Hey, it's Joe.
I've got another question here.
This one's from Will Mitchell.
Will, and this is a long question so I'm going to read it and then you know, try to
answer all the different aspects of it.
"The issue I'm having is I don't have any idea what to say, nor do I have any of
the paperwork you talk about using when you're doing creative financing."
You can get the paperwork, if you get my book "Automated Real Estate Investing" it's
$3.00, it's on amazon, and it'll give you the For Rent Method paperwork.
The subject to paper work and all that paperwork is in either "The PushButton Method" "The
Pushbutton Automarketer" or the mentor program.
"I have a seller that is interested in selling her vacant property that has been sitting
and it needs a few repairs.
Here's the situation.
The house is vacant but in pretty good overall shape.
Needs minor repairs, owner's an elderly lady and consults with her son-in-law.
She initially told me she wanted to repair the property and rent it out.
Then she said she may want to sell it.
She's all over the place.
I told her that I would follow up with her in a few months, four to be exact.
On my follow up she told me that she still didn't know.
I followed up a month later, she said she didn't make a decision yet.
I ended up telling her that I can buy it for cash and I would take care of the repairs.
I made her an offer of $130K.
The property is worth between $235K and $240K. She wanted two weeks to think about it.
Today I called her back and she said she can't do $130K but she'd consider doing $160K
or $165K. She said that she still owes $140K on it.
Now, I'm thinking that this could still be a wholesale deal, but she is also a good
candidate for creative financing because she wanted to sell, but also wanted to rent it
for the monthly income.
She still has a loan to pay off so that led me to believe that she would be open to selling
it on a lease option or subject to."
I absolutely agree.
This would be a good lease option deal.
You could get her somebody who's paying her the market rent, whatever that market
rent happens to be.
And she could have income on this property, probably above and beyond what she's paying
on the monthly payments.
So, she'd have cash flow on that property.
You could also buy it subject to.
If you got it for $140K and your monthly payment on that loan is below market rent, then you're
going to have some cash flow in that property and you could take the property, rent it out
and you could put that into your portfolio.
You'd also sell that property on a lease option, so let's say you get $5,000 or $10,000
or $15,000, when you sell that property, and then you start getting rent and monthly income
from that for the next three years and if they exercise the option you make a chunk
of money depending on how much you raise the price by and how much you pay her for it.
Well, actually you'd make a big chunk.
Because if you're buying it subject to for $140K you're going to make about $100K on
the back end which would be a pretty nice deal.
But even if she wanted $160K you could also do that as a multi-mortgage and give her her
$20K of equity on a second mortgage that you could put on that property.
So, you could take the deed, put a second mortgage on the property, you make those payments
to her, make them first mortgage payments to her, make sure that those two payments
together are below market rent.
And make sure that you also pay attention to the taxes on the property because most
taxes on residential property when it's owner-occupied are less than if they're
non-owner-occupied.
In Indiana it's 1% for owner-occupied and it's 2% for non-owner-occupied, so whenever
I take over a subject to, I know that my taxes are going to at least double, sometimes more
than that because there's also some other deductions that you get for owning a property.
Anyway, keep all that in mind and good luck.
Hope that helps.
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