Is This Subject- Toable??
Hi. Could any of you tell me if you think this is feasible. I will be meeting with the owner on Tues.
FMV = $70-80,000
Loan amount = $50,000
Behind on Payments = $5,000
Transfer Tax = $500
Repairs/cosmetics = ??
Year Built = 1957
Amount Owner Would Like for Equity = $2,000
Probable Downpayment from New Buyer = $7,000
Thanks in advance,
Brian
The numbers dont sount that great especailly with the repairs part of your equation left as a " ?? "
[addsig]
Actually, I disagree with Wheeler on this deal. The numbers aren't that bad, DEPENDING on the cost of repairs.
Some issues you need to pin down better, though. First is the repair costs. You need a close estimation. Guessing here might cost you tons of money. Second, you need a much better estimation of FMV. A $10K spread is simply too much. Third, are you sure in your area that you can actually get roughly 10% down? I understand that is the number that most courses say to get, but real life events have a tendency to throw that out the door.
If you can clear up the above, here's how I see this deal.
If you allow $4500 for repairs( thats high for this price range), you'll have about $10K of your money in the deal. A downpayment from a buyer of $7K would leave you with only $3K of your money in the deal. Your monthly spread, or cashflow, should easily be $300-400/month here. That'll get back your $3k the first year. So, if you'd sell this on owner terms of 2yrs, you'd have your cashflow from yr 2, about $4K, and a $20K backend profit when the buyer refi's.
Not the homerun deal, but a pretty descent deal overall, by your numbers.
Roger
I agree that this is a very doable deal. Repairs are a concern. You can move your property much faster if you ask for less than 10% down. 3-7% maybe.
Good luck!
I still stand my ground.
However,
I guess it depends on what you are trying to do.
If you were going to flip these with an unknown repairs estimate. I would pass.
UNLESS:
You refine your costs and the FMV. FMV is used very loosly on these forums in my opinion. The comps AND " days on market" DOM, tell all.
As it stands now you are either at 71% or 81% of sell without repairs.
The advice you were given by Raj can work. it takes experience to do these "backend deals" They dont always work out as planned. Counting on someone to refi could take longer than expected. You know what they say about things that are temporary? They can become permanent.
I take the conservitive approach to all of my deals. That is because of of lack of experience on my part. I dont want to learn from my mistakes. I want to learn from OTHERS mistakes. Now, as I get more familiar with the process Then I will get more creative. Untill then "keep it simple stupid" is my motto.
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(A division of: Half Vast Enterprises)
"Most american millionairs today (about 80%) are first generation rich"
[ Edited by WheelerDealer on Date 01/18/2004 ]
Thank you all for your responses.
Would it be possible to work something out with her bank so that when I buy it I would only have to pay say $2,000 in back payments instead of $5,000?
I'm concerned about not breaking even with the new buyers downpayment versus the amount I pay her (which I am thinking of now offering $1,000 instead of $2,000) + holding costs + transfer tax + repairs (I haven't seen the condition of the house yet...but she said it's fair/good).
Most likely the only way I will be able to afford this deal - if at all - is through those wonderful cash advance checks...with "deadly" interest rates. But, then again, that IS a sizable amount of equity!
Yes, it's possible to negotiate with the bank to have all of the back payments postponed for a period, added to the existing payments, or simply put on the backend of the deal (added to the principle). You need to know what you're doing, though.
If the money is that tight for you, then this is probably not the best deal for you to try to do. It's simply too much risk for you, IMO. Have you thought about birddogging/assigning it to another, more experienced investor? If I were in your area, it's a deal that I would be interested in, so I'm sure that others would as well. Get control of the property either thru a purchase agreement or option contract and then starting calling on some other investors.
Be upfront with the seller. Tell them that you have a plan to sell it to another. As far as a fee for you, personally, I'd ask for a minimum of $500 or so and the opportunity to follow the deal throughout. That way you get some $$$ for your time and some experience as well.
Roger
Roger,
Great. Sounds good. Just a couple more questions:
1. So I basically want to "tie up" the property and then sell it to another investor? So I would wholesale it then?
2. I looked on www.uslegalforms.com and the "Contract for Sale and Purchase of Real Estate - No Broker - Residential - Home Sale Agreement" looked like the best choice, I guess?
3. Where would I find an "Option Contract" and what is the difference between the two?
4. Would I most likely be selling to another investor who would $CASH$ out the existing mortgage?
Thanks again!!
Contract wise, or best chocies are to get a contract from an attorney or another investor who has actually had it approved for use in your state. I wouldn't recommend any online forms, free or otherwise, to use for real estate. You really don't know if they are legal and binding for your state or not.
A purchase agreement means that you, as the buyer, are agreeing to buy the property under the terms of the contract.
An option agreement gives you the right, or "option" to purchase the property, but not the requirement to do so.
I don't want to offend, but it sounds like you're pretty green on real estate terms and methods. At this point, I'd suggest that you try to just birddog this to another investor. Try calling on some of those other "we buy houses" type ads or run your own ad something like investor special. You could also visit the local real estate investors' meeting.
You might be able to find an independent contractor form that you could use to try to protect your birddog fee. At this point really, you don't have anything to lose if you want to just go on faith and goodwill, and hope that an experienced and honest investor is interested in it.
Roger