Am I trying too hard?

Question

I have a seller in his 80s. He is behind 30K in mortgage and has a 40K lien on his home. Current mortgage balance is 600k (not including the arrears-30K) with a 3.5% 30 year fixed, payment $2700. (It's in So. California - VERY DESIRABLE BEACH COMMUNITY)

SFR, 4/2 - single level (5/3 - with permitted 2 story granny flat, permitted - part of Tax record)

ARV - $850K -(remember so. cal)

Repairs - $50K

Deals Presented:

1. $700K - Cash ($30K to buyer. (He really wants $50K to walk)

2. $100K - Sub. To. ($70k pay off arrears & liens) $30K to buyer to walk. (He really wants $50K to walk)

3. $70K Sub. To. (Pay Off arrears & Lien) ***He Like This One***

* He would like to stay in property (doesn't want to move if he doesn't have to) - He can pay $1500 p/m.

* Fix up the GF $5-8K

* Rent out the GF - Lease, or AirBnB (I would manage.) - Could command $1500 p/m lease, possible more as AirBnB.

While this third option doesn't give any cashflow, it does allow me to get into a very desirable property at a discounted rate. When they do move out, which I may be able to negotiate a time frame 1-2 years, rents for the 4/2 would be as much as $3200 per month.

Am I trying to hard? What am I missing? Is there a deal to be made?

Christopher Brainard · Answer

You can't make a deal with someone who doesn't want to sell. I don't think that under any circumstance you should allow him to remain in the property. The reason he likes #3 is because he's not going to move out after you catch him up. If he can't keep up with his bills now, he's going to be a terrible renter in the future.

In my opinion, you are trying too hard. He's well on his way to foreclosure and seems unconcerned, so you need to wait until he is concerned. Plus, if you're too 'into' the deal, he's going to sense that and figure he can get more money out of you. As is, you're going to be 780k+ into a property after closing costs and repairs that is currently worth about 850k. If you need to get out of that property for any reason, you'd be lucky to break even.

-Christopher

Am I trying too hard?

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