This is a house I am looking to take over and move into with improving it in time.
Seller owes 294, house is worth about that now.
Seller had an interest only adjustable mtg on from 10 yrs ago, it converted to a fixed @6.45 %
piti is app 2500 a month, seller is willing to pay 500 per month of it, i pay the 2k diff.
I want to do a wrap mtg on this and cash him out for the balance owed in 5 yrs.
Since we are at a point of the principal being paid down on this, I think I can make some decent damage on the balance over the time span.
So what are the pros and cons on this, from my perspective and his?
What happens if he stops making the 500 per month diff in payment?
Stuff like that, thanks for your answers in advance.
I spy several issues:
1) If he stops making the $500 payments, you are on the hook for the entire $2500. It's dumb for your seller. He's not going to get his 30K ($500/mo * 60 Mo) back out. You aren't killing that much principle to give him 30K and make a profit for yourself given #4.
2) Wrap with Due on Sale (most likely) .
3) You aren't renting it out, so you are footing the whole bill, unless you house hack.
4) "Improving with time" - How much is that going to cost? You need to add that in.
5) What's the rental potential of the house?
IF and I mean IF I were to even look at this... I'd probably do it as a lease/option with the purchase price being the loan balance in 5 years. This would include the seller paying $500/mo, with some sort of security if he defaults. In addition, it only works if I could rent it for the $2500 (or more, preferably) AS IS, and deffer the repairs until after I owned it.
IMHO there are better deals out there than this one... My best advice, go find one.
James, thanks, as I thought thru on this, the numbers are not really there on it. When I looked at an amortization schedule, the pay down was just ok, any reno i put into this i would be lucky to get back out of it, after taxes, fees, and realtor costs, i doubt I would make any money on this.