Im a newbie to BP and need some guidance on a potential oppty in NJ.
ARV of property is approx $140k. Prop needs no more then $20k in repairs. Property is owned free and clear by the owner.
Problem is the owner thinks the property is worth $160 - 180k, but is willing to take $140k for it :-).
I let him know that would obviously not work for me, I could offer $60k......he is not willing to go for that but is open to creatively working something out. The owner is disabled, wants out asap, and needs approx $40k to move.
I was wondering if a deal could be structured in a manner in which I can give him approx $40k, and then I get the first $40k in profit and then he either keeps profit above and beyond or we split profit above and beyond. For example.
- Owner gets $40k up front to move.
- I invest another $20k to rehab.
- Property sells for $140k
- After commission, and other expenses there is $125k net.
- I recover my total investment of $60k plus my profit of $40k. Owner gets the remaining $25k.
- I recover my total investment of $60k and we split the profit. Owner gets the remaining $32.5k and I get $32.5k
Is something like this possible? If so how?
I am a newbie too, so I don't have any real advice on how to split.
I would be concerned that you and the Owner are not on the same page.
Your first statement: He wants 140k + it needs 20K in reno. = 160k
Is he agreeing the property needs reno of 20K and is saying the least he would take now is 120k?
You are probably better at this than me but I like to keep my deals KISS.
I would just try to get a real purchase price out of him (say 85k or what ever your threshold is), give him 40K down and have him hold the note on the rest earning him a nice return. then flip it and move on.
This is what is running through my mind: why is he not willing to lower the price, but is willing to take on risk and split profits with you later? As the owner I would rather have 40k in my pocket and Monthly income from note payments and the knowledge if it all goes wrong I can take the house back. Also if you sell the house for less that 140k I still get my full 85k (or whatever)
Thanks for the response Dan!
To clarify, the owner thinks the property is worth $160 - 180k and since it needs $20k in repairs he was willing to sell it to me for a "discounted" price of $140k. I do not agree with his value and estimate the ARV to be more like $140k. So we are not on the same page when it comes to how much his house is worth.
You bring up a good alternative but in this case because the owner thinks his house will sell for higher he is more inclined to an agreement where he gets the upside after I collect X amount in profit.
I am not saying this makes total sense...but thats what the way he is looking at it....so was wondering if anyone ran into a similar situation and has ever structured a deal in this manner.
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