1st Motivated Call, Please Help.
Well after a few discouraging first calls, I got a call from a motivated seller. He told me that he lost his job a while ago and they are 3 payments behind. I asked him what his backup plan was if he didnt sell and he said I am his backup plan. He saw my flyer in a laundrymat.
House is about 75 years old. Was a 2 family but was remodled into a 1 family. 5 bed 2 bath 2 car garage. He said no major repairs needed. This is a decent part of town. He says he could probably rent it for $700 a month but he doesnt have time to find a tenant.
He said he thought about selling a year ago and an agent told him he they would list for $90,000. He owes $64,000. PITI is $670 a month. Taxes $1900 a year. Bank is EMC mortgage. I didnt get the interest rate because I was to nervous. I asked what he wanted to get out of the sale and he said he would like some money but I think he had to say that. He sounds VERY motivated.
I am meeting him at 9:00AM in the morning. I am thinking this is a possible sub2 for the $64,000 giving him $2k to move. I could lease option for $90k option price and maybe $800 a month rent providing the comps come back that high.
I am meeting with him in the morning so any quick ideas or words of encouragement or what to take with me would be appreciated. Thank you, Bill
Hey sounds like you have a great potential deal. Don't jump into things too fast but don't hold back either. Due diligence is the key.
I'm almost thinking that you should be able to get more than $800/mo for a 5 bedroom home. In my area rents are determined more by the number of bedrooms than sq ft. Know your exit strategy before you make the offer. You have a lot of research to do before 9am tomorrow.
Well the problem is that I wont have any comps until after I meet with the seller. I was planning on getting a contract signed anyhow and then do due diligence. If I can get it for $66k I could just sell it for a quick profit I think as well. I really wont know many details until I meet with the seller. Is that OK?
You might look into some more aggressive financing at very low interest rate. There are constant pay plans that where the payment is at the LIBOR rate plus a margin. The payments can be fixed for 3,5 and I believe 7 years (there are some contingencies) but for a relatively short term L/O this would improve cash flow during the lease period. You might have to consider the cost of the loan but you can tack this on to the amount you borrow and not pay it until you sell.
It sounds like a pretty good deal in terms of equity, but your cash flow looks a bit anemic, hence the suggestion.
Quote:
On 2003-12-11 19:11, billfaith wrote:
Well the problem is that I wont have any comps until after I meet with the seller. I was planning on getting a contract signed anyhow and then do due diligence. If I can get it for $66k I could just sell it for a quick profit I think as well. I really wont know many details until I meet with the seller. Is that OK?
How about doing a search in Yahoo with XXXXX county tax appraiser. The xs are the name of the county the house is located in.
Then you can look up the property and then look up properties next door and see what they sold at and how long ago. Keep going in the area the house is in until you get similar houses which sold in the last year or so.
VOLA there are your comps
The county tax assessor's website is where I get most of my comps. I also look up mortgages and other information on the county recorder's website. I can quickly guestimate what the equity in the property is.
You may be able to convert back to a duplex for a few thousand and get $1200 rent. Check into that tomorrow too.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
That would be nice. too bad my backwards county does not have anything online.
Good idea looking at converting back to duplex. Thanks all for your help
Try http://www.bankofamerica.com/loansandhomes/index.cfm?template=hc_home_worth
and http://www.homeradar.com/ for comps not sure if will work for your area but I use them for my area.
Boy, texas stinks. none of those sites work for texas....NONE. Gotta have MLS>
[addsig]
5 bedrooms....you know here is a crazy idea....checkout HUD's website for section 8 rates in your county....5 bedrooms is usually the highest rent (sometimes 6 bedrooms is), but in any case, with 5 bedrooms you can get well over a $1000 a month on Section 8 and it is guaranteed by the government. You can also stop by the municipal building and ask how much they need section 8 housing...In some places they are so short of these types of housing that they will pay you even while they find the tenant for you (while its empty).
Plus you can probably refinance the house with 80% LTV and get some money out of it right away.
Just a crazy thought.
Quote:
On 2003-12-11 22:19, wpruett wrote:
Try http://www.bankofamerica.com/loansandhomes/index.cfm?template=hc_home_worth
and http://www.homeradar.com/ for comps not sure if will work for your area but I use them for my area.
Wrpuete...
These site are AWESOME...thank you very much!!!
P.S.
it works for Texas (Houston) and Colorado.
Thanks so much
Well I think this guy was feeding me a real line when he said he thought its worth 90k. He bought it 4 years ago for 65k. It was a 2 family then so maybe converting to a 1 family increased the value, I dont know. Its a typical old home. Needs some work. He is open to just about any option. We discussed me taking over the payments if I can prove its worth it and he wants me to. He also told me there are two other mortgages on it for $4,500 and $2,500. Not real big liens but man I dont think it would be worth much more than the $64k first and the other 2. I basically left saying that I need to research the value before we make any decisions. He really wants to sell but my exit strategy will totally have to change if its not worth that much. I had some comps come in for $65k to $80k on 2 familys but the person doing the comps didnt know its a 1 family now. Any thoughts?
Sounds like a dog with fleas. Dont get emotional about it. If you think its worth a shot try and short sell it if you got time.
If doesn't make dollars, It doesn't make sense!
One more bit of advice here:
All internet comp value search engines are great as long as you keep one thing in mind
They almost ALWAYS come up with 10 to 25 % less in value compare to the hot sellers market. I have observed this on many occasions.
This is just something to keep in mind while determining real AS IS property value.
Dmitry.
Well I finally got some comps on this being a single family home. First off he paid $64,900 in 1999. He has done nothing major to increase the value much. Comps come in for $65k to maybe $75k at best. He owes about $71k on the 3 mortgages. Shorting the second and third would bring it down to 65k. No deal there. Shorting the first would be the only way to make the deal happen. I dont know if thats possible or not. It does not need much work.
Also this guy has been out of a job for a while and I thought about referring him to my place of employment to fill out an application. Do you all think thats a good idea? He seems pretty genuine and I would like to help if I cant make an offer.
Bill, If you're still looking at this house in Sheboygan send me a private message with the address and I'll go to Sheboygan MLS and get the assessment and last sale info for you. I can also check to see if he had it on the market recently and didn't get it sold etc. If I were you I'd also go to the courthouse on Monday and do a search for any other mortgages or surprises. [ Edited by Sandbahr on Date 12/13/2003 ]
Hi thanks
I already got some comps and made an offer but have not heard back from the seller.
If I do I will get down to the courthouse. I really dont know how to search for that stuff down there though.
Bil
Since you are a beginning investor, I would advise against this deal. While I think it is important beginners dive in with both feet, this does not seem to be the right deal. I would hate to see a beginner get wiped out on a deal, get discouraged, and quit, or not have the funds when a proper deal presents its self. First clue...you were contacted. Second clue...you were lied to. Third clue...numbers don't lie. If you do go for it, get a clear plan and be confident in all your numbers. I am no expert, but I can spot a dog.
[addsig]
Good advice. I made an offer and and am hoping this guy doesnt call back.. I checked his court records and he has a long history of trouble. Not sure if I want to deal with someone like that for a first deal.
Awesome thread and what a learning experience for a new investor! Even though the deal wasnt made, you are still much closer to your first deal than you were before you received that call. Hats off to you and all the supportive colleagues! With this newfound exposure, I'm sure you'll soar with the next deal!!! Happy investing and Merry Christmas!!!
Just an FYI....... You can call and cancel the deal at anytime before the seller accepts it and returns it to you. It isn't considered "legal" until he signs it, hands it to you or puts it in the local mailbox. So, you can call and simply say "I am withdrawing my offer".
So then how do you prove who did what first.
"I am withdrawing my offer" what if the response is " sorry i signed it and sent in the mail 5 mins ago" and really does it 10 mins from now? who wins?
[addsig]
I understand what you're saying. There is no way to prove whether or not the contract was put in the mailbox. Is the seller going to be willing to go to court and pay a large sum to a lawyer to argue this? It would be the sellers word against the buyers word unless the seller had a witness. Most of the time the seller isn't going to do this anyway. Usually it is going to be delivered personally. Most people are going to accept the fact that the buyer isn't going to buy. It would be very rare that someone is going to go as for as to ask a court to decide the matter. All I know is that it is stated in the real estate codes that an offer can be pulled before delivery has taken place. It doesn't sound to me as though this particular seller would waste his money going to court. From the sound of it, this guy never called billfaith back anyway.
if you had a few escape clauses in your contract, it wouldn't matter if he signed it or not. You would have a way out regardless. Depending on what the mortgage payments are, you still may be able to get section 8 rental income. It would at least cover the payments and then some and you can sell down the road after it appreciates a little more in value. Or better yet, you can do a lease option and add 10-15% to the current value as your sales price (for 2-3 years down the road) and make some money up front as an option consideration fee and possibly make a monthly cash flow plus future appreciation.