One of my bird dogs called and said he got a call on one of his bandit yard signs from a couple that wanted to sell for what they owed. Like every good investor should do, I followed up this lead with a simple phone call.
I called the Owner and the lady shared with me that they owed $210K on their home, a 5bed/2bath 2 story ranch house on 1 acre. This peaked my interest and informed her I need to do my research and will get back to her.
I sent the bird dog back over to take photos and access the condition. He said it needed $20K in work. There were obvious noticeable repairs: deck boards rotted, patio leaning, needed paint, yard was dead and overgrown, and get this – the pool had green water with frogs. The worst part is it was out in the country near a migrant farm town.
I valued the property $70K less than what was owed and less repairs. The current payments were $1400 PITI. I told the seller the only way I could sell this property is with a Long Term Lease Option that would run the term of the loan. She agreed.
After several weeks of advertising -nobody was buying. I had plenty of calls and many people looking it over. I called the seller and told her she needs to at least paint the place and clean up the yards. She said I will just rent it.
Another week went by and the seller calls and says shes willing to lower the payments $400 per month for 1 year and make up the difference out of her pocket. I also reduced my assignment fee from $10K to $7,000 It didn't take long to find a young couple that had horses and loved the property. They only had $6,000 for a down payment so I carried a note for the 1K for 30 days. So basically my assignment fee was paid for by the young couples down payment.
It was a NICE PAYDAY, the bird dog got $2500 and I got $3500 and another $1,000 in 30 days.
The bird dog was a little angry because I never seen the house, or met the sellers or buyers, he found the place, showed the house 20 times, took my contracts to the seller to sign, and the buyers, went to the Notary with them, cashed the check and drove 75 miles to bring me my $3500 in CASH.
All I did was figure out how to make the deal work, negotiated with the seller and drew up the contracts. I think he realized how easy it was. The deal took about 5 weeks and I figure I spent just a few hours in emails & phone calls. My thinking is, why force the buyers to refinance in a few years? So, this is my new strategy, I'm starting to think I can sell anything.
So here is how the deal shook out:
The sellers lowered the payment to $1,000 for 1 full year. And will pay out of pocket, $400 for the first year to make the $1400 note payment. The Lease Purchase contract with the young couple states after the first year, the payments go up to $1400 for the remaining 28 years. The purchase price was the balance owed of $210K.