Looking for advice on 2 separate potential deals

[dan332 0]

Potential Deal 1: Might be somewhat overpriced but house on a nice lake, owner out of state, just fired realtor after 6 months, has plenty of equity, and I think he'll be flexible when the time comes. Also 5 minutes from my house. He just wants to sell. The issue: the inside of the house needs updating. I was thinking of getting him to offer a healthy purchase price credit for a handy T/B to update the place. My question: How does this work.. ie how would a price for the work be set, what if the T/B does lousy work, etc.. Remember the owner is out of state (house in Fl, he is in Az), so he cant be checking the work. I think the credit may be a good incentive, plus a good deal for the owner (if they dont buy he'll get improvements for nothing.) But.... is this risky.. are there pitfalls?

 

 

Potential Deal 2: Owner is open to owner financing to help with the purchase. Is this usually a big selling point? How does it work.. just that the owner takes back a second? Any advice on using this to make the deal more marketable?

 

Any suggestions/advice highly appreciated.

 

Thank You!

[Jonathan RexfordFL 8]

Okay here is how I do my Fixer type of deals. First be clear on your After repair value. Also you need to make sure your repairs are noted.

 

What I do is a lease and option.

 

Option fee

 

Move in inspection report

 

Schedule of work that needs to be done.

 

So if there needs 10K in repair break it down like contractors do. In draws. Draw up a promissory note with a set of schedule values. Make them sign it as part of the option fee.

 

Seconds are great. Now the issue is to find a lender that will finance them.

[MichaelC 160]

Potential Deal 1: Might be somewhat overpriced but house on a nice lake, owner out of state, just fired realtor after 6 months, has plenty of equity, and I think he'll be flexible when the time comes. Also 5 minutes from my house. He just wants to sell. The issue: the inside of the house needs updating. I was thinking of getting him to offer a healthy purchase price credit for a handy T/B to update the place. My question: How does this work.. ie how would a price for the work be set, what if the T/B does lousy work, etc.. Remember the owner is out of state (house in Fl, he is in Az), so he cant be checking the work. I think the credit may be a good incentive, plus a good deal for the owner (if they dont buy he'll get improvements for nothing.) But.... is this risky.. are there pitfalls?

Dan, these type deals usually fly off the shelf. Note I said usually, because in this market nothing is flying. Advertising it with the usual buzzwords: Rent To Own, Handyman Special, 100% rent credit, U Fix-U Save, etc., will get your phone ringing. Everyone has been told to look for a house that needs cleaning and updating as a means of getting a bargain. Let people know this is what you have, and they'll come running.

I can tell you from experience not to waive the option money in lieu of repairs, because you may find yourself with no option money and no repairs being done. Instead, collect your option money, emphasize the rent credits are so generous due to the needed work, and agree to a list of work to be done and a timetable for it.

Potential Deal 2: Owner is open to owner financing to help with the purchase. Is this usually a big selling point? How does it work.. just that the owner takes back a second? Any advice on using this to make the deal more marketable?

Seller financing is always a plus. How it works depends upon what the homeowner is willing to do. It could be a second. It could be a first if the property was free and clear. Whatever it is, it's a plus and a good thing to be able to advertise.

[dan332 0]

Jonathan and Michael,

 

Thank You!

 

The fixer really doesnt "need" work, its just that the inside is tired looking. I'm not looking to spend or give up any money myself, I just thought that it might help marketing it if "sweat equity" was mentioned when people call. The idea was offer it at say 320K, with a 25K allowance for improvements, if done. The part that I am wondering about though is quantifying the type, worth, and quality of the work. Might open up a lot of issues that are better left alone.

 

Thanks again-Dan

[MichaelC 160]

Dan, I would let the handyman t/b assess for themselves what needs to be done at what it might cost. I would emphasize the low down payment and the rent credits as the great equalizer for the needed upgrades.