Would you do this one?

[sholandaingeorgia 0]

Hi Everyone!

First, let me just say that Ms. Diana Fontanez has been remarkable in sharing her words of wisdom and her time with me. Diana, you are the woman!! I wish you are blessed with even more prosperity, an abundance of blessings, and strength and health in 2006 and beyond.

 

Now, I am the listing agent for a home that is not in a subdivision, within walking distance to a lake, 3/2 ranch/1 car garage/1.25 acres. I have recently reduced the listing price from 110,000 to 105,900. I was getting bites on the home but the seller fails to see the significance of cleaning the home so her profit potential lessens. My hubby is contemplating making this our first deal. I know the seller is motivated, not enough to clean the place , but she'll be willing to do a lease purchase. Her current mortgage is 975.00/month with a balance of 95k. She might even be a candidate for a sub-2 exit strategy. I am checking with her lender to see if she needs to sell her home b4 she purchases a new one. Her thing is she wants to re-finance b/c she wants her monthly payments to be less. The re-finance company has told her that they could get her 120k for the home. I told her, traditionally, if she re-fies she is not going to be able to make much of a profit on the home and might even have to come out of pocket. She's only lived in the home for a little over a year. Realistically, I'd say the home is worth 110-115k. It needs carpet cleaning, paint touch up, and pressure-washing. Hubby was thinking of leasing the home at her current mortgage and then subleasing it for market rent, which is about 1000-1200. He wants to immediately re-fi to get a better interest rate. Do you think this is a deal we should pass up or do we have something to work with here?

 

I've been reading Wendy Patton's new Lease Option book and I think I will like Michael's material better. Nothing against Ms. Patton, but it's not really as "naked" as I would like for it to be for someone that is a beginner.

 

Thanks everyone!! :xsmile:

[pinoydarv 0]

1,000 to 1,200 sounds like alot for a 110-115k house. I don't know if you could find someone to sublet that for that much.

 

- DarvinM

[Adam King (MI) 1]

Sholanda,

Good stuff about Ms. Fontanaz. It's nice to see people giving back!

 

As for the deal. As Wendy says in her book, it can go against a Realtor's code of ethics to violate the DOS clause. That is a fact here in MI and may be in GA as well. But also as Wendy says, it's better to just let the bank know what you're doing with a certified letter and not beat around the bush trying to mask the sale. I agree with this but also have my own system of Sub tos where if you buy the house right who cares what happens? Let the call the loan due, you'll just cash it out!

 

As for Wendy being less naked than MC I would have to say that MC gets to the point much faster and much simpler. This isn't to knock Wendy but she is a broker and it's very obvious she thinks like one. Again, that is NOT to be seen as an insult because I deeply respect what she has done with her career. The only thing that I disagree with completely is that she talks about Sub tos being a great vehicle to buy and not sell. I find more sense in the opposite if you hold the note yourself. A triple net lease and partial conveyance of beneficial interest is attractive as hell to a buyer with moderate to good credit. Although I'm saying this now, I must also say that the lease option is my strongest selling vehicle above and beyond the sub to. This is because there is a much greater market for the lease option including a MUCH less risky way to hold property without financing. I'm very picky if you're going to become a partner in the deal versus a tenant/buyer.

 

With that said; sub tos may be out for you.

 

So let's look at your numbers.

 

Let's say you get the property for $95K and it's worth $115K. How is your market appreciating in GA? The price PITI seems about right and I think you could get that rent if the market allows it. I have to agree with Darvin though, $1,200.00 a month seems a little high for my market and it may be for yours. But not necesarily on a lease purchase. Just some things to consider.

 

So if you get it for $95K, let's figure in your holding costs, future closing costs, your vacancy costs and your rehab costs. Let's get nuts and say it could be as much as $10K. Now you're at $105K. Now what if she refis? That's another $2 to 4K (or more) in closing costs. Now let's say the true FMV is really $110K like you said. Do I need to go further? In my opinion an SLO is out of the question on this property based on it's need for rehabilitation. But if it didn't need work and it's in a highly appreciating area, you could still have a deal.

 

Now let's take into consideration your license and the lady's motivation. If she's leaving and the property becomes vacant I see two choices that you may have.

 

1. A light rehab that she pays you (someone) for from the the proceeds of the refi, and then offers you the ability to do a CA (Cooperative Option) I.e. in your case a rent to own listing where you are paid a commission. Although a CA could/would get your a higher profit then a commission. (Realtors do option investing too)

2. She fixes the damn property up, quits wasting your time and allows you to move it on a LO. (I.e. number 1.)

 

The latter makes the most sense to me because you're already in control with your listing agent agreement. This way you could turn your listing agreement into a dual agrent agreement while doing a CA and still putting yourself in the middle through the use of a purchase agreement to get a full commission at the end. This way you're fully disclosed to all parties, while acting as an agent and a principle. How's that for thinking outside of the box?

I'm sure there's more to the equation but this is where I would start.

Hope that helps,

Adam

[sholandaingeorgia 0]

Go Adam! Go Adam! Go Adam!

 

Thank you so much!!!