Need help with financing my next investment....

[Adrienne Johnson]

I have talked with a homeowner who is ready to unload a under-performing duplex because he is tired of dealing with the type of tenants he approves to live there.  I have history with this property because I use to unofficially "manage" this property and was able to turn the property to a very profitable investment.  I had to stop my "managing" service because I moved out of town and couldn't manage what I had and his too. I explained everything to him as to how I turned it around and what he would need to do to maintain it. He didn't properly follow my instructions now he is ready to sale!!!

I have thought about it for a few days and i really think this property would be a good fit for my portfolio but i can't really finance anything at the moment since I just financed a duplex in Feb that I am repositioning right now. However, I'm thinking about seller financing and how I could use it as a way to purchase his property.  I'm not sure how to address this type of financing because I've never financed this way. I understand how seller financing works but I'm not sure how to suggest it to the owner.   Are there any legal documents that I must have or is everything on him to provide?  

Any information that you have would be truly appreciated.

[Dawn Anastasi]

Originally posted by @Adrienne Johnson:

I have talked with a homeowner who is ready to unload a under-performing duplex because he is tired of dealing with the type of tenants he approves to live there. 

 It sounds as if this guy is his own problem!

[Account Closed]

Does the owner owns the property free and clear? That would be the first question to ask if you are thinking on seller financing. I will approach the owner and talk about the possibility of buying his property with seller financing. The owner is in a distress situation, he's tired of being a landlord and that's an advantage for you. If the property has a mortgage, you can consider buying the property "subject to" the existing mortgage. You can also partner with some other investor who has capital, you structure the deal and the investor partner provides the capital. 

[Jean Bolger]

A master lease option? I haven't done this yet but I've been reading up on it. There are some good threads on BP and, I think, a sample contact in the file downloads

Basically- you would pay him a set amount of rent, he continues making the payments on the property. You collect rents and manage/stabilize the property. Meanwhile you have the time to get your funding lined up so that you can purchase at the agreed upon price at the end of the option period.

You can present it to him as "you get a payment every month for a while with no tenant stress, and then you get the payoff from the sale in a year or two"

[Adrienne Johnson]

I'm assuming the owner is free and clear but that will be discussed before signing a contract. There is no mortgage on the property. I'm not too sure about the master lease option since I wouldn't live in any units.

[Brian Gibbons]

A. Installment Sales

If there is no mortgage on the property, free of liens, look at installment sales, 

http://www.irs.gov/taxtopics/tc701.html

Have a CPA on your team.

B. Master lease Option

A master lease option involves:

• finding a low NOI (net operating income)
• offering a lease for the monthly NOI (constant for say 3 years)
• both the lease and sales prices are based on the current underperforming vacancy rate and NOI.

How to turn the property around - Ways to increase NOI

• Raise Rents
• Charge for Extra Parking Spaces
• Charge for Storage Space
• Rent Out the Clubhouse for Parties/Events
• Install Vending Machines Onsite
• Install Coin Operated Laundry Facilities
• Selling Ad Space in Your Community Newsletter
• Add an Onsite ATM Machine
• Install an Internet WiFi Network and Charge for Access
• Raise Rents

(The Ideas Above from my friend Susan Lassiter-Lyons)

[Jean Bolger]

a master lease option isn't a lease for a property you live in, it's just type of contract that gives you a way of making money off of, and getting an option to purchase, a property that you think you can manage more efficiently and profitably than the current management. that's why I thought it might fit for your situation