OfflineThe woman I spoke with had her town home up for sale with a RE agent for 3 months. Just as Deans book said, the RE agents did not do anything but put it on the MLS and put a sign in her yard. Nothing else..She didn't get one hit, so she pulled it off.
As I talked to her I was jotting information and asking questions right off of Deans "Determining a Sellers motivation" section of the book.
She is currently on unemployement and is moving to Chicago soon and needs to sell her house. She preemptively told me that her bank will not accept a short sale because she refinanced in to an equity line of credit. She is having a hard time making her payments and is considering renting it, but she doesn't appear to have the know how or fortitude to make it happen.
The FMV from what I can tell is around $119k according to the County Assessors office, but that is a drop from $133k from the previous year. Comps in the area are showing a drop to $101k by 2010.
Now....she owes $115k approximately. Which puts her at about 4k in equity. I asked her a hypothetical before I got off the phone...I asked "if I brought you a cash offer today, what is the lowest price you would take?" she replied $115k. We both laughed..sarcastically.
To sum it up...I don't think she will be able to rent it or sell it in the time she is looking to move to Chicago. If she doesnt take a lowball, is there such thing as her keeping the note in her name and me renting it for profit for her? Her mortgage gets paid, credit doesnt go bad and I make a profit?
DON'T QUOTE ME ON THIS BECAUSE I'M FAIRLY NEW MYSELF...
But I believe it's a "subject to" deal. If she's fairly motivated to sell, she'll be up to that. Basically, and please correct me if I'm wrong anyone, but with a subject to deal, the title becomes yours however the mortgage stays in her name and you just take over the payments. (?Verify?) Generally the mortgage company isn't aware of the change and you just keep making the payments...
At that point you probably want to just lease option it out at 12-24 mos to someone for a little more then the mortgage if you want a little cash flow. You might want to charge them with an option fee, which is usually non-refundable. You could keep it, but to motivate the seller even more you could offer her a cut, for example. An option fee you give to seller for allowing her to give you the deed this way may be 1k, then turn around and charge the lease option buyer 2k for "financing". Not only do you get paid up front but it also motivates the buyer to exercise their right to buy because they'd already have a good portion of money tied to the property.
You could also just lease option from her right from the start for 14 mos and then lease option it right back out to a buyer for say... 16-18 mos (depending how long it might take to get a motivated buyer) So at the end of both your terms you both can buy the property (of course your selling it after you buy it to the buyer at then end of their option)
The thing to remember is if you do it either of these ways... it's definitely a LONG TERM INVESTMENT. It could be more profitable then fast cash right now deals, but you wont see the payday til the buyer exercises their right to buy the house... which is why you charge the option fee, makes them stick to their guns or they lose out on the capital they paid upfront. Don't forget, a truly motivated buyer for these type of deals typically has a nice down payment, they just got turned down by local banks or couldn't get financed for whatever reason, use that down payment as an option fee, don't forget to include the fee to the seller. Also, hopefully, you can grab a broker so they get financed by the end of the buyers term, otherwise you'll have to wait again for a hefty check until they get financing... (maybe someone knows away around this???)
A figure example...
You find a house for 189K worth say... 250K
You option the seller for 2K
You find a buyer for 230K
You option buyer for 5K
Take a look at the here and now...
3K in your pocket and at the end of the buyers term, a hefty check for 29K.
Now if you can handle it, do 3 of the exact same deals at the same time and in say... 15 mos you get 87K at the end.
Plus whatever monthly cash flow x15.
You don't have the money for the the sellers option fee??? Not a problem, if you know that the seller is legit and you have a date to sign papers, you can go out and find a buyer... that way when all is said and done you have the option fee that you need (Again someone verify if that is when you pay the option, at contract signing, lol told you fairly new)
Take ACTION and don't be afraid to ASK... worst case you get a no, then you look for the next yes!!! YOUR WELL ON YOUR WAY!!!!!!
EDIT: Oh btw, In either of these explanations did I use a penny of my money.. heh heh of course not
Knowledge is Power
- Pimpedoutgeese
Allow your fear to gently pass. Then genuinely ask yourself,
“What needs to be done?”
I really appreciate all of that information. After doing further research, this may be the field I stick to and become an expert on. I am about to call her back right now. I am probably going to make mistakes. I did a dry run with my uncle that lasted for an hour, so I feel pretty warmed up. If anything it will be good for training. Thanks again.
Absolutely, and don't forget, eventually you will make mistakes, that's great though because you learn and become a better investor!!
You'll NEVER get comfortable with talking to people if you never do, so might as well go for it!!! You'll succeed! Your already successful by taking action, now it's just a matter of time!
Knowledge is Power
- Pimpedoutgeese
Allow your fear to gently pass. Then genuinely ask yourself,
“What needs to be done?”