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To buy or not to buy?


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#1 Learning and Burning

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Posted 27 October 2015 - 07:08 PM

Iv had this property for coming on four years that has penciled out for income and is coming due. Its two attached tax lots with two dwellings on one and one on the other. Been renting two of the units and one being leased with option to buy. Not sure that t/b will be exercising the option due Feburay 2016. Now if t/b does not how does this play out? Seller says she will not extend the agreement so do i assign back to her? If so how do i do that? Trying to keep the horse in front of the cart.

 

Because of the income i would consider a loan for the property in case t/b does not buy. So is this something a guy would consider and would you do it under the LLC or not?  Would you do it al all? 

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#2 MichaelC

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Posted 27 October 2015 - 07:46 PM

Mike, the numbers tell the story.  What's today's FMV and what's the option price agreed to years back?  There should be some equity there.

What's the rental income?  Will it cash flow enough to make it worth your while as a long term buy and hold?



#3 <Steve>

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Posted 27 October 2015 - 08:43 PM

I would consider purchasing my longer term SLOs if they perform well and cash flow.  Either with bank financing or some kind of creative financing, In fact I would jump at it.


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#4 Learning and Burning

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Posted 28 October 2015 - 09:10 AM

FMV today and original price there is equity there and cash flow. This has penciled out and from what i can see it will continue to. Seeings all units are in good standing with good tenants. This would be my first in tryig to purchase in my own, as an investment property. A question is if i do proceed with such would i be best served financing through the LLC? Because id like to buld up the llc to do more of these down the road. Or do i try and do it with just my qualifycations as an investor cause this business is my only real income source. 

 

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#5 MichaelC

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Posted 28 October 2015 - 01:47 PM

Mike, it sounds like a keeper from your description.  Do you have a mortgage broker you can sit down with to assess the deal and how best to finance it.  That's where I suggest you start.  They all have an in-house counsel who should be able to answer your questions about asset protection.



#6 Learning and Burning

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Posted 30 October 2015 - 01:16 PM

Still work to do on this one to confirm its a keeper.This would be my first keeper if it works out. I do not have a lender but will start looking as this one clears up. 

Now this would be a plan B for this if tenant does not buy. And so the other part of my question is play this one out if tenant does not buy and plan B falls out? How would i go about giving property back and what happens to tenants? Do i have to get them out for me to close out so to speak? 



#7 <Steve>

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Posted 30 October 2015 - 01:54 PM

You could ask the seller if they would be the lender as a wrap.  Or, see if you can buy subject to the existing financing.  Or, keep it as a sandwich. If going the bank route, is the current mortgage a qualified assumable with good terms and interest rate?  Any way you go, if the property is performing well try to keep it and lease it to another tenant/buyer.


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#8 MichaelC

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Posted 31 October 2015 - 10:44 AM

In addition to what Steve wrote, if the t/b doesn't exercise their option and you decide not to exercise yours, you advise the homeowner of your plans as far in advance as you can so he can make his plans.  As for the t/b, their agreement with you specifies that they are required to give you written notice of their intent to exercise or not no less than 60 days prior to the option expiration.






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