I Might Have Found One

[DineenJJ]

Hey I REALLY need some expert feedback and advice on this deal I found. Here`s the info on it.
Asking: $699,000

Professional Appraisal 6 months ago: $730,000

Mortgage owing: $550,000 at 5.25%

No repairs needed

Listing expires in 3 weeks

Doesn`t need to move for 6 months. They want to downsize and build a new house but need $100,000 down.

Here`s what I was thinking....

Buy with an AFS for $650,000, get the owner to take out a 2nd mortgage for $100,000. Sell with owner financing to pay off interest on 2nd mortgage and 1st mortgage payments OR could they take out $100,000 on a home equity line of credit and put it into another house and defer their capital gains while I do a wrap?

Can I do this, any thoughts?

 

[GaryMcGowan]

QUOTE (DineenJJ @ Dec 1 2009, 10:10 PM) Hey I REALLY need some expert feedback and advice on this deal I found. Here`s the info on it.
Asking: $699,000

Professional Appraisal 6 months ago: $730,000

Mortgage owing: $550,000 at 5.25%

No repairs needed

Listing expires in 3 weeks

Doesn`t need to move for 6 months. They want to downsize and build a new house but need $100,000 down.

Here`s what I was thinking....

Buy with an AFS for $650,000, get the owner to take out a 2nd mortgage for $100,000. Sell with owner financing to pay off interest on 2nd mortgage and 1st mortgage payments OR could they take out $100,000 on a home equity line of credit and put it into another house and defer their capital gains while I do a wrap?

Can I do this, any thoughts?
Nice Job,
First thoughts.
They want to build a new house?! Do they want to live in this one while the other is being built? Are they open to owner financing?
For the second mortgage it would be high LTV for them therefore a higher interest rate would apply. The LTV would be at 89% currently they are 75%.
May be explore an option agreement for yourself at 650 and sell at 700ish.

The main focus though should be to get them what they want and that is 100k to put towards their new home.

Good luck

 

[BrianPersaud]

QUOTE (DineenJJ @ Dec 1 2009, 10:10 PM) Hey I REALLY need some expert feedback and advice on this deal I found. Here`s the info on it.
Asking: $699,000

Professional Appraisal 6 months ago: $730,000

Mortgage owing: $550,000 at 5.25%

No repairs needed

Listing expires in 3 weeks

Doesn`t need to move for 6 months. They want to downsize and build a new house but need $100,000 down.

Here`s what I was thinking....

Buy with an AFS for $650,000, get the owner to take out a 2nd mortgage for $100,000. Sell with owner financing to pay off interest on 2nd mortgage and 1st mortgage payments OR could they take out $100,000 on a home equity line of credit and put it into another house and defer their capital gains while I do a wrap?

Can I do this, any thoughts?


If i was you, I would get cash now and divest. Nothing like getting a big fat cheque no strings attached

 

[RedlineBrett]

There is no money in this deal.

Here`s why

1. They want 100k... which leaves the property at 650k. Work in payout penalties, realtor fees and legal fees and you may be left with ~10k for all your time and trouble and risk of taking on a 550k loan in a property you could not hold onto. Or your neighbor pops up at 675 or 650 and you have now turned into the motivated seller.

2. You will have to give them this 100k... they won`t be able to pull it out of the property as nearly all HELOCs go to a max of 80% LTV. So if they did a new appraisal now and it came in at 700k that would be $560,000.

I would look elsewhere... and never go more than 10% above the average selling price in the city you are working in.

 

[RedlineBrett]

QUOTE (GaryMcGowan @ Dec 1 2009, 09:34 PM) The main focus though should be to get them what they want and that is 100k to put towards their new home.

There is a big difference between `want` and `need`. You help people in need not with what they want.

If these guys are asking for 100k they just aren`t motivated enough for our investor to make any money. If they don`t have to move for six months and are not behind on payments there is no motivation and hence no deal.

 

[DineenJJ]

Thank Greg and Brian of your input.

Brett - appreciate your insight and opinion on this one.

 

[cmattric]

I think your exit should not be rent to own, rent or take out a second mortgage. I would take an option to purchase at 650 or less. And using Red Ribbon Auction like Terry and Mark used last week, make a quick buck, try for a month. Show your appraisal at auction date, this will attract buyer. If you sell it for 660 and over you keep the difference.

For a high interest rate this could be the safest method. Because I bet they are paying around 2400 a month, if I am not calculating wrong, plus the 100K LOC interest(given that you agreed on paying only the interest with the vendor) that`s a lot of money for monthly payment.

I think for a beginner you should use the safest method. Like others say they have to be in need of selling not want to sell for this deal.