My first lead - Next Step?

[Mr Ervans]

After placing ads on Craigslist, I got a hit.  So, I gathered the following

No Agent
Needs to sell by Jul 19
Wants to  move to Ohio
If she doesn't sell/will walk away from it
Asking $110K (As is)
 Which is what she paid 5 yrs ago
3/2 no repairs needed
Wants $5k-6k walk away
Approx mortgage balance is $100k and current

Comps and CMA shows a price around $100k.
She is in Barstow and  I am in Murrieta
What are the next steps...? in putting together a presentation and getting the contract?

Eric

[TonyDiCorpo]

Before u sign a contract, be sure to see she is delusional here.  she needs help and is trying to call the shots....???   

I'd offer mortgage balance as a purchase amount/contract price.

I'd also offer maybe $500.00 for her to rent a truck.

U can Buy it subject to and keep the orig note in place

sell it on a contract for deed, add 10% to the price

get 10% down to owner finance it.  no credit check

It's not worth $110k, sorry.  if she is adamant to the $5-6k to sign the deed over, walk away.  u r the one doing her a favor here or she will get the foreclosure.  present to her that w/o your help, it will be on her credit for 7 yrs.

if she still says no, she is not motivated.  tell her to call you when she want to actually sell it, then move on.  there are plenty more deals out there.  if she calls at a later time, and if it's still a deal then do it.

sounds like u hit a good lead with a CL ad.  usually u get more trailers and fixer-ups when u do that.  precisely the reason I stay off CL for leads.  most are tire kickers anyway.  hope this helps

[chunkoftheearth]

Not sure what Tony is thinking, but this isn't a deal yet.  Where exactly do you expect Mr E to make a profit?  If comps are 100k, and the mortgage balance is 100k, why would you advise he sign it up Sub2?  I think more questions about this 'lead' are in order first, yes?  How about when is the mortgage due for renewal?  This way you can figure out the cost to discharge the mortgage.  What if that alone totals 10k?  Is it still a deal?  What about market rents?  If he can't charge high enough to cover expenses and give him + cashflow, then I don't see a deal there.  Sure you can exit with Owner finance if you wish, but I'd think the questions I posted above needs to be explored FIRST so that we can help Mr E make a proper and informed descision on things.  When it comes to exit strategies, one needs to consider what it will be like for the buyer you have to get their financing.  Overall (monthly cashflow + equity), how does Tony propose making a profit on this 'lead'?  And where will he find the money to help the original owner out with moving expenses?  We haven't even discussed legal fees down the road, which has to be factored in.  This will definitely put Mr E in the hole fast.  Where is the deal?  Curious is all.  This over-inflation of price just because it's contract for deed or whatnot is laughable.  Especially given what the economic climate is in the States.  Stick to ACTUAL prices, and not banking on appreciation. 

[TonyDiCorpo]

somewhere in the orig post i thought I saw a mo pmnt amount.   OP do u know this amount?

the profit is in the down pmnt, monthly cash flow and the backside. 

Chunky quit being so judgmental.  this is how I do this.  he asked for options so I am giving one

mortgage renewal?  ummm.....?

discharge the mortgage? ummmmm?

what legal fees?

the moving $ is the only investment up front besides transfer tax and closing costs (notary)....in for little and that $500 is being generous.  one could do it for $10.

[chunkoftheearth]

So you're giving advice on what you THOUGHT you saw.  Ok, whatever.  No sweat.  Profit is in down payment, mnthly and backside?  In fairness, you can't count monthly cashflow yet since Mr E hasn't told us what FMV rents are.  Down payment, jokes.  100k minus 100k equals zero.  I gather you planned on hiking up the value banking on appreciation.  Also with the valuation and mortgage balance, there is no back side of this deal.  Perhaps I missed something though.  Discharged the mortgage you say?  When you pick up Sub2 deals, since you are financially stepping into the seller's shoes don't you factor in the mortgage penalty?  Whenever someone has advice that differs from Tony he gets upset.  Not sure why though.  It's clear to me that him advising Mr E to put this 'lead' together is a joke.  And furthermore his advice seems to entail Mr E possibly selling on CFD then hiking up the overall cost of the house banking on future appreciation.  This is exactly what got so many investors in the states in trouble to begin with and they lost their shirts many of them.  They just kept over-inflating.  Stick to what has sold period.  No way is this a deal.  Too many good ones for Mr E to wet his beak on.

[Mr Ervans]

Thanks Guys! I do want all my options...

I'd offer mortgage balance as a purchase amount/contract price.

I'd also offer maybe $500.00 for her to rent a truck.

U can Buy it subject to and keep the orig note in place

sell it on a contract for deed, add 10% to the price

get 10% down to owner finance it.  no credit check

     @Tony, No Mo. payment but what would be your mo. payment limit?  With a contract for deed,/owner financing who owns the deed? I keep the 10% and the payments (plus any +cash flow) come to me?

How about when is the mortgage due for renewal?  This way you can figure out the cost to discharge the mortgage.  What if that alone totals 10k?  Is it still a deal?  What about market rents? 

     @Chuck, would this apply only to a Adj mortgage?  What exactly is mortgage renewal and discharge?

Eric

[chunkoftheearth]

Mr E,

Discharge meaning the same as the mortgage penalty.  So what I was saying is find out what the penalty for paying the mortgage off will be.  You can do this by asking the seller to call their bank to get a discharge statement emailed or faxed to them, and they show you.  Basically it lists all the particulars of the mortgage (interest rate, mortgage bal., maturity date etc).  This would apply to either adj rate or non adj rate.  Mr E, is this an adj rate?  If so, this would further my view that it isn't a deal.  I'd show sympathy to the seller, but like I said I'd run away from this lead. 

[Mr Ervans]

Thanks Chuck.  So, for future reference, take all the above info (minus negatives) and could you give me a scenario where you would not walk/run?

[TonyDiCorpo]

why would he discharge the mortgage? or get a penalty.  unless there is a prepayment penalty but I doubt that in 2 yrs when it would be tie to refi.  if he is taking over pmnts, it's status quo.  I do not think you really understand what you are talking about Chunky.  i am not going to try to explain my profit centers to u becuz u just can't comprehend it.  so go play on the highway please?

[chunkoftheearth]

Thanks Chuck.  So, for future reference, take all the above info (minus negatives) and could you give me a scenario where you would not walk/run?

Yeah.  Basically, you just need to make sure that there is much more equity.  Example, mortgage balance 70k, comps at 100k.  This would at least give you 30k in the potential profit to you provided you sign up Sub2.  In addition, lets says mortgage, taxes & insurance on seller's current house is 700/mnth.  And your research (through newspaper for rents etc) show you that if you decided to sell the house on rent-to-own you could potentially command 900/mnth from a future tenant/buyer.  That gives you positive cashflow of 200/mnth.  Now if you calculate this simple example, you will have enough equity for yourself and you'll make money each month you have it.  That is one to keep in my opinion.  Some folks like a higher monthly cashflow as a minimum, some are ok with minimum 200/mnth for a single family home.  Also just make sure to do your homework before signing anything, meaning get a loan info release signed by the seller allowing you to contact their bank, and the tax dept to verify what they tell you so that you confirm everything they tell you before making the commitment.  99% of sellers will lie to you on the phone about something, so you know, just to protect youself first and foremost.  I hope this helps.  By the way, no matter what Tony's one liners are, don't bother signing this deal up.  His explanation for not explaining his profit centers are that I can't comrehend it..haha.  Whatever.  Have a drink and go to bed Tony.

[Mr Ervans]

Thanks guys...

[TonyDiCorpo]

i have explained my profit centers to u already Chunky.  Ervins can do whatever he wants.  i never told him what to do.  he asked for insight and that is what I gave so go play on the highway with your transformers.

[TonyDiCorpo]

i still do not know why Ervins will need any type of mortgage release for a sub 2 buy.

Ervins, what is the mo pmnt of the note and the APR?  if it's adjustable, it can still work as a S2 purchase, just be sure ur buyer is aware they need to refi or buy out b4 the APR adjusts.  Also, the APR at the time u take over should ideally be low enuff to pack on add'l $$ every month to make some cash flow.  However the mo pmnt must be attainable for someone to want to buy it/rent it from u.  they should be in line with rents in your area. 

run comps for your area.  remember that if you sell this house owner finance, your buyer will buy the terms and pmnt, even if it's higher than what they can rent in the area.  the key here is they are buying it from you, or building equitable interest so paying more in a mo pmnt is not a bad thing for your buyer.

[chunkoftheearth]

Tony says: i still do not know why Ervins will need any type of mortgage release for a sub 2 buy.

Chunk says: I'll dumb it down for you.  Very easy.  I was simply suggesting to Mr E on the initial phases of figuring out his numbers, figure out what it will cost to discharge the mortgage down the road.  Let's say you sell on rent-to-own after picking up on Sub2 as entry.  I Suggested that Mr E factor in the cost to discharge the mortgage, legal fees costs etc so that this way he'll know his true profits.  I wasn't saying (as you put it) that he'll NEED any type of release right away to BUY.  Guess you saw something that you didn't again.  Gotta control your boos man.  But if you're tenant/buyer qualifies to buy 1 year, now you have to start thinking of the mortgage penalty and other costs.  So why not do that beforehand?  Understand?  Of course you don't.  Thank god for boos right Tony?  Don't take yourself too seriously Tony, calm down and breathe.  You're way too quick to anger and we can all see it.  GROW UP.

Tony says: sell it on a contract for deed, add 10% to the price

Chunk says: Yeah, nice profit center.  What happens IF the economy in the states continues to be crappy.  You suggesting Mr E hope and pray his neighborhood appreciate.  Dumb.  Sure you've explained it, but it sucks is all.  Why is it important in your mind Tony that Mr E sign up such a crappy deal?  And what makes this a good deal?  What should he do if he signed that deal as you suggested and the economy tanked in his area another 10%, what should his contingency plan be?  Curious.

Tony says:  Ervins, what is the mo pmnt of the note and the APR?  if it's adjustable, it can still work as a S2 purchase, just be sure ur buyer is aware they need to refi or buy out b4 the APR adjusts.  Also, the APR at the time u take over should ideally be low enuff to pack on add'l $$ every month to make some cash flow.  However the mo pmnt must be attainable for someone to want to buy it/rent it from u.  they should be in line with rents in your area. 

Chunk says: I'm simply challenging your advice Tony, that's all bro.  The advice you are giving to sign a crappy deal in the first place, then saying that if it's adjustable that it could still work is asking for trouble.  The deal already sucks, and that'll make it worse.  Also YOU should be the one who found out when the buyer is able to qualify to buy you out on Sub2 deals before they even move in.  You check their financials with the mortgage broker beforehand.  Not depending on them to refi before anything, especially APR adjustments.  Ridiculous advice all round.  In the begining of such an arrangement you suggest you might make money, but this isn't advisable since at it's source its an adjustable rate (hyperthetically speaking).  Your an intelligent guy who is quick to anger and gives bad advice in this particular case.



 

[TonyDiCorpo]

But if you're tenant/buyer qualifies to buy 1 year, now you have to start thinking of the mortgage penalty and other costs.

Little Chunky...ummm...when the refi or buy occurs down the road it is not a cost to Mr E, it's a cost to the buyer.  those are closing costs that Mr E does not pay.

sell it on a contract for deed, add 10% to the price

in 24 mos the principle will be reduced further, and with a refi your appraisals are almost always better then a purchase.

it is not important to me that Mr E signs anything.  this is how I learned it and it works well for me. what might be a good deal to me may not be a good deal to anyone else. 

u know Little Chunky, you remind me of a guy that used to be on here named Merlin, that got himself banned a few years ago because he could not keep his mouth shut at the right times.  in fact, he got himself banned on several boards.