Possible owner-finance deal

[Jim Viens]

Got a call from a yellow letter today. Guy and his wife have lived in the house for 45 years (inherited from in-laws who were the original owners) and they own it free-and-clear. Property is a nice 3/1.5 raised-ranch on a quiet street. Comps in the area have been selling for around $85k but values are going up. The way he described the house it's been well-maintained and needs little work to be move-in-ready. Typically I'll refer deals like this to a realtor to sell at retail, but this one I'm thinking a little differently. What I'd like to do (once I actually view the property and get a good idea of the condition) is to offer around $70k but see if I can pick it up as a zero-down owner-finance. I'd propose they carry an interest-only note at 5%, 30-year amortization with a 3 to 5 year balloon. I would then do the needful to get it ready for tenants and rent it out for $900-$950/mo (would really like to do a 2 or 3 year lease-option). If I can work out the owner-finance part that would make my debt-service on the property about $300/mo and I should cash-flow about $150-200/mo on it. Could someone verify this for me to make sure I'm not missing something? I want to make sure my numbers are good before I even float this to the seller.

Thanks!

[Brian Gibbons]

Well the way I look at it is if it's Free and clear I'll give them $100% for their property maybe 105 % for the property, but my terms.

Say they got expired listing, they try to sell for hundred thousand, didn't get any offers

I'll go to the free and clear seller and see if I can get you not 100% but 105% for your house would you be open to some creative terms?

Then I'll take market rent let's say it's 1000 a month and I need a $300 a month positive cash flow out of out of it

So I'll offer them $700 a month for a period of time

I know with installment sales there is imputed interest I know you need get a minimum of imputed interest so I check out the imputed interest table on the IRS.gov website and charge them that.

That I work backwards and offer them 105% of the value of the property with the cheapest possible financing. I have three hundred dollars a month, no banks, put a long-term renter in there, no Dodd Frank because I'm not living in it

The way to sell this to the 60 to 70 year-old couple is,

if I can give you not 100% but 105% of value,

Think of this payment that I give you as an annuity stream, because if you got all cash today you probably have to save it and live off the interest or live off payment if you bought an annuity, right?

Go to investoPEDIA.com and print out all the stuff that they have on annuities.

Go to iRS.gov and print out all the stuff that the IRS has an installment sales of residence.

Go to Nolo.com and print out the seller financing articles.

Offer to see their CPA and give them all that information, and help them sell on installment sale

You take possession with two pre-pay payments paid for the future possession, and move a renter in, and make $300 a month positive cash flow.

If they want a solution to, "what if you don't pay me I have to foreclose?"

Offer to have a warranty deed held in escrow with escrow instructions that if you are 60 days or more lady they get the house back. They just have to honor the lease.

And in 12 to 18 years you have a free and clear house.

Do the math

Brandon Turner

Is installment sales for free and clear houses and your creative finance book?