Several weeks ago, I was stopped at a red light when I noticed the driver next to me motioning me to pull over. When I did, she told me that she saw my “I BUY HOUSES” sign on my car and asked if I would follow her to her house which she wanted to sell. Since it wasn’t far away, I agreed.
It was a beautiful 4 bedroom, 2 1/2 bath in an older established neighborhood. Knowing the area, I knew the house was worth between $135,000 and $150,000.
She then began telling her story. Now, normally, I’m not one to be swayed by emotions, but her story was somewhat sad. She and her husband had lived in the house for 36 years. They had paid it off–but had taken a first on it back in 1994 for $45,000 to help put their granddaughter through college.
Last year, her husband had a heart attack, and they decided that living in and caring for the house was too much for them. So they bought a condo by the ocean. They listed the house with a Realtor, who, for some unknown reason, wasn’t able to move the house.
After the listing expired, they decided to sell it themselves. They found a buyer, but three days before closing, the buyer was murdered by some loser who stole his car and $56. After that they found another buyer, but he backed out at the last minute. They were able to keep the earnest money, but that was it.
By now she was crying as she told me her story. She and her husband were struggling to make payments on their condo and on this house, and she was afraid that any more pressure might cause her husband to have another heart attack. I asked her what she would like me to do for her. I almost dropped when she said: “Tom, all we want now is for someone just to take over the payments on this house.”
After catching my breath, I agreed to meet the both of them at their condo that evening. (Now before you go thinking I’m the type of person who gives real estate investors a bad name by taking advantage of other people’s misery, read on.)
I met them that night and explained to them that I was indeed interested in buying their house, but that I had no intention of just taking over their payments and robbing them of over $100,000 in equity.
Together, we structured a five-year >lease option with me paying them $775 per month and agreeing to a purchase price of $123,000. (I am however going to make some money on this deal.) Their payments on this loan are $352.95. So, they will receive over $400 per month cash flow for the next five years.
I’ve been able to put a tenant/buyer into the house who has agreed to pay $1075 per month and a purchase price of $145,000. And to think, I was actually angry when I got caught by that light…