NEED HELP: Potential 1st Deal and Not Sure What To Do

4 Replies

So...

I'm brand new and my deal structuring creativity isn't exactly fine-tuned yet. But I ran across a home 2 days ago and it's a 1st time flipper who is apparently in trouble. It's a fully renovated 3 br/2ba house in an area that I am looking to buy and hold(rentals).

From what he has told me, he put $150K into the rehab and has a reno loan payment of $1200/month that he can't afford. Said he's in trouble and needs out of it. I'm not sure what the balance is on that loan. He has it listed for $162K but said he will consider all offers at this point. The comps in the area are showing around $150K-155K with rental comps around $1200.

I do have cash(just sold my business) but not enough to pay that much for it. 

My question is...something like this...is there a potential deal here to help solve his problem and come out with a good deal for me as well? Or no? Would borrowing private money at a 30-yr fixed rate be a way of offering him the balance due on the loan and get the home for under market? Or is this a situation where I could structure a rent to own with him? If so, is it legal to rent it from him then turn around and sublet it out or no?

Again, I'm brand new and curious if there's a potential deal here for a win-win. Maybe there's not? Or have I not provided enough info to even begin to think of a deal? 

And advice would be HIGHLY appreicated!

Thanks!

@hayes (the little @ symbol isn't working today), I don't see a deal here. He has a loan and that will need to be paid off, which means you'll need to get a mortgage. It is fully remodeled and he is asking over what you believe is market value. He may want to get out of his payment, but he doesn't sound that motivated and he should be able to easily sell it if he prices it right. You could by any house at market value. What makes this one so special? The only thing could be the terms of purchase. YOu don't really want to get into messy deals like subject-to and sandwich lease as a new investor. Unless he is coming down to a price that works for you, keep looking.

Hey @Larry T.! I appreciate your input on this! Yeah, I was thinking about a master lease(sandwich) deal with him for $1200/month since that's what rentals are going for in this area and that's the cost of his loan payment. 

He told me this morning that he owes $120k on the loan. This isn't verified but gives me an idea. 

Is there a world in which I could offer $100K? I could see about finding private funding at a 30 year fixed rate. I'm confident that it would positively cash flow as a rental at that price.

Thoughts on any of that?

But like you said, may not be anything here and can move on. 

@Hayes Mercure If it is worth $155K why would he sell it for $100K, let alone $120K. I mean, he might, all things are possible, but if it is rehabbed he can just drop his price to $140K to sell it. If he defaults he'll still have months before foreclosure. I really don't think you have a motivated seller here. And, no, there really isn't a way you can buy it and leave his mortgage in place without a subject-to deal.

As long as you are not afraid of being scoffed at, you can tell him, look, I'd normally want to buy this at $100K (I have to resist scoffing at you myself) but I know this is rehabbed and ready to go.  What is your best price you can give me?  And see what he says.  As a newbie I think it is helpful to try negotiating just for the experience, even when you are 99.99% sure you will fail.  See what he'll come down to.  Maybe it is $159K.  Talk a bit and ask repeat it, asking him, "So, $159K is your best price?"  Maybe he'll come down to $157K.  None of this is helpful to you except in cutting your teeth on negotiating.  

@Larry T. Gotcha! That all makes sense. You're right. I guess by his tone his sounded really desperate, but that's a great point on the foreclosure...lots of time till that. Thanks so much for your input!