CBA For Foreclosure Purchase
I'm looking at a property that is scheduled for auction next week and being I've never bought at auction before, I wanted to run my CBA pass the group for feedback. Really, I'm looking for people to identify what expenses / risks I haven't accounted for in my analysis.
My goal is to purchase, rehab, and then resale the property. Its a SFH that is having the 1st mortgage foreclosed. It has no back taxes or other liens on it.
Revenue when re-sold:
The averaging of 3 different, but very comparable properties show the FMV to be $125,000.
Expenses:
My max bid price = $76,000
Closing cost on purchase = $1,100
Closing cost on future sale = $1,500
Hard money expenses = $6,500
6 mnth loan payments = $3,600
Repairs = $18,500
TOTAL Exp = $107,200
Potential profit = $17,800
Thanks in advance, Mark
Looks good. Have you done any other investing in RE. Auctions are the most risky.
Have done some rehab's (not in foreclosure process). I also have done some new residential spec houses.
I'd like to pick your brain. I'm aware of some of the risks, but what risks do you feel exist when purchasing at auction ?
Thanks, Mark
You get the house as is. In some states the owner has the right to get it back for up to one year. You need to look up the state laws on the whole Auct/Forecl process. It might be better to find people who are Preforclosure and approach them to buy their property. That way you can look inside and do a good check to make sure the house is ok
Have you "over-estimated" your repairs? Be sure to allow plenty of cushion, as it seems there is usually something you will discover, or decide needs to be done after all, or it rains and takes longer than expected, or ....
Good Luck!
Auctions are the least RISKY from a liabity end ........ shorts are one of the greatest.
Learn what u are doing PULL the state code on Trustee Sales IN YOUR STATE and read it
10 TIMES first!!!
Period
Then go to 10 Trustee sales FIRST
Then do 10 title searches on 10 good propertys and of course go to each ones
Trustee Sales
In other words do 10 dry runs before U EVER
do one buy.
Believe u will know what I am talking about when u do this.
Oh you have to do 10 appraisals and review of the property.
SKI