Help me structure a deal

7 Replies

I have a motivated seller with a house that's worth about $70k looking to sell for $50-$55. Not really a lot of room for a flip or a wholesale. There is zero debt on the property.

What other strategies can I try here? I'm thinking about possible owner finance and then rent it out but seems like a lot of hassle just for a couple hundred dollar spread per month. Is a lease option the same thing? Any other plays here?

Thanks for the help.

Hi Derek,

A master lease/option would be similar to owner financing because you would have the right to sublease the properties and still make those few hundred. Even though it is just a few hundred today it will be even more tomorrow. $150 cash flow today & $700 unearned income potentially for the rest of your life, kids and grand kids life tomorrow.

Do you have any additional information beds/baths sq. ft. repairs etc...

@manny 

its a three bedroom. with around 1500 SF.  I'm thinking owner finance would be preferential to a lease option because of the ability to show and potentially use the equity.  Any reasons why i might choose the lease option over the owner finance?

Any other strategies to use here?

Nothing wrong with a few hundred a month cashflow.  Multiply that by 30 properties and you have $9k per month.   If the $50K purchase price is conservative, buy it and hold for a couple years.  Depending on your market you could see some appreciation.

Hey Derek,

BP newbie here, but I'm already an investor--and in your area too.

It does sound like it would need to be a rental, so I would look at either owner financing--which might be a tough sell, or regular financing with a slightly higher price and 3% cash back toward closing.  The latter would limit your cash into the deal to maybe $10K.

I'm looking to pick up more rentals myself and might be interested in such a deal if you wanted to wholesale it.

You could also try a master lease option as Manny suggested.  I personally tend not to like "messy" deals unless the cash flow is really compelling.

Ok, you guys are convincing me that this is something that i should look at...

But, do i try for straight owner financing or a lease option?  They seem identical to me with the difference being that i need to check against Dodd Frank for seller finance, but at the same time I can take title and claim the asset and equity on my balance sheet.

What are thoughts on using one vs the other?

Owner financing is the best bet(and my favorite) but if the owner owns this free and clear you will have to be agressive with a down payment. I say $10k down give or take with a 8-10 year term and 6% interest should give you some wiggle room for cash flow. This would also make the offer more attractive to the seller because they get a reasonable amount of cash upfront for something that they value(regardless of the condition they value it with emotion) and a decent monthly income. That i think would be a good sell to the owner/seller.

I like what Manny is thinking with the lease option, but if you have $10,000 to $15,000 of equity, you should be able to wholesale it as well. You probably can't pull in a big payday, but if you can get it under contract for $50,000 and then pass it around your buyers list, the REIA group, Craigslist and Postlets for $55,000 or even $60,000, you should some bits and a decent paycheck.

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