I Need Help!! Creative Thinkers and Problem Solvers

Calling all Creative Thinkers...

How can I turn this into a win-win?

This is a potential exchange deal. For info on exchanging, see the formula thread or the realtor thread.

I have: a SFR

value: 575,000
loans: 280,000
equity: 295,000

motivation: high. want to put equity to work
could add some cash

I want: Self Storage

asking: 890,000
loans: 690,000
equity: 200,000

motivation: high. divorce. neither party wants property. currently negative cashflow.


Question: How can I put this together so that they can unload the "alligator" and go their seperate ways... and I can unload my sfr?

Would love some brainstorming on this...

What benefit can my sfr give them?

Here is a peek at the inner workings of my brain... lol.

Total stream of thought rambling ahead. beware.

The challenge is that we have more equity then they do....

We could carry back a note.

So....

Option 1:

We take SS plus a note of 95

Now, they have:

loan paid off
SFR and
a note to pay.

Still doesn't help them go seperate ways.

Hmmmmmm.

Option 2:

We deliver SFR free and clear.
They can sell and split proceeds.

But, if we deliver free and clear, they can't pay off the SS loan.

We could carry a note.

UG.

I know there is a solution here... I'm walkin on the edge of it... I just can't quite see it.

Do they have children going to college in the next few years? If your SFR cashflow then this could be their kids' college plan somehow.

Also, what is the motivation for you to buy this SS if it does not cashflow? Do you have a plan for turn it around? If it does not cashflow at the asking price then probably they are asking too much (but I don't have to tell you this, you know it better than I do).

In option 1, how do they end up with a loan paid off? I don't see this one.
Also, it does not need to be one note, it could be two notes so each of them does not depend on the other to pay it off.

It breaks even. This house was origionally going to be our personal residence, but then we moved. It is a nicer / more expensive home - - and so the locals can't really afford the high rent that it deserves. It's not an ideal rental for this reason.

Great question!!

This is a new construction. They are in lease up phase - only 30% occupied. We can fix that. Once leased up, this property is worth much more then asking price. They made some mistakes in site planning - but we can fix them easily and speed up the time for lease up.


In option one.

We deliver:

SFR. They take over the debt on the house. We are delivering the 295 equity.
Cash of 690. (they pay off loan on SS)

We have over delivered 95.


They deliver:

SS: 890
Plus a note, secured to house for 95. This takes care of our over delivery.

Still doesn't help them split the asset though.

hmmmmm...

I have 2 other SFR's... one local to the SS owners - 50 K equity. Great rental.
Another in oregon about 70K equity.

Option 3
Put your exchangor to work... ask him/her to find you somebody that wants to trade up their two rentals for a nicer home just like yours. Once you do that then you trade these two with the SS owners and each gets a house and a note.

Option 4
Give them 690 cash and a note secured by the SFR (actually two notes, one for each, no payments for one year, interest only for the second and third one, maturity at 3 years).
Put the house for sale (no rush here as it is breaking even).

That way you get a whole year to sell the SFR.

I am a little confused. Do these people want a SFR? If not, can you assume the existing loan on the SS, (since they are motivated and I can't imagine that there are a bunch of sellers lining up) present a modified proposal to the bank stating where they have gone wrong, what you will need to do to correct the situation and then ask for flexible payment terms ,(no payments for 6 months, etc) and then if you need to refi/ HELOC your house to tap the equity?

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Good question too!!

They have the property listed with an exchangor - - which to me, says they are open to taking an exchange rather then taking cash. They have been counseled about what exchanging is all about.

Sometimes, in the world of exchanging, you ask: Which is worse - - - what they are offering, or what I have? Sometimes it takes a few steps to get to the ultimate goal. If they understand that, they might be open to it.

We would buy this place outright...

BUT...

Why not try to unload a SFR we don't want? Because they are listed with an exchangor, I see a higher probability - - if I can figure out a way for it to fit into what they want - - - which is primarily to: split the asset.

Thanks for the ideas! +

Any other ideas out there?

I think based on what you mentioned about them, this isn't necessarily a good exchange deal for them, unless you were going to give them much more equity than they're giving you, which I'm not sure you want to do. Even that I don't think necessarily gets them excited about a deal though since it doesn't seem to accomplish their current goals.

What they want:

-ability to separate ties to eachother.(owning another property keeps them in the situation of owning property together so it's not a proposal that would get them excited based on their current motivations.)

-ability to free from the negative cashflow.(it'd probably be easier for them to stand owning the property together if it was making them money, but since it's not, they probably just want to be done with it)

Based on these things, I'd offer them money for their property, and forget about exchanging on this deal. I'd also break down numbers to show them how much money they'd be losing by hanging onto the negative cashflowing property and not accepting your offer. I think after this it'd be a great time to break out 2 briefcases full of $75,000 in cash each, and sit down with the two of them and show them that they can walk away from the "alligator" property and go their separate ways with $150,000 in cash, and not have to deal with anything else.

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Thanks snowbank...

I'm wondering about this..

Briefcase 1 ) SFR with 50k equity and 50k cash

Briefcase 2) SFR with 70k equity and 30k cash

Ya, I mean, that's 100% a lot more tempting for them to take than just a property. One idea if you are thinking that route is something along the lines of: let's say $65k equity, and $50,000 in cash(or whatever), and have one of them take the cash, and the other to take the property. This then accomplishes their goal of cutting their ties, which I think at worst is the 2nd most important thing to them in deal. Heck, let's pretend you had 2 properties where you could give them $50k equity/each, I think this deal is 10 times better for them since it allows them to go their separate ways. Also, you could have a PM set up for your properties so that when you offer you can show that the property is turn key and it won't be a big hassle for them.(just throwing out ideas, not sure how many sfr's you have but I remembered you were trying to get rid of a bunch)

I know without a doubt showing up with a briefcase full of cash is as good of a sales tool as any in this situation. It's amazing how much more motivated they would be than even just an offer sheet with $50,000 or whatever on it, even though it's the same thing.

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Something else I was thinking of, was... really get to know these people, and what they like. I mean, you've already narrowed down that they obviously want to get rid of eachother(since they're divorcing), and they want to get rid of the property. Maybe this is a little out there, but I'm a bit crazy so here's what I'd do: You find out wife likes Celine Dion and husband likes Nascar. Get the wife front row tickets and back stage passes to a concert, and husband front row tickets and weekend get away to a race. If you offered them twice the value of these things in the form of a check included in your deal on top of whatever else you planned to offer, I would bet a lot of money these things would motivate them more to accept the deal, because these are things that they like. They can envision doing/experiencing these things, where with a check they have no vision, it's just a random offer. These people are going through a time where they are probably looking for something to put a smile on their face. Find out what they like, and you can definitely make this a win-win deal.

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ya, I've got a handful I want to get rid of...

want to throw one in. We can give em one of mine and one of yours!

yes, I would.

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ATW,

If you only look at what you have to trade directly with that seller has, you might be limiting yourself. What if you bring a third party in? Find out exactly what seller wants, then trade what you have to someone else who has that.

Go to craigslist or classifieds for wherever it is that they want. For example. Seller of SS wants a vacation home in Myrtle Beach. Comb Myrtle beach classifieds for someone trying to sell and do a swap with what you have (one of your homes). Then trade the Myrtle Beach spot for the SS.

A little trump-esque, but creativity is king here.

RealOG

Do they want to stay in the area? If so, they will need two houses/condos to live in. You sell/trade/exchange them one, plus cash to split. They already have one house they were living in while married, so the other gets the existing home. They can go or stay. Sell or keep.

HTH

+ This is a great idea.... and could potentially meet everyone's needs!

I'll present a few different options to them tomorrow and see what happens! Thanks! Everyone

so, did you talk to the sellers today?

We have a meeting for 9 AM tomorrow.

I'll let you guys know the outcome!