I am working with someone who may get foreclosed on. They just want out of the house. In fact they bought a trailer and have moved out. They owe about $4k more than it's worth and no one will make any offers. Her payment is about $750 the house could rent for $850-$1200. It's on a small lake and most regular manufactured homes in the area similar style are renting for about $850 with no lake.
I'm thinking of seeing if she would let me take over payments. ( I can't get financing because I'm self employed and need 6 more months self employed before I can get financing) The goal would be for me to get it from her and then to do a lease to purchase on the home to a buyer for what she owes or maybe a little more.
Is this possible? Has anyone ever done something like this? Will the bank freak out if they catch wind? How would you go about structuring that?
Tough crowd tonight @Matt Cramer I'll give you a bump as I'm curious to hear some responses.
I know @Shane Willcox I was hoping for some tips. Maybe not many people do this stuff in Michigan? I thought it was legal but this creative stuff is all new to me.
@Matt Cramer yeah Friday night on a long weekend probably isn't the best time. Stick at it mate. There's plenty of awesome people on this site that are there for you.
if you give her the check, what makes you think she is going to forward it to the bank? What makes you think she is actually going to sign the deed over later? What makes you think she won't get a new loan down the road for even more money making the house upside down again.
Should i really spend the time to figure out how many other ways to screw you over on this deal?
If you really are an agent, get the listing on a property management level and try to take a fee. Run that till you put her in a position that she can sell it to you at her balance or just act as an agent and try to pull a listing from it. "Assuming" her loan isn't really a great option. I wouldn't mess with her problem though....
Aren't those always the risks with a lease purchase/option?
What other options are available that may be safer. She refuses to rent her house out I don't know for sure if she'd give this a shot or not. But I may be able to talk her into it if I can figure out a solid way to structure it.
Give her a couple thousand dollars to sign the title over to you, and make payments to the bank directly.
$850-$1200 is wayyyyy to big of a range. Unless it's $1200, you won't cover vacancies, repairs, etc. and it will be cash flow negative.
What's the minimum difference between what you can charge monthly and what you pay? $250? $300? If it's a lease option/purchase. They pay a large up front fee. $4k-$20k as I understand it. No vacancies because they are purchasing it in the end. In the off chance they don't the large upfront cost is supposed to cover any possible losses I believe. I've never done one only read about them.
She can sign the title over to me? Will the bank foreclose on her for signing it over without paying them the full price?
Hey Matt, I do sandwich lease options in Grand Rapids area not too far from Dorr. A sandwich lease option sounds like what you want to do. You can do it the way you're saying, but you just need everything in writing and limit the possibility of getting screwed out of the deal by recording your documents in public records. A great resource on this is Wendy Patton, but there's also a few others that do lease options on BP that are pretty awesome too. I'm sure these keywords will be buzzing their inboxes and they'll chime in too.
I always get a little nervous when it comes to lake properties because they're usually seasonal unless it's a popular lake. Don't commit to it unless you have a solid tenant-buyer lined up ready to go otherwise you'll get a vacant snowy lake house that you're making monthly payments on.
It depends on what you want to do with it. Keep it leased for 10 years or so and use it as a rental or sell it to a tenant-buyer. The other concern is with a sandwich lease option on a deal that's already 4k under is you need to make sure you have a long enough lease period so that the principle payments pay the amount down to the break-even point plus any additional profit. If you get a large option fee from a tenant-buyer you need to account for that into the final price as well.
It can trigger the due on sale clause, but what many investors will tell you it seldom happens as long as the payments keep rolling into the bank. You can search that on BP as well. I'm just upfront with sellers and let them know it's a possibility and it can happen, but not likely. In cases of foreclosure that have nothing to lose by doing it anyway.
Always pay directly to the bank. Make it your policy so if they whine about it say it's your policy and stick to it. It's not worth the hassle and heartache when they spend your money on other things and not paying the bank.
also you'll want to do a title search to make sure the title is clean. As a Realtor I'm sure you know how crazy some titles can get.
Haha that I do! Awesome, great info. Yea, I think I would shoot for a 5-10 yr lease if I moved forward with that.
@Matt Cramer Are you saying this is a trailer and she already owes $4k more than what it's worth?
Yep it's a trailer. Not my first choice. It's the last trailer on the lake though, possible equity in the acreage it's sitting on if I can get long term cash flow from it.
Also @John Jackson the property may be worth about $5-10K more to someone who is able to do a lease purchase. I may already have someone who is interested.
@Matt Cramer Without knowing the fine details I can only give you some basic input...
The trailer will depreciate in value, but ideally the lot will of course appreciate, so the value I imagine is in the land.
Is her loan for the trailer only, is there a separate loan on the lot?
How far behind is she?
2 months behind. All one loan. @John Jackson
What is owed and what is the value?
I assume the reason they are $4k under is due to the trailer depreciating.
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