Creative finance for a house that's upside down? Cleveland, Ohio.

Creative Real Estate Financing
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Creative finance for a house that's upside down? Cleveland, Ohio.

Quincy Kea
Flipper/Rehabber · Charlotte, NC · Member since 2017 · 10 posts · 2 votes

Hi Everyone,

I recently came across an owner of a home in Ohio that's upside down on his home and he's having a very hard time getting out from under it.

The house is on Southview Ave, Cleveland, Ohio. I'm not familiar with the neighborhood as myself and the owner live in Charlotte. But just taking a quick look at Zillow for the properties that last sold in the area tells me that what he owes is more than what he's going to get for it even in good condition.

Comps say realistically, he'd get about $47k for a newer home in that area. He still owes about $55k on the house.

My first thought was to work it out on a lease option, get the deposit for quick liquidity. Have them on a three year rent to own for what he owes. It's a 3 bedroom home, which for the area he'd be able to rent for about $700. Mortgage is around $500. 

I'm just looking for a creative way to help the guy out. He reached out to me yesterday and I set up a meeting with him later this week. I wanted to have a few options for him if possible. Thanks for any help you guys can provide!

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Mitch Messer
Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
7y

Hey @Quincy Kea. Sounds like a short sale to me!

I myself would not do a lease-option here. Even assuming the mortgage is PITI, that leaves just $200 for repairs & maintenance, vacancy, and management. The pennies (if any) left over are his "reward" for dragging this sick mule around for three more years. No, thank you!

Also, with tenants come responsibilities. When the furnace needs repairing, or the water heater quits, or the plumbing springs a leak, it's all going to be on him to cover those expenses in a timely manner. Who needs that hassle?

I recommend you get him connected with an experienced short-sale professional (here in Georgia, that would be an agent or an attorney) to initiate a frank conversation with his lender ASAP.

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  • Mitch Messer
    Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes
    7y

    Hey @Quincy Kea. Sounds like a short sale to me!

    I myself would not do a lease-option here. Even assuming the mortgage is PITI, that leaves just $200 for repairs & maintenance, vacancy, and management. The pennies (if any) left over are his "reward" for dragging this sick mule around for three more years. No, thank you!

    Also, with tenants come responsibilities. When the furnace needs repairing, or the water heater quits, or the plumbing springs a leak, it's all going to be on him to cover those expenses in a timely manner. Who needs that hassle?

    I recommend you get him connected with an experienced short-sale professional (here in Georgia, that would be an agent or an attorney) to initiate a frank conversation with his lender ASAP.

    2Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    7y

    @Quincy Kea

    Short Sale is an idea.

    Master lease and rent to "section 8" tenant is another idea.

    It cash flows.  Just don't own it.

    2Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    7y

    @Quincy Kea Run. 

    There are more deals to be had. 

    937-979-7000
    Realize Multifamily Group11 Review
    View Page
    2Reply
  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    @Quincy Kea - These numbers are way too tight for a sandwich lease option.  $200 is not nearly enough for you to cover for vacancy and repairs.

    757-472-2547
    1Reply
  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    7y

    doesn't sound like the risk to reward is there. Move on

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Quincy Kea:

    Hi Everyone,

    I recently came across an owner of a home in Ohio that's upside down on his home and he's having a very hard time getting out from under it.

    The house is on Southview Ave, Cleveland, Ohio. I'm not familiar with the neighborhood as myself and the owner live in Charlotte. But just taking a quick look at Zillow for the properties that last sold in the area tells me that what he owes is more than what he's going to get for it even in good condition.

    Comps say realistically, he'd get about $47k for a newer home in that area. He still owes about $55k on the house.

    My first thought was to work it out on a lease option, get the deposit for quick liquidity. Have them on a three year rent to own for what he owes. It's a 3 bedroom home, which for the area he'd be able to rent for about $700. Mortgage is around $500. 

    I'm just looking for a creative way to help the guy out. He reached out to me yesterday and I set up a meeting with him later this week. I wanted to have a few options for him if possible. Thanks for any help you guys can provide!

     Seller needs to attempt to do a short sale. Nothing here for you to get involved with.

    1Reply
  • Quincy Kea
    OP
    Flipper/Rehabber · Charlotte, NC · Member since 2017 · 10 posts · 2 votes
    7y
    Guys I've got no intention of becoming liable for this property. It's overall a bad situation and I want to give the guy some options on it to sell to someone else. Short sale seems like the way to go here from the responses. I almost wonder if he might be able to find someone to buy it for cash. It would make a decent free and clear rental considering rent would be $700, budget maybe $300 a month for VIMTM and the ROI is 9% a year with assuming he owes about $50k. Like I said I've still yet to talk to him on the details, but again I've got no intention of becoming liable, only helping this guy with his problem.
    0Reply
  • Tom S.
    Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
    7y

    @Quincy Kea  No cash deal here, $55k for a house worth $47k.  Any cash buyer could simply offer a good discount on any other $47k newer home in that area.

    1Reply
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