they cash out. But that balloons the grant.
What was the grant for? How much would you be willing/able to put down if they carried the balance (including their underlying mortgage).
Thanks for the responses. Basically the grant is to encourage home ownership of certain race/ethnic groups. Of course I am not a member of that group. The grant also had income limits. I think you are right about fraud and I am concerned about this being a grey sort of deal. I can't figure out why the owner would want to sell either because it is a painless profitable rental. The owner has been relocated to Canada and I think currency exchange issues are biting him. Also, I think they spend more than they make and are in a cash crunch.
I was considering paying off the HELOC and offering him 10 k cash. That would get him 10k more than if he sold it on the market right now. According to my math with listing fees he may be about 5k in the hole if he sells it now. For my 43k investment I would be making a decent cash on cash return but I would be committed to hold the place for at least 12 years. What do you think?