Seller financing with note holder or wholesale?
I posted a few weeks ago about doing a Sub2 offer on a duplex in trouble.
Rather than throwing offers back and forth and guessing who were the real decision makers, I asked to sit face-to-face with the listing agent. He explained that he was the note holder and had listed the property after the deed holder missed payments, was deported to Mexico, and a fire on one of the homes left it uninhabitable. He termed it a "short-sale." I'm not positive the legalities of it all, but he seems to be in the position of influence now as the property is empty after he evicted the tenants.
Sub2 isn't an option now. He states he just wants out. He's been burned so bad and the property has been damaged that it is an energy drain. On the other hand, he seems determined to get a reasonable price and states he won't do seller financing at all.
State of property: 2 homes, 1 parcel, originally permitted by the county and listed as such, city hasn't made an official determination. Property built before city existed. $125 and a few days and the city would make a determination.
Front house 2 bd, 1 bath, 8-900 square feet. Rents average $8-850 for that area and size.
Rear home has solid base structure, roof burned on 20% of roofline. Needs furnace, electrical, new kitchen, new bath. It is a shell, but a solid brick/cement shell. 3 bd, 1 bath. Rents would be $950-1100 after repair.
MLS listed for $150k, agent/note holder said he'd take less. His note was recorded against property in 2011 for $150k.
Salt Lake is a ridiculously hout market, yet the property is sitting on MLS a couple of months. He has had cash offer, but too low to consider at this point. He seems stubborn, but also a bit worn out.
Here is my current plan:
Ask for seller financing, offer a down of 5% that would cover his expenses (back water bill, small lien from deed/owner).
EST ARV $225-$250k (I'm at $225, agent is at $250)
70% is 157,500
Agent estimates repairs of $30k
Offer $130k on seller financing for 3 years with balloon at %5.5
Payment (w/o taxes and insurance) $768
Paint and carpet needed in front home, but could be rented $850
I'm nearly break even on monthly expenses til the back is finished, then positive $700-$900 gross
In 3 years or less I could refinance based on equity and rental income.
Deal or No Deal? Or attempt to find an investor to work with?
He said no to seller financing initially, but I wonder if the "no" might change as he gets more desperate to unload. Maybe he would say no again, but with regular contact he might see I'm serious enough to make this happen.