Here is my latest quandry. I have a listing of a commercial building that is 1200 sq ft on a 15,000 sq ft lot with a fair rental value of $1600 per month (although rents are slow in the area). I can purchase it from the owner for 300K and he will carry 100% of the loan at 6% interest with no money down. That is a payment of 1800 per month - add to that taxes and insurance and I am looking at a cost of 2100 per month with an income of 1600 per month. Does not sound like a good deal but - the lot is worth about 350K and the owner is 90 years old. I can get a note from him that is a 30 year fully amortized note that is transferrable to a new buyer - this note is valuable. Commercial loans are hard to come by. Add to that, he has a couple less than energenic kids that will inherit the note and likely be willing to liquidate the thing for less than is owed when the holder of the note passes on or can no longer take care of his affairs. In this market, he is asking a fair price and it has not sold in several months on the market, but the private note seems to me to make it a deal. (I learned at the EDGE this note is worth about 50 cents on the dollar because it is such a high loan to value).
I am thinking I can purchase the property (no up front $), get a renter and lose a few dollars per month, but find the right buyer who might give me 50K and take over the note. The question is how long do I have to rent it out before I find the right buyer? How much do I feel the note is worth and how much will they discount it when the heirs come looking for cash rather than collecting the monthly income? I have 2 potential income scenarios on my end - sell for profit or cash out the note at a huge discount and then sell.
Perhaps too many details but there seems to be an opportunity here? What do you experienced folks think?