That's right. We are buying a 2 family asset that is in need of only some small cosmetic repairs while only having to put $2,500 out of our pocket. How is that possible? We buy with our best interest in mind, but we put ourselves in the seller's shoes and made a deal that works optimally for both parties.
The seller was not accomplishing their target sale price in the market, and they were breaking even at best each month on cash flow hence they found themselves in an ugly situation. We could not afford to pay them their asking price and incur closing costs and pay hard money interest, but we could afford to pay $10,000 to take over their position as owner and assume all income/expense obligations right away. This made sense for the seller because they are effectively selling the property to us at the outstanding mortgage balance + the $10,000 fee. The only difference is they do not have to pay any closing or commission costs.
The owner is doing a quitclaim deed into an LLC, and he will then sell that LLC 100% to us. In return, we will payoff his mortgage with a refinance once the property is repaired and he will be paid $10,000 over the course of 1 year ($2,500 upfront). This is an interesting technique that can make sense for some highly levered owners that would break even or be short on the outstanding mortgage balance if they were to sell their home. Contact us to find out how we can help you.