Possible/Possibly my first deal a lease option

Please.

Even though I havn't even done a 1st deal,
so probly shouldn't give my opinion...
Sounds like a no go to me...
FMV of $150K
total of both mortgages $220K ?
hmmm....
and doesn't sound like much room for monthly cash flow(rent)
am sure you will get plenty of imput on this from more experienced DGers after church hours.
Best of luck to you..

from what you stated, the house FMV is 150K; the homeowner owes 220K, plus $6,700 in arrears; the payment is $1,240/month.

I guess you could do a sandwich lease option, which means you would need to find a tenant buyer who can pay about $1,600/month and give you a $10,000 non-refundable deposit, which would cover the $6,700 payment, and give the homeowners $3,000 to relocate, and you would keep $300, plus a cash flow of $360/month. Not sure what the rents are in the area, but obviously you can change the amount accordingly...

good luck,
Valerie

No way do you want to do this deal!

The house is too upside down that the T/B should be put into this. PLUS they are behind too much AND it needs a new roof and other repairs.

If you were to find someone who would be foolish enough to come on as a T/B, you would be doing them a disservice. They will probably not be able to get financing at the end of their L/O period and then would lose all their money.

I am not saying walk away. I am saying grab your purse and RUN, girl!

Karen

What will the property rent for? Is the existing financing fixed or variable?

it's in a good area; what are the comps?

you could have the current owners continue to pay the second to bring the balance down...

Valerie

Sorry for my delay in getting back today but I had church this a.m. with Joel Olsteen and then had to go to work for a 6 hr shift.

I believe the property could rent for $1500.00 - $1800.00 a month and the existing mortgage is fixed at 6%. Property value was appr $380,000.00 before the bubble burst and it is in a good location in a pocket area. Its in a cul de sac on a large pie shaped lot. Easy access to freeways and shopping. Also access to public transportation.

I know prop values are still dipping and could drop more. This one dropped to around $140,000.ish but is holding value for the moment. I have no doubt the values will increase and I thought that if I could find tenant buyer who would agree to $190,000. then get a loan in 2 or 3 years. Buy that time the homeowner could take care of the 2nd and their would be equity in the home.

Comps are good. This homeowner has been in the home for around 10 years and they refinanced thru Countrywide which became B of A causing the upside down. Needless to say they are very upset with themselves at this point.

This is what I see based on the info you supplied.
1st $190,000
2nd $30,000
Rehab $20,000

$240,000 owed

$6700 to cure foreclosure.

Value $165,000 (high?)

$75,000 in NEGATIVE value.

Never and I mean NEVER speculate on a property going up in value. NEVER, NEVER, NEVER. You buy based on what the property is worth today.

This is a short sale at best in my opinion.

As Karen stated, this is not a L/O deal. Don't waste a bunch of time trying to pound a round peg into a square hole. Move on to the next is my advise.

If you try this you will have to ask for more than $6700 as an option payment if you want to make money on the front end. Cure the foreclosure plus some money in your pocket.

Then you will have to get over $1250 a month rent. This seems possible. Say $1500 a month. A whopping $250 a month. No thanks.

Now the hard part. Who is going to buy (L/O)a $165,000 property for $240,000??
How will your tenant/buyer get financing so he can exercise the option? No bank is going to loan $240,000 on a $165,000 dollar house. Needs a roof this will have to be fixed also. Where is that money coming from?

Good luck, It is great you are out trying to make a deal!!

Mentoring/Team Building Nationwide
Michael Mangham
MD Home Acquisitions LLC

Just as mention, theres nothing there, The numbers tell you it was it trouble from the start, $1250 payments $6700 arrears, fmv $150k, $220k debt the numbers do not work. Why would the home owner pay on the 2nd mort if they walked away, that doen't make any sense to me at all, you need to walk away from this one, first thing you need to learn is you can not help everyone, and this is one of those times......John H.

Michael

The client wanted to save the home from short sale or foreclosure and not just walk away. It is important to them to not have this on their credit record. What would you tell them and how would you advise them to find the funds to pull it out of foreclosure? The client is being told they need $6700.00 before end of January.

The sad part is they may not have a choice in the matter. Their house is worth less then $75,000 of what they owe including the repairs needed.

They got behind on payments for what ever the reason. How are they going to have to make up the $6700 and then make the $1240 a month payment. So they really need $7940 the first month! Then pay the $1240 every month or they will be right back in the same situation.

Maybe they could borrow from a relative or a cash advance on a credit card? Unfortunately in the situation they are in, I don't see any profession money lender helping them.

Put them in contact with your broker to see if a loan mod is possible or if they qualify for any programs that are out there. This is highly doubtful.

Sometimes you just can not help. To me, they need to do a short sale or walk away. They are just going to throw good money after bad trying to save something they can not afford. An investor would look at this place as a short sale or after the auction as an REO. There is no money to be made on this one as is. Remember a short sale is not as damaging to their credit as a foreclosure.

Put them in contact with the people that can TRY and help them (realtor/broker) and move on to the next one is my advice.

Mentoring/Team Building Nationwide
Michael Mangham
MD Home Acquisitions LLC

Thanks again for the information. I really do appreciate it. It will be hard for the client to swallow this information but I really want to help them. Even if I can not do the deal and make anything off of it, I at least want to help them to do what is best. I will get a deal in due time I just know it.

The positive element here is that if they retain the house, they have shelter for less than the market rent. The other positive element is the fact that the house is $75k in the negative and I can't see the bank wanting to take it back. Since the house is $75k negative, it's going to be difficult for you to help them out. I don't think you are getting the whole story. To receive a notice of default, the December payment would have to be missed, not just a mix up in the January payment. They should see if they can work out a forbearance with the lender. Maybe offer to pay $300 a month on the $6700 for 2 years. That would make their payment right around what market rent would be. If it's a simple mix up in the payments, I'm sure the lender would take $300/mo for a couple of years to get it back on track rather than foreclose and have another REO. But then again, if there is more to the story, who knows. It wouldn't be a bad thing to help them find a solution and not make any money. The worst thing that could happen is you'd have someone going around saying good things about you. That's worth something.

On an aside, you said FMV was $150k. If someone were to buy it, $150k @ 5% for 30 years works out to $805/mo. $200 for taxes and insurance and it throws off $500-$800/mo cash flow. A cash purchase yields a 12-14% cash on cash return. Are retail priced properties throwing off that kind of cash flow in your area?