1st Timer Potential Deal HELP
I met a man in his 50s who is trying to sell his home. Hes very motivated cause his wife just passed recently. He said that hell take 45k cause that what he owes. The property is run down but with the right work could sell easily for 85k +.He said that he just wants to simply get out and move to CA or an apartment. Its also in a very decent quiet neigborhood.
The house has 5 br?, 1.5 baths, 2 kitchens. Since Ive never done a deal before Im new to rehab. The problems that I saw were it needs a new paint job in and out, the balcony needs to be completely redone, needs a shower, new carpet and I believe that the plumbing may be functionaly obsolete cause the pipes are all old Iron or steel I think. He also said that there was a cess pool or something, what ever that is.
I dont have very good credit. And Im not working right now, although I did just pass my RE sales exam and preparing for state test. What do I do? He said that if I gave him 4500 that I could lease option for 1200 per month but I cant afford that.
Im really lost. Should I take a chance with the LO and try to assign the contract or should I just bird dog it to another investor? Birddogging in ythis situation seems a bit unfair though cause I heard guys saying that 500dollars is bird dog pay, but this guy could possibly make well over 30k + on this deal?
Have any of you ever been in a situation like this? Howd you handle it? Thanks 8-)
Don't go swiming in the cess pool. LOL.
It likey to be an old septic tank that hopefully was properly decommisioned.
Iron pipes aren't bad if they are in good shape.
if you have a 10% note it should only be like 400/mo if I punched the buttons right.
Would he finance it for you at 8%, and you fix and flip?
Have you tried to get approved, 10% is pretty "hard" money where credit would not matter.
Are you willing to pay a couple 100 for a house inspection to get a profession opinion of what's wrong.
Or see if a GC will walk thru on the "promise" of getting the work?
As has been mentioned b4, with older houses, lead and asbestos can be of concern.
p.s.
Where do you find people like this?!?! Good deal.
Sounds like this guy is dilusional as far as payment goes. Let me get a bit more info.
Do you have the money to do the rehab?
Do you have any money to get into this deal?
How long is he willing to L/O for?
Sounds like there could be 10k to 15k worth of work- puts you at 60k, worth 85k. Sounds like these numbers could work- are you familiar with hard money lenders? How "bad is your credit?" Keep posting here, and I will help you.
Sign the lease option paperwork with him and make it contigent on getting a tenant buyer in there in 30 or 60 days.
Agree to the 45k price that you will cash him out in two years or whatever.
Get at least a $5000 non-refundable option consideration from a tenant buyer and give $4500 of it to your seller for the "downpayment." Now you make an agreement with your tenant buyer to buy for 70k or whatever.
I would prefer to get a private investor to loan me the money to buy it outright, fix it up, and sell it. Many will loan you 65% or so of after repair value with no money down, credit checks, etc. The numbers here look like they would work. Buy it, fix it, sell it = big profit, even when paying high interest rates on your private investor money.
Just some ideas. Good luck!
Where can these "private investors" be found
Every so called private investor that I have talked to that say that they will lend money were basically blowing smoke up my hind- quarters. Thanks[ Edited by miraclehomes on Date 06/09/2004 ]
The deal could be a good one if you manage it right.
If you bird dog the property and receive a 500 fee that is the value of what you have contributed. Just because someone else can make more by taking on a lot more risks and can supply working capital should not be a factor.
Either you can raise the funds, get the work done and lock in your profits when you sell or you can not. Hence the potential gain is really only potential gain until you complete the job.
Watch out for problems that crop up. An inspection will help reduce the chance you will find something unexpected. This does not mean that the average inspector will find everything.
The L/O deal is reasonable. Finding a hard money lender is another. Taking on a partner who would be the cash partner is yet again another possibility.
If it was me (you asked)...
I would want to minimize the money I give the owner so I have more to put into improvements. I want control of the place but I do not have to have complete control (L/O). I would also look at buying on contract (some advantages).
I have the money now so I would do the deal differently from what you might have to do. In my cash I would buy for cash and hire out the work. Getting in and then out quickly is important when you are using your own cash. If you are borrowing and the rates are high the motivation is similar. Sub out the hard stuff that is structural or requires sign off.
John
[addsig]
I may be able to borrow 10-15k from a friend. I havent even calculated holding costs and soft costs. My broker friend is running a CMA for me right now, should be ready tomorrow. Hes interested too so he may bring extra $ to the table. After I know for sure what its worth we may get this thing up and running. Im hoping that the comps look better than Ive assumed. Ill make an offer based on the situation
oh yeah, Id rather not deal with any hard money guys. I heard that these guys can get you into a lot of "trouble".
oh yeah, Id rather not deal with any hard money guys. I heard that these guys can get you into a lot of "trouble".