Deal in Hand - Should I Wholesale or Buy and Hold?

[Tyler Vining]

I have a lead on what seems to be a deal. I’d like to solve the current owners’ problem and hopefully create an opportunity for myself.

Property:

• Location: Tulsa, Oklahoma
• Type: Single family
• Built: 1999
• Size: 2,675 SF
• Layout: 4 bed/2.5 bath
• Stories: 2

Backstory:

This is a single family house. The current owners are in a tough financial state. They have missed a couple mortgage payments over the last year or two and are struggling to keep up with payments. He even tried restructuring his mortgage to get a reduced payment--this didn’t work.

I can go into more detail but to make a longer story short, he is motivated. 

I asked if he had ever thought of selling his house to an investor and then renting it back from them. This has really gained his attention.

After some leg work I’ve a) educated him on what it would take to sell and get market value, and b) established realistic price expectations if he were to sell to an investor instead. At this point if he could pay off his mortgage and then some I think he would be happy to get out of ownership.

Numbers:

• Previous Sale: $235,000 in 2007 ($87/SF)
• Estimated ARV: $240,000 ($90/SF)
• Mortgage Balance: ~$160,000 (66% of ARV)
• Potential Purchase Price: $175,000-$180,000 ($65-67/SF or 72-75% of ARV)

Potential Solution:

The current mortgage payment is about $1,350/mo.

I think an investor could purchase the property for $175,000 - $180,000 (72-75% of ARV) and reduce their rent to say $1,100/mo for year one, then maybe $1,200/mo for year two. But as part of the agreement/lease the rent would then return to market value of about $1,800-1,900/mo.

My Role:

I would love to do one of two things. One would be wholesale the property. However I think it might be hard to find a buyer willing to take a reduced revenue stream for years one and maybe two. Or Two would be have a real estate investor act as my bank and fund my purchase of the property. Then I would be the investor willing to take a reduced cash flow. Those numbers might look like: $175,000 note at 6-7% + $5,000 down payment, I/O payments during the reduced rent period (1 or 2 years), then revert to P&I payments for the remainder of the term.

Wholesale: Are their investors who are willing to structure a deal like this?

Buy and Hold: Are their investors looking to invest cash in other investors at terms close to these?

Any advice or recommendations on what I should do would be greatly appreciated!

Tyler