A couple of months ago I drove past a place on the MLS for $52K, peaked in the windows and it seemed clean and straight. Looked like someone had spent some time fixing and painting, nothing fancy, just basic house.
About a month later I'm playing golf with an agent friend of mine who mentions that this place might be in my price range. Too high I said, I own one almost across the street that's bigger, newer, more bells and whistles that I only paid $51K for 3 years ago. Agent says that the owners got it last year, estate deal, and put about $8K into it and didn't think they could take less.
For the life of me I couldn't see what they could have put $8K into, roof is not new, exterior is old T-111 and it doesn't look like it had been recently painted. Anyway on a hunch one day I had her write and offer for $37,350. Three days later they countered at $49,500, I countered at $39500 and got a deal last night at $44,500, all cash.
I probably paid a thousand too much but I'll have it in Friday's paper on my usual offer: 2/1, owner will finance with $2,000 down payment. I expect I'll get close to $60 for it since my buyers typically are "payment buyers", not price buyers.
Remember newbies, you can never offer too little.
good advice, thanks. is that the way you do most of your deals? by carrying the mortgage, doea it work well for you? how many have you had to repo?
can this be done if I have the property mortgaged? I would think so as long as I continue to make payments to the mortgage company.
I've done about 35-40 of these "Owner will carry with small (usually $2K) down payment" deals. I just did my THIRD FORECLOSURE (actually Trustee's Sale as TX is a Trust Deed state), and it cost me about $700. Actually one place I sold 3 times before it took but I scared the one deadbeat into deeding the place back to me.
I've done a couple of these where I bought on the MLS and sold within 72 hours for as much as $15K gross profit, without doing ANY WORK. I usually charge pretty reasonable interest rates, particularly when you consider that they're not paying any points or origination fees! I'll probably charge this one about 9%, but my effective return is much higher.
Consider the numbers, I pay $44,500, and I sell it for $58,500 at 9%. Since I'll collect $2K down I'll be collecting ($56,500 @ 9%) $454/month in P & I. That's an effective rate on my investment, $44.5K minus $2K = $42.5K of about 12.5%. Not too shabby.
I really think it's done pretty nicely for me.I think with a mortgage you might trigger a Due On Sale clause. Dong it on a CFD might work but I'm not sure that CO didn't tighten up their CFD laws.
What does "CFD" stand for? Can you explain it?
Contract For Deed. I don't have time right now to explain it, but an archive search should point you in the right direction.
Thanks all cash. Very cool, succint post. I've tried seller financing and got nibbles, but no bites. Most of the folks were too wary because they hadn't heard of that arrangement before. Any tips on how to "sell" the idea to someone who is otherwise unfamiliar with it?
Obviously, there are situations where it is certainly a benefit to the buyer and I don't really see a huge downside as the seller since you can always call the loan for nonpayment as long as the mortgage / promissary note is written up well. The only major problem I see right now is the competition with a lot of "zero down" loans available to buyers in the New England area and the overall ridiculousness of the prices--giving someone low / no closing costs would be an incentive, but the loan is still going to cost a pretty penny in PITI.
This technique is the basics of how Lonnie Scruggs talks about doing mobile homes. The numbers are smaller but the rates of return are higher. He buys 10-12 year old mobile homes for $2K to $3K cash and then sells them to buyers for $5K to $6K on terms. I would think that he gets a fair amount of them back for non-payment, but he just does it again. If he has to put some money into fixing them up, it really isn't that big of a deal since most repairs on mobiles are pretty minor.
I hadn't heard of anyone doing this with homes, but it makes perfect sense.
tackleberry, many people are in situations that they can't get loans or don't want to get loans. I am sure that all cash is doing his homework on the buyers, but many people just don't like to deal with banks. If they can get the financing straight from the owner they jump on it even at a higher interest rate. I never knew how many people were in tight situations that caused them to not be able to get a loan until I started selling houses on lease/option.