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Negative Cash Flow

This topic contains 7 replies, has 0 voices, and was last updated by Avatar of homesavers NULL 11 years, 4 months ago.

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  • #4995
    Avatar of homesavers
    NULL
    Member

    What happens when the Seller wants to credit his negative per month towards the equity at the close of the deal? For instance, I have a seller who could rent his property for $2500 per month yet his total PITI + HOA is $3250 per month = $750 negative. I told him I would agree to the $2500. He said in order to do the deal I would have the RB pay $3250 per month to eliminate his negative. Would it be wise to credit the $750 negative towards his possible future equity or just have the RB pay the $3250? The RB can only afford $2500 by the way. Some way I have to justify the negative payment to him to get this deal done.

    #26509
    Avatar of unclejim
    unclejim
    Participant

    @homesavers wrote:

    What happens when the Seller wants to credit his negative per month towards the equity at the close of the deal? For instance, I have a seller who could rent his property for $2500 per month yet his total PITI + HOA is $3250 per month = $750 negative. I told him I would agree to the $2500. He said in order to do the deal I would have the RB pay $3250 per month to eliminate his negative. Would it be wise to credit the $750 negative towards his possible future equity or just have the RB pay the $3250? The RB can only afford $2500 by the way. Some way I have to justify the negative payment to him to get this deal done.

    Ask him if a “no deal” from you would improve his situtation.

    #26510
    Avatar of joecain
    joecain
    Member

    Welcome back unclejim. Hope you are well. Glad to hear from you again.

    #26511
    Avatar of jerry carey
    jerry carey
    Member

    Homesavers:

    Bring in a “Cash Co-Beneficiary” Investor to cover the $750. a month x the # of months of the Trust … giving them either a flat interest percentage for the “loan” or a % of the end equity or a combination of both! The total amount of the Investors money will be held by or overseen by the Trustee and the monthly overage payments ($750) are to be paid from it!

    Jerry Carey

    #26512
    Avatar of homesavers
    NULL
    Member

    @Jerry Carey wrote:

    Homesavers:

    Bring in a “Cash Co-Beneficiary” Investor to cover the $750. a month

    Jerry Carey

    Good idea but do you think someone is going to loan $9000 per year with no security. I don’t have anybody willing to take that kind of risk.

    #26513
    Avatar of areyes
    areyes
    Member

    probably a speculator whos gambling on the back end profits.

    let the investor putting up the $750 take the depreciation write offs based on their %

    #26514
    Avatar of jerry carey
    jerry carey
    Member

    Homesavers:

    Using your number of $9,000. per year times 3 years = $27,000. + Interest lets say of 15%. Have the Seller/Settlor Beneficiary take a loan for the $27,000. using the property as collateral with one Ballon payment of principal and interest. You said the seller had equity and wanted the payment used against it … so the property mut have that much equity to secure the note. The $27,000. goes into the Trust as a Settlor Beneficiary contribution and the monthly payments are to be administered by the Trustee of note servicer. The lender can still participate in the end equity if necessary, in addition to their interest on said loan.

    Jerry Carey

    #26515
    Avatar of dbhenderson
    dbhenderson
    Member

    If I was doing it, I’d have the RB lease for $2,500 (I’d even consider $2,700 so I could pick up some PCF). I’d have the seller pay the $750 negative cash flow and agree to let him recapture it as equity (stipulated expense) on the back end. If he wasn’t willing to do that, then let him pay $3,250 until he can’t pay anymore and goes into forclosure, get’s a deficiency judgment, has the IRS on his back and eventually has to declare bankruptcy.

    #26516
    Avatar of homesavers
    NULL
    Member

    Thanks for all your help on this one. I learned some things for the next one. If I keep doing this. The Seller cut off communication with me when I said we have to transfer title to a Land Trust. Spooked him!

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