All Forum Posts by: Alex Johnson

@Bob B. Current rent is 1200. It will need a cosmetic rehab to get it up to market but should rent closer to 1750 after its done. Im looking to use the equity in the property to cover the rehab, but am not sure how to access it without having the owners pull a HELOC. Have you done owner financed deals? If so, how did you structure them to make sense for the owner. This couple is in their 70's so a 30 year mortgage doesn't make sense. Would you offer a shorter term, 15-20 years, as long as the property cash flows?

And yes, a win/win is exactly what Im looking to do here.  Ideally I want to show them higher net take home through holding the mortgage with me over selling the property as is and having to pay taxes and fees at closing. 

I wanted to throw this out to anyone who may have a good grasp of taxes due on the sale of a property.  I have a family member who owns a property outright which they have been renting out for the past 20 years.  They recently received notice of their tenants plans to move out at year end which has prompted them to look at selling as they no longer want to deal with managing it.   I have offered the idea of owner financing the property from them, which they are interested in.  To put my offer together I want to know a little more about taxes and fees due on sale of the property to help determine the net proceeds after the dust settles.  My main questions revolve around if the equity is taxed as a capital gains and if so, how heavily.  Does owning the property outright change anything about taxes being owed?  Also wondering about any other costs associated with closing.

General Numbers for the property:

Purchased for 47,000

Current Value 190,000

ARV 255,000

Thanks so much.

@Brian Gibbons

Very good info, thanks so much.

@Julie Haveman

Very nice cashflow!  How are you planning to handle the balloon at 5 years?  Refinance into a traditional mortgage or sell the property?  Also, what paperwork did you use and did you have a lawyer help draw anything up?

@Denny Pugh

I really dont know what falls under the act or not.  Have you run into any problems or situations with it?

@Arlan Potter

Its a good way to get into the house for sure and a very simple and straight forward loan.  A 20k house that rents for 550 will work all day.  Have you run into any big cap ex issues.  Thats the only thing that scares me about under 30k houses, an ac unit can kill your year!  Thanks for the feedback.  What paperwork did you use for your promissory note?

Looking for a little help on the nuts and bolts of putting together an owner financed deal.  A friend's parents have been retired for about 5 years now.  They own a small 3/2 outright and have been renting it to the same family for 15 years,.  They just found out the family will be moving out in 3 months and are thinking about selling it to be rid of the hassle of managing it.  They aren't in a place where they necessarily need the cash at the time so I approached them with the idea of owner financing it and they liked the idea.  They have been renting it at about 30% under market value so there is room to bring it up to market.   Its also mostly rent ready and is in a stable neighborhood with access to good schools.  Think starter homes in the upper 100's...

So I am looking to put a deal together and would love any tips or recommendations from those that have done something similar?  In particular, what kinds of terms have worked for you in the past. They are in their late 60's so a 30 year note probably wont be too appealing.  I was thinking in the neighborhood of 15-20 years at 5% or possibly a balloon payment if and when I sold it?  

How have you sold the idea to an owner to sell to you under retail value instead of  putting it on the market and trying to get asking price? (avoiding closing costs, interest payments over time increasing overall take home, avoiding taxes, etc.....).  Even though its a great way to get into a property, I still need it to be a good deal and under retail....

And more on the nuts and bolts side of the deal.  What kind of paperwork did you use for the agreement and did you involve a lawyer?  The deal will be in North Carolina so not sure if there is anything specific that must be included.  Did you use a basic amortization schedule you found online to determine monthly payments and repayment?  Did you put any additional clauses in the agreement that have worked well for you etc....

As you can see Im starting with a blank slate and have a ton of questions, so any and all input is hugely appreciated!

Thanks so much, you all rock!

Alex

How did you find the online auction process to be and would you go that route again?  You had success with it so it seems to be a great strategy as long as you have cash to be able to do the deal.  Also, were you able to go by the property prior to the auction and get a good feel for the extent of the rehab, do any research on the history or title etc.?

Lastly, you originally made connection with an investor friendly agent but then proceeded with the auction.  I assume that cut your agent out of the deal?  How did you handle that with them to maintain the good relationship you mentioned you were building with them.

Thanks for the great info and update, well done!

@Chris Shuptar

Turnkey in essence without the marketing and shiny packaging.  The deals may not have as much equity built into them, but having so many other things going on with a career, its a way into real estate.  We're in the similar boat....

600$ cash flow is strong

@Jay Hinrichs  Good points about getting your own home inspection to confirm what is being sold.  So much goes back to dealing with a professional outfit, its easy to cut corners with so much distance between buyer and seller.  Thats the major risk I see in pursuing turnkey.  Thanks for the input

@Account Closed  I havent come across any insurance like that, but if you start offering turn key with a buy back contingency, Im sure you'll get some interest!

Does anyone have strong opinions either way about purchasing turn key properties for buy and hold investment?  Have you had success with them and stand by the model, or on the flip side, have you had a negative experience and would stay away at all costs?

My fiance and I are considering the model mainly due to our living situation.  We are working 3-6 month contracts on the west coast for the next 5 years for lifestyle and income reasons. Currently we are in the bay area where housing is outrageous, and without a long term plan to stay here, we don't want to/cant get into this market.  An idea we're thinking about is using the higher income we are making on the west coast to purchase turn-key properties in a mid west or south east (we are both from the southeast) market with strong cash flow opportunity.  

Turn Key offers us a convenient way to put our money to work for us while we're moving all over the country.  It also offers us a like minded team focused on investment property with access to professionals to source property, rehab if necessary, and manage.  That being said, we would be putting complete trust in a company and market we wouldn't live in ourselves and will pay a premium for the convenience...  

There are many more positives and draw backs to consider so I figured I'd open it up to the forums.  Any input is welcome and very helpful.  Thanks everyone.