- Joined
- Oct 17, 2007
- Messages
- 295
We have a deal on the table that is somewhat new for us. It is a great deal from a financial standpoint but I am looking for some feedback and where we have may some issues. Scenario
We have a distressed seller. He inherited a house many years ago (clear title) and has since racked up considerable debt against it. He can no longer get financing. He is trying to get his life in order and would like to sell the home to us and then rent-to-own it back. Without getting into a bunch of detail, I would consider this guy a "high risk" client. I think we can work with him but I want to make sure we are well covered from the security standpoint. This is why I want a large deposit and would rather take title as opposed to doing a "sandwich lease" or an "agreement for sale". This is also why I want to make sure we purchase at less than market value.
The numbers
Market Price - Approx $230,000
Sale Price to us - $200,000
Existing debt for the Seller - $150,000
The Rent-to-Own
Down Payment to us - $40,000
Sell Price back to the client in 3 years - $240,000 (still working this number)
Monthly payment - Still working out but we will make sure it cash flows.
We will purchase the price from the seller through a new mortgage. The assignment of funds through the lawyer will be to secured creditors first for the 150k, we will take the down payment for 40k for the rent-to-own contract, it will leave him 10k in cash to get on his feet. This deal is fairy heavily stacked in our favor but he approached us. I also know this person and I wouldn`t do this deal without heavy security or getting on title.
Anyone see potential issues from a legal standpoint or have any suggestions? I want to make sure everything is done correctly on this deal.
Thanks
We have a distressed seller. He inherited a house many years ago (clear title) and has since racked up considerable debt against it. He can no longer get financing. He is trying to get his life in order and would like to sell the home to us and then rent-to-own it back. Without getting into a bunch of detail, I would consider this guy a "high risk" client. I think we can work with him but I want to make sure we are well covered from the security standpoint. This is why I want a large deposit and would rather take title as opposed to doing a "sandwich lease" or an "agreement for sale". This is also why I want to make sure we purchase at less than market value.
The numbers
Market Price - Approx $230,000
Sale Price to us - $200,000
Existing debt for the Seller - $150,000
The Rent-to-Own
Down Payment to us - $40,000
Sell Price back to the client in 3 years - $240,000 (still working this number)
Monthly payment - Still working out but we will make sure it cash flows.
We will purchase the price from the seller through a new mortgage. The assignment of funds through the lawyer will be to secured creditors first for the 150k, we will take the down payment for 40k for the rent-to-own contract, it will leave him 10k in cash to get on his feet. This deal is fairy heavily stacked in our favor but he approached us. I also know this person and I wouldn`t do this deal without heavy security or getting on title.
Anyone see potential issues from a legal standpoint or have any suggestions? I want to make sure everything is done correctly on this deal.
Thanks