[Lei Qu]

Lei Qu

Hi everyone!
My wife and I are completely new to real estate investing. We bought our first house with the traditional way through the bank. But after discovering Cashflow Depot we are trying to make more deals creative. Recently we discovered a property that is sale by owner, here is a brief details:
4bds, 3bath, 2 story, 1850 sqft. Year built 1957. Previously owner has lived there for 30 years and has kept it in really good condition. Decent school district.

Talked to the current owner: has a HELOC of 85k. Owner also wants a 50k payment because he wants to do some new improvements on his current house.
Asking price $185k
Average rent for this type of property in my area is around $1300-$1500. The tax per month on the property is approx $400.

After some calculation and thinking through, I can’t figure out any way to get a decent deal. Any input will be greatly appreciated! Thanks!

[Jackie Lange]

Jackie Lange

HI Lei

Welcome to the world of creative real estate at CashFlowDepot

What’s the house worth?

If the house is worth $185k, in good condition and he’s not motivated to sell fast, I honestly don’t see an opportunity here.
$50,000 down payment is not attractive enough financing to get involved.

Is he willing to sell for $135,000 ($50,000 down + pay off $85k Helco)? If so, you could get an option on the property for $135,000 then do a highest bidder sale. You’d sell to the highest bidder over $135,000. Your profit would be the difference between the $135k and what you can sell it for.

But if he wants $185k, it is not a good opportunity unless the house is worth a whole lot more.

rents are low and taxes are very high.

[Lei Qu]

Lei Qu

Hey Jackie,

Thanks so much for your help and responding!

From my understanding then it seems like a HELOC is like a lien on the house. Would this be any different if the house was paid off but there was a 15K HELOC on it? In that instance, could we pay the 15K HELOC off and this be considered the down payment for the house?

Thanks again,
-Lei

[DON WEDE]

DON WEDE

Lei,
A HELOC is an note secured by a mortgage recorded against the property. It is most likely an equity line of credit that you can bower up to that limit. If the house was paid off other then the HELOC it would then be in first position. Yes you could pay off the HELOC if the owner wanted to take that as a down payment.

[Lei Qu]

Lei Qu

Thank you! This was very helpful 🙂