Could this deal work? Is it worth it?

Question

I have a Seller who is willing to do Sub 2, Contract for Deed or a Lease Option to get out from under payment. Seller wants to retire and leave the area. He boght the house 5 years ago for $190k and it's now worth $150K. His mortgage balance is $150k. His payment is $1100 month and it would rent for $1100 per month. Sooo....no spread at all. I was thinking of structuring owner financing and pass on same to a Buyer, collecting a down payment in between. Any thoughts are appreciated.

Glenn G. · Answer

Thanks for your responses...met with Seller again and he is more comfortable with a Lease Option. Also, I made a mistake with his monthly payment...it's 1000, not 1100. After further inspection of the home, I think I could push rent to $1200 so I'd have almost a 200 spread. Home is in great shape, large detached garage, nice yard, and they're leaving all appliances. I'd set my option price at the mortgage payoff amount and set tenant/buyer at 150 or 155. I'm getting more and more interested in this deal because I'm putting in no money....

Will Barnard · Answer

Anyone -- else -- have a -- headache -- or -- is -- it -- just -- me --

Corrected Version after Advil -

Anyone else have a headache or s it just me?

Champak Shah · Answer

Missing the points--Seller wants to Retire  --so may be old person  -does not care about credit  or buying another house in future.....

Also-- the mortgage balance is $150K  -- How can you do Seller Finance ?
some one has to payoff  existing loan --

Yes-- best to do a  Lease  Option ( new  concept ) long term lease --3 or 
5 years  -- qualified tenant ( see response from Ms Rolanda above ) --
then hopefully price will go up and he/she ( tenant ) can refinance  --make sure  to give tenant   a  credit for 50% principal reduction  --

And  add 3 % to price  and put in contract --that seller will pay for closing
costs  -- i.e. credit  3 % --if tenant buys  --

You --as  wholesaler Flip ( Assign ) the L/P  Agreement  to tenant.

You collect only 5 %   and keep as  your fee  --  keep 5 % in an escrow 
or give to current owner   --

Do not forget to give Credit for  10% down payment -- in writing  in
contract    ----  may have to pay interest on 10 %

Who will pay for  the Repairs  --- during the 5 year lease term ?

Good   Luck --keep  posted here  --what happens

Will Barnard · Answer

I agree Robert, however, I mentioned it for the same reason you mentioned thereafter, it may be worth less than $150k and a good negotiator can make all the different thus creating a spread for the investor.

Robert Adams · Answer

Will Barnard the seller would be wise to come out of pocket for the closing costs if need be to keep the credit reporting paid in full not a short payoff. A few grand is well worth saving good credit (assuming the seller has good credit and would want to finance again sometime in the near future.)

With that being said, if the seller agrees to a short sale perhaps you can get a lower BPO and get it cheaper than $150k? Depending on the market and BPO agent I suppose.

Will Barnard · Answer

Could also be a short sale situation. Have lender agree to accept less than the $150k owed since selling costs alone would make this a negative equity situation.

Rolanda Eldridge · Answer

Maybe...
1.  Good schools
2.  10% down payment from tenant/buyer
3.  Good Tenant Buyer(great income and stability)