Am looking at a House Deal for Debt LTO

[JimSlobodzian]

Hi,

Can I please get your thoughts on this quick-turn deal I`m considering:

A young couple in Airdrie have split and want to sell their house for amount owing. My Strategy: Acquire house for Debt by Agreement for Sale - Exit with Lease Option

Listed: $358,000
Owing on Mortgage: $338,000

They are half way through a 5 year mortgage at 5.9%. Monthly payment is $1800.
House Details: 2 storey, 1700 sq ft, attached garage, 3 br 2/5 bath, partially finished basement, deck, house is 6 years old.
Note: They have missed payments of $3500 on mortgage and $1,000 property taxes.


This house seems like a good candidate to acquire for the debt by way of Agreement for Sale. And since there is little/no equity it also seems like a good candidate for a Lease To Own exit strategy. (do you agree?) But what do I do with the payments/taxes they owe? (i`m worried that the bank will begin foreclosure proceedings if payments are not brought current)

- Should I ask them to bring current before the sale (assuming they can)?
- Or pay it myself as part of a lease option deposit I hope to collect?
- Or ask them to make 3 future mortgage payments in lieu of me paying this debt (assuming they would or could)?

Thoughts/advice on this deal?

Thanks!

Jim

 

[neill]

Hi Jim - congrats on the find!!

If this helps, based on the payment shown, that is a tough cash-flow house without a lease-option or owner finance - hard to get more than your mtg payment for standard rent here, depending on what neighbourhood the house is in....

What is ARV?

 

[Thomas Beyer]

QUOTE (JimSlobodzian @ Nov 3 2009, 09:45 PM) ..
- Should I ask them to bring current before the sale (assuming they can)?
- Or pay it myself as part of a lease option deposit I hope to collect?
- Or ask them to make 3 future mortgage payments in lieu of me paying this debt (assuming they would or could)?
..

you give them enough cash so they can pay that debt .. and make it a condition on your offer. Assuming it is listed they also owe the realtor about 12,000 !! Did you intend to pay them that too ?

Thus, for you: 20K cask to close .. more or less !

However, the bigger question is: is this a "deal" .. what is the street value of this ?

Can you rent this for well over $2500/month ? .. as this is your cost of mortgage + taxes + upkeep + management !

Can you lease-option this for more than 20K down ?

Also to consider:

Agreement for sale is a senior strategy !

Lease Option is a senior strategy !

Doing both at the same time is VERY SENIOR !

How many other homes do you own / how many deals have you done thus far ?

Stay away from these senior strategies until you have done 5 "normal" deals !!

 

[neill]

QUOTE (ThomasBeyer @ Nov 4 2009, 09:55 AM) Can you rent this for well over $2500/month ? .. as this is your cost of mortgage + taxes + upkeep + management !

Slim probability on standard, non-optioned rent in Airdrie, esp if it is a mid 3`s house

We have a house in Sagewood, 2 years old that we get 1695/mo for today, and our friends just sold the twin house next door (we both bought on low pricing to take advantage of the equity upswing, and they rented theirs for a while and then flipped theirs last month) - theirs was listed at 344,900 (and if we had been to RLG`s course just that smidge sooner, we would have come up with a deal on that house with/for them that was truly win-win, but that is another story......)

Exit will def require something creative

Hope that helps....



N

 

[JimSlobodzian]

Thanks for the advice gentlemen, I appreciate it!

Am evaluating this deal from a "quick-turn" perspective, to exit with a Lease Option to a tenant buyer. (holding as a standard rental would not work because of 0 to negative cash flow).

No appraisal available, but original purchase price 2 1/2 years ago was $367,500.
Currently listed with Realtor, but owners claim the Realtor will let them sell on their own. (without commission? that`s the question)


Digging into the #`s on this deal, the little equity combined with cash-to-close (missed payments + commissions, etc) are making it a "pass".

Thanks for your thoughts!

Cheers,

Jim

 

[Thomas Beyer]

QUOTE (JimSlobodzian @ Nov 5 2009, 10:55 AM) ..
Digging into the #`s on this deal, the little equity combined with cash-to-close (missed payments + commissions, etc) are making it a "pass".

..
yes .. PASS .. get more deals in your "hopper" .. 9 out of 10 likely are passes for a number of reasons ..

 

[neill]

Hi Jim - what neighbourhood in Airdrie?

 

[JimSlobodzian]

QUOTE (neill @ Nov 6 2009, 08:44 AM) Hi Jim - what neighbourhood in Airdrie?


It`s on Stonegate Way.