All Forum Posts by: David Kilgore

I am a newbie investor currently negotiating a deal with a neighbor and if I can get this property under contract I would like a partner to go in on this deal with me to bring capital and experience. I am very eager and have been a student of real estate investing for almost two years now. Reading countless books, listening to endless BP podcasts, and attending multiple investing seminars but have yet to strike a deal. I fear I have gone into analysis paralysis and believe I would benefit tremendously from a partner that could help guide me through my first deal. Below you will find the details of the deal, if you are interested in learning more about this opportunity please PM me. 

PROS:

The property is a 2 bd 1 bath in a college town with vacancies that are little to none. The home is in fair condition with hardwood floors throughout. There is a building in the back yard that can be converted into a one bed one bath unit. Current rent is $625 but comparable market rent in the area is $750. Quoted from the seller, "within the past 6 years the property has only been vacant for two months." Take that with a grain of salt if you will. 

CONS:

The roof has not been updated in 7 years. There is no central heating or air. There is currently a window unit for A/C and a natural gas wall mount heating unit. There is no laundry room. The washer and dryer currently sit in the kitchen.

The Proposed Offer to Seller:

She currently has the property listed for $74,000; However, comps in the area are around $70,000. The seller currently has a $64,000 existing mortgage on the home. The seller would like to get at least $8,000-$10,000 out of the deal for a down-payment on a land. My proposed offer to seller was to give $8,000 for the keys and then take on the existing mortgage. 

If you are interested in partnering with me on this property please PM me so we can discuss terms. If you are not interested and would like to leave some advice on how I can better structure this deal please leave a comment below. Thank you for hearing me out!

@Mike S. I was told clouding title can be a way to protect against the seller attempting to resale the property. However the memorandum seems to be simpler and just as effective. How can clouding title put me in the position of a potential lawsuit? As you can tell I am new to this strategy and would like to mitigate as much risk as possible.

@Mike S. During the recording of a memorandum do you leave deposit monies in escrow and once memorandum is finalized the deposit can then be given to seller?

@Mike S. When closing the lease option agreement is it not wise to place a cloud on title to insure against the chance of the original seller attempting to sell within your option period? How would you get around the cloud on title if yourself assigned another option to another buyer and that buyer exercises their option before expiration?

Thanks Mike! That is some valuable advice. What would it be subject to though? The option agreement? what would happen if the buyer of the sub 2 deal decides not buy within the time frame of the option? Who would pay the renewal fee? & Worst case scenario what happens if the original seller decides not to renew the option?

I am currently looking at a property that I would like to acquire via lease option. My plan is to turn this into a rental for at least 5 years. I understand that the seller and I must agree upon a master-lease outlining the terms and operations of the property. There must also be a clause that will permit me to sub-lease the property. My question is who typically pays taxes and home insurance on a deal like this? I would assume that since I would be managing the property and covering repairs would it not make sense to have the seller pick up this end? Can anyone offer some insight with the formalities of these types of deals?

Collin, was that a 5 years line on your primary residence?

Hello BP, I am a teacher in the state of Georgia. During one of my math lesson's I had an epiphany. In my class I have my students come to the board to solve a problem. With all the different math strategies these days, kids are able to solve the simplest problems using a wide variety of alternative strategies. Some that work better than others, it usually is dependent on the type of learner you are. Anyway, once my student solved the equation, the other students in the class all had an aha! moment. All the students loved the strategy that she used because it made solving the equation so simple. I thought to myself, students sharing with other students can be incredibly beneficial during the learning process! Why am I not doing this on biggerpockets!? I could post a hypothetical real estate scenario and see how the rest of the community finds a solution for the seller. This would be a great property analysis exercise for us to go through and I am sure we would all learn something in the process. 

Scenario:

The year is 2007. The seller buys a flip for 115,000 right at the top of the market. He initially puts 5% down on the property and gets an interest rate of 8% for 30 years. The house is a 3 bed 1.5 bath ranch, 1300 square feet and is in prime condition at the time of purchase.

Fast-forward to now. The seller gets a new job and needs to move. He is current on all of his mortgage payments. However, property values in his neighborhood has taken a negative turn and have not benefited from recent overall market appreciation. Similar comps in his area are anywhere from $80-$110,000. Not to include the wear and tear his house has taken during the ten years he has occupied the property. The property is rental ready, but will take some work to get to full value. Repairs are estimated to be $5,000. Estimated rent that can be collected for this property ranges from $950-$1,100. The seller is asking $110,000 and is selling the home on his own. No agents involved. 

Given this information, How would you solve the sellers problem? 

Ok I see. Thanks for clearing things up Chris. 

Aww I see. So who is in control of the property at that point? The trustee or would it still be the homeowner? I am wondering because if it is the homeowner, would it not be in our best interest, as the real estate investor, to provide solutions to that home owner? Also at this point, would the trustee be willing to provide us, the REI, with the home owners contact info or would that be against any identity protection services that the trustee may provide?