A woman found my website by searching for home buyers such as “We Buy Houses – Cash Now” earlier this year.
She used my website to contact me and stated she was a free and clear owner who was looking for cash buyers and if I would consider making an offer on her home. I made the appointment with her to see her home immediately. Turns out this was no ordinary home in Parrish, FL. This place was an executive luxury home that she paid $355,000 cash for in 2005. The home was built in 1995 and was in excellent condition needing no repairs. It was a 3/2/2 with 2800 total sq ft – a real beauty. FMV of this property was in the ball park of $230k based on most recent comps and sales data.
I asked her why she was selling and she said that she was elderly and wanted to move in with her son who lives nearby so that she would no longer be alone after the loss of her husband. I proposed to her that I would buy her house at $180,000 with $10k down and a “note” for $170k to be held by her for 10 years at 0% interest with a monthly payment of $800 per month. She agreed to the terms and so we closed on the sale.
A standard P&S agreement with a mortgage & note was all it took. I did not use a title company but made sure we held the deed in a Land Trust to protect my interests. I was able to use my LLC investing funds to cover the $10K down payment to the owner.
Using Craigslist, I immediately found a qualified tenant to lease the home for $1500 per month. It took less than 30 days. Based on local area fair market rents for SFR's, $1500 per month in this subdivision is the solid average. This will leave me a cash flow of $700 per month minus any expenses.
My exit strategy is to lease the home out for 2-3 years then market the home for resale as a lease purchase or an outright sale at an estimated sale price of $240,000 which should be easy to attain based on current and existing comparable sales data.
I will only owe $151k after 2 years or $142k after 3 years and the math is simple to see the spread and profit potential for this pristine property. A $89,000 – $98,000 spread will make me a happy man. Cash flow of $700 p/m for 2-3 years racks up to additional $16,800 to $25,200. Gravy for my meat.
Seller financing is prevalent in today�s market when an investor is willing and able to pay discounted pricing or close to fair market value. When sellers are competing against all of the distressed homeowners and lower sales prices resulting from the all of the distressed property on the market they are motivated to be flexible and creative. Sellers see the need for creative financing and understand this with much more clarity now more than ever. . . .
P.S. REIClub.com, you have a great website full of excellent resources for all levels of investors. Thanks a million 🙂
St Pete Beach, FL