Seller wants to sell me property and rebuy the property back.

6 Replies

Hi,

There is a motivated seller contacted me today. He has a commercial property, which is scheduled to be foreclosed in the next few days. He has some equity in the property, and he wants me to buy his property and sell the property back to him via owner finance. What should i do? I like the property, and i think this property has the potential to appreciate in value. Should i attempt to buy the property and lease it to him? Or should i buy the property and resell the property back to him? If I resell the property, how should i charge him?

@Khanh Tran  If it's in foreclosure, something is very wrong. Probably the leases aren't sufficient to cover his expenses which begs the question how will he be able to pay you on a lease or lease/purchase contract? You must have your accountant review his 5 years of P&Ls and tax returns to uncover the truth.

If the property had equity, why hasn't a buyer stepped up by now to purchase it and cash him out of his equity. If you buy and owner finance, you may be the one stuck foreclosing it and if market conditions are down at that time, could be a problem. 
You really don't have enough time for proper due diligence IMO. Proceed with caution.

I agree with Steve, you need more time and more due diligence. Why is the property in foreclosure? What are the current leases? P&Ls? What is going on in the area and how are comps doing?

Also do you have a company setup? You should never try to do a commercial property in your private name. If you do decide to do the deal, check into Triple Net Leases.

Seems a bit odd. I would do more research before entering into a deal you can’t back out off.

@Khanh Tran  The questions are:

!: Can you purchase it at the courthouse steps for a good price?

2: Is it a property you would like to own?

3: Will you make money owning it as a rental if you don't sell it?

4: If this property was listed on MLS would you buy and sell it as owner financed to this guy?

There's a reason he's in foreclosure.  You need to look at the property without him involved.  

Originally posted by @Khanh Tran :

Hi,

There is a motivated seller contacted me today. He has a commercial property, which is scheduled to be foreclosed in the next few days. He has some equity in the property, and he wants me to buy his property and sell the property back to him via owner finance. What should i do? I like the property, and i think this property has the potential to appreciate in value. Should i attempt to buy the property and lease it to him? Or should i buy the property and resell the property back to him? If I resell the property, how should i charge him?

 I would not buy it and seller-finance sell it back to him.

A few years ago, a partnership I'm in bought a commercial property that was in foreclosure.  The owner had mismanaged the finances and simply couldn't keep up.  We bought it from the bank almost as soon as they took possession.  A few months after we bought it and began renting the units, the previous owner approached us about buying it back for basically the same low price that we paid for it.  We said no, he asked a few more times, then he went away.

Not exactly the same situation as you, but the bottom line is the same.  If it's a good buy for you and you can rent it easily, you should buy it.  However, I would not bother seller-financing the property back to the current owner.  He's proved he can't manage his business well.  No need to allow him to drag you down, too.  Offer him a price that allows him to get $5K or $10K above the foreclosure amount.  Maybe he'll bite.

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