All Forum Posts by: Account Closed

@Rene Owczarski   I think thats what I'm going to do! However, he decided he wanted around an 80k down payment. Now I'm looking at a $1,400/month mortgage and he wants between 1-2k/month for his equity. If its over a month its a no go because I'll be paying more monthly than if I took out a conventional mortgage for the buildings appraised value.

@Rick Pozos rents can go up an additional 2K/per month. If I take out a mortgage on his remaining 120k the payment will go down from $2,200/month to around $700 increasing cash flow $1500 then I would just have a note (with seller) for his equity 

Seller owes 120k on a 400k building 

His goal is cash flow for retirement 

His mortgage is 2,200/month

After expenses he’s breaking even due to below market rents...

should I... do a wrap around mortgage pay his 2K mortgage and make an agreement I won’t start paying for his equity until I get rents up?

OR

Take a mortgage out on his remaining 120k mortgage balance so the new mortgage is only like $700/month have him take a second lien position and immediately start a seller financed agreement since he’d technically have it paid off. 

Today I met with a seller of a 3 unit regarding selling his property.

The property is currently valued at 400k.

He owes 150k.

Equity 250k

PITI around $2,200/month

Expenses around $1,300/month

His current gross income is $3,650/month which is around 2k LESS than he could be getting per month.

He is only breaking EVEN on this property each month.

He is getting ready to retire and would like a steady income with some money from a down payment.

Being that this property is only breaking even due to his low rents what are my options? Would a wrap around even be worth it? I wouldn't create the second note for his equity until I raised his rents but even then I would be almost splitting that new cash flow with him whereas if I purchased conventionally I'd be out a 20% down payment but I would be getting all the cash flow.

His biggest goal is avoiding paying capital gains all at once, Appreciation recapture, and steady income.

I'm not sure what the best route is and he is open to selling me it conventionally. I'm a realtor so I could save him on commissions.

Thoughts?

Today I met with a seller of a 3 unit regarding selling his property.

The property is currently valued at 400k.

He owes 150k.

Equity 250k

PITI around $2,200/month

Expenses around $1,300/month

His current gross income is $3,650/month which is around 2k LESS than he could be getting per month.

He is only breaking EVEN on this property each month.

He is getting ready to retire and would like a steady income with some money from a down payment.

Being that this property is only breaking even due to his low rents what are my options? Would a wrap around even be worth it? I wouldn't create the second note for his equity until I raised his rents but even then I would be almost splitting that new cash flow with him whereas if I purchased conventionally I'd be out a 20% down payment but I would be getting all the cash flow. 

His biggest goal is avoiding paying capital gains all at once, Appreciation recapture, and steady income.

I'm not sure what the best route is and he is open to selling me it conventionally. I'm a realtor so I could save him on commissions.

Thoughts?

@Erik W.

I 100% agree.

However, per the way our conversation goes monday when we meet in person I'd like to have the knowledge to explain things to him. I know his PITI. I know his goal is some money down, and monthly payments.

What I don't know is how to structure or vocalize the deal. 

"Thats great so what we can do is I can offer you X amount cash down, I can take over your mortgage, and we can discuss a payment + balloon for your equity."

At that point he accepts and we agree on terms for the equity..

Would I then vocalize that I will have an attorney draft the paperwork and get it over to him? Do I contact his bank and let them know I'm taking over. I have the gist of the deal I just need the small details.

@Erik W.

Sounds like that can be a hard sell to a seller. 

His PITI is $1,900.
equity 250k

Building value 400k

His goal is some cash in his packets and monthly payments with an undisclosed balloon.

What would a good offer look like to a  seller in this situation? I’m not trying to rip him off but I also think the control from sub-to is more appealing to me.

@Derek Dombeck

My goal is to hold his 3 unit long term.

At this point I’m just wondering what the difference is between doing a sub-to and giving him extra monthly + potential down payment & just wrapping the first note with an additional note. It seems no different? He just wants to be done with the property and have a steady income from it + some cash. Both these options sound the same with different names.

@Derek Dombeck
Thanks for the reply Derek.

Seller & I haven’t hashed out the specifics.

He’s 68 years old and I was just wondering what options I could bring him.
With the wrap around I’d be paying his remaining mortgage balance, then paying him an agreed amount monthly for his equity/a potential down payment?/balloon?

Seems difficult to get cash flow that way. Although I suppose it beats 20% down.

Seller owes 150k on a 400k 3 unit.

He’s interested in seller financing to defer capital gains.

What creative financing option would make the most sense for he and I?

Seller finance, sub to, wrap around etc. and why?