Pendaric
06-27-2007, 09:20 PM
I've started a new company up 3 months ago buying houses at below the market value.
So far I've done one deal and am in the process of completing another.
Deal 1:
The property is worth £120k. Owned by an elderly couple with no money other than the equity they have in the house. They cannot get a mortgage because they have no income but they want to access the equity in order to have some money to spend. They don't want to move out of their house, having lived there for the last 30 years.
They are elderly but in full possesion of their mental faculties. They understand what they are doing. They had 2 other offers from similar companies to my own but chose to go with me.
My offer was £88k and they rent the property back from me at £500 a month. They accepted this. The deal cost me £4k to do in terms of mortgage and legal fees. On the day I bought it I took out a mortgage for £97k, therefore I have covered all my costs and have £5k in my pocket and £23k equity remaining in the house. I will be holding it long term and expect it to double in value over the next 10 years.
The mortgage on an interest only basis is costing me £410 a month, so covered by the rental and leaving me some money which will just about cover the running costs (insurance, yearly safety checks, occasional maintenance).
Have I blatantly ripped them off or have I been a benefactor to them?
Deal 2:
The property is worth £185k. Currently owned by a couple who are in a bitter divorce and only speaking when necessary, principally through solicitors. They need to sell quickly due to financial pressures.
I am buying it to sell again. My offer is £156k, which has been accepted. It will cost me £19k to do the deal if I can sell it within 6 months, which leaves me with £10k profit.
Am I preying on their misfortune or am I doing them a favour?
Please note that I am totally comfortable with the ethics of what I am doing - I am transparent with people that I am offering them less than the market value and I tell them what I anticipate making from the deal. The people I am dealing with are fully aware that they are selling their houses for less than they are worth and are making a conscious decision that a quick sale is worth the discount for them.
Having said that, they normally agree to this sort of thing because they are in desperate straits.
I have been told by a couple of people that I am a parasitic, blood sucking leech preying on the misfortunes of others. I don't see it like that myself, but I just wondered what the general feeling on here was.
So far I've done one deal and am in the process of completing another.
Deal 1:
The property is worth £120k. Owned by an elderly couple with no money other than the equity they have in the house. They cannot get a mortgage because they have no income but they want to access the equity in order to have some money to spend. They don't want to move out of their house, having lived there for the last 30 years.
They are elderly but in full possesion of their mental faculties. They understand what they are doing. They had 2 other offers from similar companies to my own but chose to go with me.
My offer was £88k and they rent the property back from me at £500 a month. They accepted this. The deal cost me £4k to do in terms of mortgage and legal fees. On the day I bought it I took out a mortgage for £97k, therefore I have covered all my costs and have £5k in my pocket and £23k equity remaining in the house. I will be holding it long term and expect it to double in value over the next 10 years.
The mortgage on an interest only basis is costing me £410 a month, so covered by the rental and leaving me some money which will just about cover the running costs (insurance, yearly safety checks, occasional maintenance).
Have I blatantly ripped them off or have I been a benefactor to them?
Deal 2:
The property is worth £185k. Currently owned by a couple who are in a bitter divorce and only speaking when necessary, principally through solicitors. They need to sell quickly due to financial pressures.
I am buying it to sell again. My offer is £156k, which has been accepted. It will cost me £19k to do the deal if I can sell it within 6 months, which leaves me with £10k profit.
Am I preying on their misfortune or am I doing them a favour?
Please note that I am totally comfortable with the ethics of what I am doing - I am transparent with people that I am offering them less than the market value and I tell them what I anticipate making from the deal. The people I am dealing with are fully aware that they are selling their houses for less than they are worth and are making a conscious decision that a quick sale is worth the discount for them.
Having said that, they normally agree to this sort of thing because they are in desperate straits.
I have been told by a couple of people that I am a parasitic, blood sucking leech preying on the misfortunes of others. I don't see it like that myself, but I just wondered what the general feeling on here was.