Pre-foreclosure Deal

[travis]

Facts:

Mortgage of 690,000.00
Payments 3,600.00
She is 2 Payments late with the next one due on Dec.29

The property is zoned M-C1 with a 50*120 lot. Currently is a large 4 bed + basement suite home that formerly rented for 3300.00. Great location and value in the land.
Appraised at 890,000.00 August 2008. Based on comps I would say it`s worth 700,000 today.

The seller is interested in a partnership, as am I. I would bring the payments current for 50% interest in the property. No terms are set in stone. Each of us agree on holding the property for at least a couple of years.

There is ample parking space in the back where the previous owners rented out 4 parking spaces (property is inner city). This would make the property positive cash flow.

Would we sign a JV deal and I place a caveat on the title? I have a meeting scheduled tomorrow with her lawyer.

I would appreciate any advice.

Thanks,

Travis

 

[MonteDobson]

Hi Travis,

At first glance, there is no money in this deal if the mortgage is at $690 and current value around $700. A property at this price point will be very hard to rent for cashflow, and very hard to sell - think of your exit strategy and target market.

My suggestion would be to move on...too risky!!

QUOTE (travis @ Dec 16 2009, 07:34 PM) Facts:

Mortgage of 690,000.00
Payments 3,600.00
She is 2 Payments late with the next one due on Dec.29

The property is zoned M-C1 with a 50*120 lot. Currently is a large 4 bed + basement suite home that formerly rented for 3300.00. Great location and value in the land.
Appraised at 890,000.00 August 2008. Based on comps I would say it`s worth 700,000 today.

The seller is interested in a partnership, as am I. I would bring the payments current for 50% interest in the property. No terms are set in stone. Each of us agree on holding the property for at least a couple of years.

There is ample parking space in the back where the previous owners rented out 4 parking spaces (property is inner city). This would make the property positive cash flow.

Would we sign a JV deal and I place a caveat on the title? I have a meeting scheduled tomorrow with her lawyer.

I would appreciate any advice.

Thanks,

Travis

 

[GaryMcGowan]

I agree with Monte, this property is almost 100% leveraged.

 

[travis]

Thanks Gary and Monte.

I`m going to dive deeper on this one today and discover what terms the owner would be willing to work with. I can`t let this one go that easily, the development opportunity for this lot is great.

Travis


QUOTE (GaryMcGowan @ Dec 16 2009, 07:54 PM) I agree with Monte, this property is almost 100% leveraged.

 

[ChrisRichards]

QUOTE (travis @ Dec 16 2009, 06:34 PM) Facts:

Mortgage of 690,000.00
Payments 3,600.00
She is 2 Payments late with the next one due on Dec.29

The property is zoned M-C1 with a 50*120 lot. Currently is a large 4 bed + basement suite home that formerly rented for 3300.00. Great location and value in the land.
Appraised at 890,000.00 August 2008. Based on comps I would say it`s worth 700,000 today.

The seller is interested in a partnership, as am I. I would bring the payments current for 50% interest in the property. No terms are set in stone. Each of us agree on holding the property for at least a couple of years.

There is ample parking space in the back where the previous owners rented out 4 parking spaces (property is inner city). This would make the property positive cash flow.

Would we sign a JV deal and I place a caveat on the title? I have a meeting scheduled tomorrow with her lawyer.

I would appreciate any advice.

Thanks,

Travis

Just for fun, create a JV deal! Lease-Purchase it with an option to buy at outstanding balance of the mortgage when (and if) you pull the purchase trigger. Lease the property from the seller at whatever rent will give you acceptable positive cash flow on your sub-let deal. Who cares if the seller has negative cash flow - he`ll do the deal only if it`s his best bet! Manage the property as a rental and, when you feel the market has improved, put in a lease-purchase buyer/tenant with a buy price that will create a decent profit, say $100,000. Your initial deal with the vendor could be to split whatever the net profit is above the strike (option purchase) price 50/50. That way he stays on side, gets some immediate debt relief, and has a vested interest in the success of the JV as he has the prospect of a share of future equity appreciation. Register a caveat on title to protect your interest. Worst case, he says no and you say hasta la vista baby

 

[robertmcleod]

I can think of lots of ways to have fun with a deal like this. The reality is you`ll be negative just to hold the property and your "partner" doesn`t have the deep pockets to help hold this so it will be all up to you.

Long term development value is a consideration but doesn`t come cheap too.

I`d pass.


QUOTE (ChrisRichards @ Jan 1 2010, 09:34 PM) Just for fun, create a JV deal! Lease-Purchase it with an option to buy at outstanding balance of the mortgage when (and if) you pull the purchase trigger. Lease the property from the seller at whatever rent will give you acceptable positive cash flow on your sub-let deal. Who cares if the seller has negative cash flow - he`ll do the deal only if it`s his best bet! Manage the property as a rental and, when you feel the market has improved, put in a lease-purchase buyer/tenant with a buy price that will create a decent profit, say $100,000. Your initial deal with the vendor could be to split whatever the net profit is above the strike (option purchase) price 50/50. That way he stays on side, gets some immediate debt relief, and has a vested interest in the success of the JV as he has the prospect of a share of future equity appreciation. Register a caveat on title to protect your interest. Worst case, he says no and you say hasta la vista baby

 

[ChrisRichards]

QUOTE (robertmcleod @ Jan 1 2010, 09:39 PM) I can think of lots of ways to have fun with a deal like this. The reality is you`ll be negative just to hold the property and your "partner" doesn`t have the deep pockets to help hold this so it will be all up to you.

Long term development value is a consideration but doesn`t come cheap too.

I`d pass.

Robert - your assumption is that the seller can`t afford or wouldn`t accept some negative cash flow. Seller`s cash position was not stated in the original post other than that they can`t make the full monthly payment required on the property. Certainly, I wouldn`t take negative cash flow.