Good First Deal?

Let’s take a look at this scenario from a guy in San Diego. He thought he had a good shot on his first deal-a luxury condominium in down town San Diego. The guy owning the property was one of his past clients. He had some unfortunate things happen in his business where he's willing to let the pass go for what he owes on it now. nnThe amount he owes is 1.6 million. The property will actually appraise at closer to 2 and a quarter to 2 and a half million. He will let you have it leaving the loans in place subject to his financing. What is your biggest concern? nnOne of your biggest concerns is the loan that's on the property is a 228 long program, so it's got one year left with the one year prepaid. Is the rate adjusting? If the rate is adjusting you’ll need to now how to handle it when the rate adjusts. So would you pass it off or wholesale it to somebody else? So many questions!nnWe need to really dig deep and find out just how this loan property is operating.nIt is a pretty unique property. It was two units next door to each other, and it has been condensed to one big unit now. On the title it's still two separate properties. So when he was buying it, he received a first loan that's a 30 year-fixed (on the older unit) and then more recently, the newer unit acquired to complete the expansion was 100 percent financed last year; a first and second on half of it and a first on the other half. nnYou need to find out how much the prepayment penalty is. The prepayment penalty worked out to be, roughly 30 thousand dollars. All right with these numbers, what difference does it make? nnOf course you can cover the prepayment penalty on it, but the big question is should you keep the financing in place that exists right now?nnNo. You are going to take over the existing debt and you're going to sell it for market price (or close to that price) because that is your only exit strategy on it. You are also going to cash out that the property. Lease option is irrelevant. Don’t lease option it; a lease option is irrelevant on 2 million dollar houses. nnSell it retail and get the buyer’s a new loan. That's your exit strategy. You have plenty of room in it to make a bunch of money (several hundred thousand dollars) and sale it cheap if you have to. nnYou may think the hardest part about selling this and getting somebody else qualified is you’d have to do something with the title to get it into one parcel. That's not a problem all. All you’ll have to do is combine the legal description when you sell it; this is up to the closing agent to handle, not you. nn