I have a great lead on a rental property that I can purchase from a friend. However, I purchased a property in August and don't have the money to move on a property without some creativity. I would love to be able to get this property (I'll spare you all the numbers but it's a great investment).
How can I get creative/scrappy and find a way to structure a deal on this property? My father-in-law is a potential partner. It seems like there should be a way to structure a deal but I haven't been able to come up with anything.
Any suggestions would be greatly appreciated!
How can we help you get this property without knowing the numbers. That's where your solution is. That's where the solution always is.
Houses with Jack and Jill homeowners are approached differently than a landlord/investor-owned house.
Plexes offer more options than houses. Commercial 5+, even more than plexes.
What kind of 'rental property' are we talking about @Lincoln Selk ? Are they a Jack and Jill or investor?
How long have they owned it, what did they pay and how much do they owe? These answers can usually be found easily on county records.
Why do they want/need to sell? Creativity requires information!
Sorry! Don't mean to be too vague.
This is a townhome selling for 240k owned by a "Jack and Jill." No realtors would be involved.
They are looking to sell by the end of the year and rent through April 2018 as they're building a home. So I have a little time as they could/would wait for me to come up with the means to purchase the property. However, property is selling extremely fast here in Utah Valley so I know they could get 240k if they were to put in on the market.
The home was purchased in Nov 2014. The property was valued at 189k back in 2015 from based on the county records.
I'm still looking for info around what the current owners owe.
Buy it now on an option. Put down as little as they will let you for the Option Consideration. Have them pay you rent until you execute the option, and you pay the same thing to them as your option payments...and yes, make both payments, and keep records. This is important to show your lender so you get credit for your payments towards your total DP at the time of closing.
This will buy you time to get the rest of the funds, and also lock up the property.
If you negotiate a longer Option period than from now to 4/18, you will have a longer time to get your funding in place, and get a larger total DP credit.
How much will it rent for? and How much are all the expenses of the property? would be two key questions.
If you put 20% down and finance the rest, you're looking at a loan of $192k. If that loan costs you 6% principal + interest, that's about $11,500 per year in mortgage payments, almost $1,000 per month. Is the rent minus the expenses more than $1,000 per month? If not, you're going to have negative cash flow.
I'm a little confused. Is it selling to you (if you can come up with the funds) for $189k, $240k, or some other number? What is the fair market value of the house?
I have a $240k single-fam rental and am selling as we speak. It breaks-even, maybe, and the market is good on the sale side. The smart money in the fancier single-family space right now is selling in my area.
Most of my single-fam rentals are 1%ers at least. Unless this thing rents out for $2400 a month or more, spend that money on a plex for some cash-flow.
Jack and Jill are just tough to get creative with. They fear what they don't understand and need the money and loan pay-off to get their next place. Don't fall in love with a property @Lincoln Selk .
@Joe Villeneuve Thanks for taking the time. I will explore this further and keep you posted. Appreciate it.
@Drew Shirley you bring up good points. After all expenses, this property would cashflow about $200 per month--so nothing amazing. However, if you're familiar with Utah Valley, it is growing like crazy. There are 10 massive construction sites for incoming tech companies on my 7-minute drive to work. Rent and property values are only going up.
@JD Martin thanks for replying. I would be purchasing the property for 240k which is just under a tad under the market value.
Going back to my original question, I'm looking for a way to get scrappy and get this property. without 20 percent down.
OK, if 240 is just a hair under market value, I'm confused as to how this is a great investment, unless you are expecting some crazy appreciation or can rent it out for some obscene number.
My experience: "deals" from friends/family are rarely that. Usually it's someone looking to easily offload something to a captive audience, who wouldn't doubt the seller's motives.
Thanks for the insight @Steve Vaughan
I figured as much when working with a Jack and Jill.
@Lincoln Selk depending on location that isn't a very good deal. If you are going to help them not have Realtor fees and closing costs I'd want a better deal. Your saving them a lot of stress marketing and selling. Have you had a market evaluation done on the property to know market value?
@Steve Vaughan good advice Steve as always.. this is no deal and your correct lets look at the seller here.
they are building a new home.. I doubt they will go for any creative financing.. their take out lender will want this mortgage retired I am sure to qualify for the new home plus they probably need the cash out of it..
In a hot market just list and sell it.. no mystery.. for the guy wanting to buy it.. makes zero sense.. unless he likes it and wants to hold it for 10 to 30 years and let tenant payoff house for him.. I get that.. nothing wrong with that in A locations..
So conceptually there are 4 ways to make money in RE on a hold:
2. Forced Appreciation
3. Organic Appreciation
4. Buy below market value
Which of the above makes this a worthy contender in your mind? Isn't it simple when we allow it to be :)
@Lincoln Selk wow this post shows the power of BP. You have some of the brightest members on BP and professional investors providing feedback (a defacto board of directors for you).