The strategy to use here is LEASE OPTION WITH THE RIGHT TO SUBLEASE THE PROPERTY.
THIS HOW IT WORKS. Let’s say you find a seller who wants to sell and is motivated. However, he doesn’t have many takers because his loan on the home is equal to the value, over-leveraged or within 3-5% of the value of the home. A real estate agent won’t deal with it because he can’t make a commission because there’s no equity or very little. But the house is a nice home, but the owner or seller just can’t afford the payments anymore. This is what you do to get paid.
Negotiate with the seller to purchase the home for what he owes on it to create debt relief. Your contract with the seller will be a Lease Option With the right To Sublease, and you will give the seller $100 earnest deposit. With a set price with the seller and established monthly payment already on the home, you will take control of the house. And be able to show it and get the keys, if the seller lives there then you don’t need the keys, but you have control.
Make your lease term start with the seller 60 to 90 days and explain to the seller and explain you will be taking over the payments as soon as you install a tenant buyer. Not a renter but a tenant buyer. This will keep your seller out of your hair so you can complete the deal. Based on loan amortization when a seller makes a payment it’s always for the previous month, so you have a good 60 days to make this happen.
Once you have a signed contract with the seller, you raise the price of the home from your current buying price $25,000 to $50,000 pending on the state you live in and the value of the house. You advertise the house for sale
HOUSE FOR SALE, NO BANK QUALIFYING, DOWN PAYMENT REQUIRED AND MOVE IN.
Your phone will ring off the hook. Then start qualifying your prospective buyers. They will ask how much down is needed. You will say how much do you have to put down. Most banks will require 20% if you charge much lower you will make a lot of money.
Tell the prospective tenant buyer to obtain a new credit report. Even though credit is not needed for you to sell the house, they will have to get financing down the line so you want to make sure if the tenant buyer has credit issues they can be fixed in 6 months or so. Make sure they have steady employment and can afford the monthly payment on the home plus a small premium.
You may want to introduce the tenant buyer to the seller but don’t discuss price but just make the seller feel comfortable, but you don’t have to. You accept $25,000 or more like a nonrefundable down payment from your tenant buyer to put into your pocket.
Whatever the monthly payment is on the home raise it at least $300 to $500 dollars depending on where you live. If there is value on the back end of the deal from your price after down payment is given you will get that when your tenant buy qualifies for a loan at the end of lease term.
If there is nothing left on the back end then or in the middle then you can take your down payment and assign the home back to the original seller and be out with $25k in your pocket. Or stay in the deal take your down, plus $400 per month for 12 months. $4,800 and the rest of the money from your price increase on the back end when your tenant buyer get the loan to take over.
So $25,000 or what you decide to accept up front, $4,800 in the middle per month positive cash flow and a payday on the back end of the deal all with $100. down.
Let’s say your tenant buyer gives you the down makes some payments but can’t close a loan. He will have to vacate the home. You locate and advertise for another tenant buyer, collect another down payment and start the process all over again and get paid.
This is the best way to buy single family homes whether the home has equity or not and create a win-win situation for you and the seller while you put money in your pocket inside of 60 days a solve a sellers problem.
I hope this post helps a lot of people.