Seeking An Advice
Problem:
Hello everyone
I'm hoping I can get help/advice here even though I'm just a new member...
I'm starting in real estate biz (buy-and-sell properties po). I just bought my first property (house and lot) this January. Now, a buyer is really interested in the property. Here's his proposal:
1) He will pay me 30% of the amount of the property.
2) Yung 70% ay iba-bank loan daw.
3) Pero ang maglo-loan is me, the seller . All documents such as Income Statements are mine. In effect, I'd have a bank-loan against my property. I'm not even sure what type of loan should I apply for this.
4) He will issue checks for amortizations.
Here are my questions sana:
1) What could be the risks/sakit-ng-ulo in the said setup?
2) Should I already issue him a Deed of Absolute Sale upon payment of 30% downpayment?
The buyer is an OFW (seaman). The reason why he doesn't want to apply for the loan himself is that his requirements might not be complete.
Sana may magbigay ng opinions saken...somebody, anybody please...
Thanks very very much po
Bigcheese
Advice:
Let's make a clear picture regarding the inquiry of bigsheese through this example:
Let's say bigcheese has acquired the property for only Php 1M and plans to resell it for Php 1.7M.
Php 700K is target gross income, let's say.
Here comes the buyer, a seaman, who is willing to pay the 30% of Php 1.7M which is equal to Php 510K.
Bigcheese should do her task carefully, studying the capacity to pay of the buyer and requiring all the needed income documents. She did the work like a strict loan officer of the bank. She found out that the buyer has a PASSING CREDIT SCORE.
Bigcheese agreed but the condition is that they will execute a Contract To Sell. The balance of Php 1.19M shall be payable in 10 years. Interest rate of this rent-to-own scheme shall be 18% per annum. Monthly amortization of the buyer will now be Php 21,442.04. Post-dated checks shall be issued to Bigcheese. There are provisions in the contract at her own advantage such as all payments made and all costs of improvement are not refundable. There shall be a 10% penalty per month for late payments. Contract shall be rescind after two consecutive non-payment of monthly amortizations. Bigcheese's lawyer has carefully drafted the contract.
Bigcheese has applied for a real estate mortgage to her favorite bank and as a valued client, she got a loan approval of Php 1.19M for her property, payable in 10 years with fixed interest of 10% per annum. Her monthly amortization is equal to Php 15, 725.94.
After the loan release, bigcheese has now acquired her capital gains in full, which is Php 700K. (Php 510 DP of the seaman plus Php 1.19M loan release less the acquisition cost of Php 1M) Bank charges and processing fees shall be shouldered by the buyer.
Bigcheese, after earning Php 700K, still gains a passive income of Php 5,716.10 for ten years (Php 21,442.04 less Php 15,725.94). Real estate taxes and insurances shall be charged to the buyer.
In case the buyer has failed to pay two months rent (monthly amortization), bigcheese still owns the property. Transfer Certificate of Title (TCT) is still under her name.
Where is the risk? Bigcheese still owns the property. She can still resell it in case the Contract To Sell was rescind due to non-payment of the buyer.
As I always say, you cannot be a true real estate investor if you will not overcome FEAR.
F-alse
E-xpectations
A-ppearing
R-eal
Bigcheese, using her capital gains of Php 700k can buy another property, repeat the process like a cycle.
CONCLUSION: Proceed with the transaction (if it is like the given example above).
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