Sometimes you might need control of the property, but don’t want to get too complex with regards to the way that you structure the deal like an Agreement for Sale. The way to do this quite simply is have a joint venture agreement with the seller, like we discussed in the previous module. You can then register the joint venture agreement on title and make sure that you get paid when the property is sold. (Sample Co-Tenancy and Trust Agreement – Review with Your Own Lawyer is a Condition for the Uee of This Agreement)
Let me give you an example. So that you have a property that requires $50,000 in repairs but the seller can’t do the repairs because they don’t have the money to do them. The property is worth $200,000 as is but if you are able to partner with the seller and you did the repairs the property would increase in value so that you would make an additional $50,000. The sellers can’t sell the property as it sits right now.
So you have an agreement with the seller that they are able to take any profit through the sale at a certain price point ($200,000 in this example) and then you would take any profit above that price point. So the property sells for $300,000 you pay for the closing costs, the curent owners cover any mortgage payments and taxes. And you walk away with a nice profit. You would use a letter of direction to the sellers lawyer to direct the funds over and above a certain amount to you.
The downside to this can be extreme. What if the seller decides that they no longer want to sell the property and you have put in all the renovation money? What if you are not able to get the price that you want for the property? What if the seller doesn’t keep their first mortgage or peoprty taxes current? All of these questions need to be keep in mind.