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Here’s the deal:
Seller wants $6000 down and to take over payments on the remaining 13 yrs with a balance of $17000 mortgage. Payments are $245/month Lender is ok with this.
House would be a good rental except that it needs some flooring, paint, perhaps a new roof and some ceiling repair. And I’m not sure about the HVAC.
The tax value is around $65k but the comps are hard to come by and are not good. One house was renovated a couple years ago and sold for $62k, but other houses around this one were sold for between $18 and $25k, likely to investors, in the last two years. I do not know the condition these houses were sold in.
House could rent for $650 if repaired.
At first glance with the tax value it looks like a great deal, but the ARV suffers because of the comps.
I am actually wanting to keep this one if it’s a decent deal, it’s a cute house on a big plot. What do you guys think?
the repair costs sound expensive and that’s why you can’t justify paying $6k down. HVAC will cost $4k, rook will cost $4k-$5k, and you’re looking at another $3lk for the other repairs.
Unless you have deep pockets for all these expenses, a buy/hold may not be the best strategy to use.
Instead, you could get an option for the loan balance, then offer to do a highest bidder sale or other marketing to find a rehabber who will buy from you with seller financing. Tell the seller you will split whatever down payment you get with him/her. You might each get a $1k or #2k
If payments on the underlying loan are $245 – does that include taxes and insurance?
If so, let’s say you could get $345 when you sell to the rehabber
You would get $1k – $2k down plus $100 a month in cash flow WITHOUT doing any of the repairs. If they default, then the house may be in good enough condition you can rent out if you get it back.
Plan B would be a straight option then wholesale to another investor. Get your money then move on to the next one.
This one definitely has potential if you can get rid of the $6k down. Everything else sounds doable.
Another other ideas folks?
If I were doing the deal, I’d say the $6k down kills the deal.
I’d just get an option then wholesale it to another investor for a cash buy out ( no owners financing)
You’d have a hard time finding any investor to wholesale to who will put up $6k down plus $15k in repairs on a $60k house
If you really want to keep this house, you need to get the seller to carry the $6k note at zero interest and zero payments until the house is sold
where do you plan to get the fix up money?
taxes and insurance could also kill the deal. They could eat up all cash flow So you need to know what they are. Let’s say you buy the house, spend a fortune fixing it up and make payments to the seller every month. Then all the sudden you get a notice that the house has delinquent taxes of $5,000 because the seller has not been paying taxes. Who gets stuck paying the bill? you do. So you need to write in the agreement that if the seller does not pay taxes or insurnace that you can and you get credited 150% for doing that towards the payoff.
Same with the mortgage payment, YOU need to pay the underlying loan. You don’t want to make payments to the seller then find out 6 – 9 months later that they have been pocketing the money and not paying the mortgage comany.
More info. I agree now that the $6000 kills this deal.
I’ve found out that the seller is delinquent on his 2011 taxes and owes about $1650 from then. I think the 2012 taxes will be around $1300.
So it looks like he needs about $3000 to get out of trouble. So the total cash needed looks like $12-15k in repairs and $3000 to the tax man.
Should I just offer to pay the taxes? Walk?
I was planning on borrowing the fix up, refinancing and paying everybody off.
I guess either the house will be sold for delinquent taxes or he’ll find a sucker who’ll pay him his $6000.
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