AFS Basics - Need Help

zauher

New Forum Member
REIN Member


Hello Quick Turn Gurus,





I took the RLG Quick Turn course several years back and cannot find the binder. I have a potential AFS deal on the table that I would like to evaluate. Can someone please assist me with the evaluation criteria of the deal.






A. When evaluating a AFS deal, what makes it a good deal for the investor?
B. What are the critical must haves in order that it makes sense?
C. What criteria are used to evaluate a AFS deal?
My guess from memory:





1. Sellers "list price"





2. Market value of property (CMA?)





3. Appraised value of property (Professional appraisal?)





4. Amount of equity in the house





5. Determine what the seller is willing to walk away with?




ir="ltr" style="line-height: 1.15; margin-top: 0pt; margin-bottom: 0pt;">6. If seller has put significant amount of cash down into the property during purchase and wants to recover that cash upon executing a AFS deal, how would this be dealt with? What can be negotiated here?




7. If seller agrees to the AFS concept, apart from selling price, how would financing be negotiated? What are some negotiating points for the investor?



a. Amount


b. Interest rate


c. Amortization period





8. Determine if the seller is willing to waive the first 3 months of mortgage payments?


-How is this justified again?





9. Mortgage amount outstanding





10. Monthly mortgage payments





11. Annual property tax amount





12. Insurance





13. Monthly utilities





14. Determine/evaluate the market rent in that area for that type of property





15. Determine/evaluate a RTO amount of rent for that type of property in that area





16. What needs to be evaluated to make this a RTO type of property in your portfolio?





17. What criteria are evaluated to determine if AFS or Lease Option is the best course of action?





18. What type of due diligence issues are required for the investor to investigate regarding the seller?



a. Ability to continue mortgage payments


b. Potential for seller to go bankrupt (how would this be evaluated?)

c.ace: pre;"> Credit check




19. What other due diligence is required that is particular to an AFS deal?





20. Is it an absolute that the seller agree to have a common bank account with the investor to monitor both:



a. payments from investor to seller


b. payments from seller to bank, city, insurance company





Do any problems arise with this method?





21. What Issues can be presented to the seller that are to his benefit?





a. Seller not needing to pay realtors commission


b. Seller not required to pay mortgage penalty fees


c. If it is a newly purchased property by the seller there is not much equity, the commission and penalty fees would eat away at any equity or cash down into the property

d.e;"> House is sold at a price both parties agree upon

e. Sellers problem is solved, both parties win
What other benefits can be presented?







I understand these are a lot of questions. Any and all guidance on this process would be greatly appreciated.





Thank you very much.
Zauher
 

Thomas Beyer

Senior Forum Member
REIN Member
Yes, that makes sense.



The devil is in the details. A house at $400,000 with $10,000 down, a quality tenant-buyer, with $4000/month may make total sense with the right legal agreements, but that same house with only $5000 down, a poor tenant-buyer and $2500/month with slightly different legal agreements might be hell.



The critical issues are:

a) downpayment

b) monthly payment

c) interest rate on underlying mortgage

d) quality of the tenant-buyer

e) quality of the legal agreements



Your questions are a tad broad, for a free pointed answer. Perhaps you can narrow it down to specifics.



Buy Mark Loeffler's book on "Lease to Own" as you will find 98% of the answers in there and then you can ask for the last 2% in this forum.
 

zauher

New Forum Member
REIN Member
Thank you for pointing me in the right direction Thomas. Much Appreciated.



Zauher
 
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