Sub-To From Investment Co?
Hey Sub-To Experts, I looked at a property for sale by a local investment company last week. They bought it last summer for 191k, sold it for 204k last fall, then the buyer "had to leave the country" (?, Thats what my agent told me they told her) so it is back in on their books. The buyer tore out the kitchen and most of both bathrooms, so the home is not an option for conventional loans since appraisers won't qualify it as habitable. They're listing it now for $234k, but we're considering making an offer. (Comps in area are around $250). Since I can't use the WaMu loan I'm preapproved for, I was considering trying to get the house sub-to their existing loan with some sort of additional down-payment. Does that sound like an option? How would I best structure my offer? Thanks!
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Explain to us why THIS is a deal? Is there something we are not seeing here? We are not attempting to be rude...
Eric & Rosa
[addsig]
No offense taken-- I need other investors to make me explain why this would be a deal, so see if it really is!
FMV= $250k
I was planning to offer roughly what the previous "left the country" owner paid, (or sligtly less since the house in not currently livable) = 200k plus Rehab costs of $20k = $220k
$250 - $220 would = $30k profit margin.
Thoughts?
Any additional feedback?
It's worth a try, but I highly doubt you will be able to get an investment company to sell to you subject to.
This is tight deal if you are planning to a plip. Do a work sheet on expenses and holding costs to get to a net figure. Gross profit is a very missleading number. dont foget to include sale comm. and use a figure for negociations meaning your wiggle room to be talked down in price by a prospective buyer.
[addsig]
200,000 - Sale Price
5,000 - Fee paid to company
20,000 - Fixup
25,000 - Initial out of pocket
225,000 - Initial Cost of House
Holding and Selling Cost
1,875 - 25k for 6 monthes at 15%
250,000 - Sell price
6,250 - Selling Cost at 2.5%
15,000 - MLS at 6.000%
1,875 Sale Profit
Of course the numbers can be worked many different ways but you are probably not being true to yourself if you shave off too much from these numbers.
bgrossnickle, Thanks for the feedback. I need those with more experience to show me where I'm being too optimistic.
A couple of quick questions:
1) You used 15%for the interest on my invested money for 6 months. Where can you get that? My money market only gets 2%
2) Why is the selling cost 2.5%? I was planning to use a flat fee service ($3000)
3) Why does MLS cost 6%/$15,000. Again, I was planning to use a flat fee service ($3000) that puts the property in the MLS and even shows it for you, they're a local company called "assist 2 sell" (dot com).
I'd really appreciate your help understanding those costs. It seems like from your numbers that selling the property will cost $21,250 which sure does eat up a margin fast! Thanks a lot for any insights--[ Edited by emerson11 on Date 02/19/2004 ]
200,000 - Sale Price
5,000 - Fee paid to company
20,000 - Fixup
25,000 - Initial out of pocket
225,000 - Initial Cost of House
Holding and Selling Cost
1,875 - 25k for 6 monthes at 15%
250,000 - Sell price
6,250 - Selling Cost at 2.5%
15,000 - MLS at 6.000%
1,875 Sale Profit
1875 was assuming you were borrowing the 25k at 15%.
6250 assumed that you would have closing cost when you sold. Most sellers do.
15000 assumed you had a standard MLS listing. You can do a flat fee listing in my town for $250. But if a buyers agent comes to you with qualified buyers you better pay their 3% commission.