Foreclosure Lead!! Please Help!!
My realtor brought me this foreclosure property that has been on the market for 8 months. These are the numbers: 6br, 4.5 ba, finished basement, 7yrs old, Fmv-$610k, asking price-$449k, needs 30k in repairs(mainly paint, countertops, carpet, etc..). Also, the original owners have contacted me to do a 1yr L/O on the home and will move in it as-is, and fix the repairs during that year Their credit will allow them to purchase within the year according to my mortgage person. How would you all structure this deal? Good deal or not? This will be my first purchase of an REO property.
Thanks
How much money can they give you up front?
They can pay 25-30k upfront, and up to $2900 a month.
td
You should check into getting financing for this property. I find it is hard to deal with REO's if you have little money.
myfrogger,
I never said I did not have the money or the financing. That is not the question. The question is what would you offer if you had this deal, and would you l/o back to the original owners? The original owners were not the ones the bank foreclosed on. Show me some #s that you would offer. Thanks for your help.
td
It's going to be hard for anyone to give you "the numbers" on this deal without actually being there and looking at the property. From what you've given us so far though, I'd tread carefully thru this, as it's not such a great deal, cashflow wise at least.
If you financed $450K at 7% for 3oyrs, your payment will be roughly $2900/month before taxes, insurance, PMI, etc. So if you're renting it for $2900/month, you'll be in the hole every month.
Now, if you can stand a negative monthly (or put that $25K down in an account as backup), then it might work okay, depending on your selling price.
It's a little confusing with this original owners thing. If they weren't the ones who were foreclosed on then who was?
As far as making an offer, just based on your post, my first offer would be in the $375K range.
Roger
Offer 370k for the house
Get 30k from the owners
Lease/ Option to them for $2900 a month
Get an interest only loan
You should have pretty decent cash flow that way-
Do a one year L/O with an option to extend for one year
Oh yeah, Sell to them for 500k or so to make a bit of profit, but also to give some room so that they can get financed.
There are some issues with this type of deal "if" they are on title and you bail t hem out and sell them their own home. MAny states view this as a "usurious loan" and investors have lost a lot of $$ when this has gone to court. You must be careful as to how it is structured and the help of an attorney would be adviseable..
[addsig]
I have done this via L/O and never had a problem.
Thanks guys for your responses. To clear a few things, the L/O family sold the home 2 years ago to the family that got foreclosed on, so they are not on the title. Here is what I am thinking of doing:
offer-379k to bank
escrow- 30k
get an interest only loan- already approved for up to 450k on this property
L/O to family at $2900/month
What do you guys think?
miraclehomes,
I really appreciate your input. We were thinking along the same lines. I am putting the numbers together now and will let you know.
Prosperous investing,
td
As Stockpro99 said, check with an attorney in your state before proceeding. I don't care who's done a hundred such deals where they are...that doesn't make it legal in your state. For example, here in California the courts are required by law (yes, it's written into our Civil Code) to construe such a deal as a loan and not a sale. You may not have a problem where you are, but why take the risk of walking into the deal blind?
I ran this through my attorney before I got statrted, and everything is set from a legal stand point. I am waiting on the bank to respond to my offer.
td