Another Question - Solve The Riddle
My Dad and I were going over the numbers of a potential property (which I've mentioned on this site before) and trying to figure out how to make the numbers work.. I keep thinking that there's got to be a better way.. So here's the riddle..
House is obtainable for ~$235K. Seller has an existing mortgage with $108K remaining (after ~13 years). With about $15K in Rehab the house can be sold for approx. $300K. So my rough expense calculations are as follows:
$8K in closing costs
$4800 for 3 months of Mortgage payments for a $235K mortgage at ~6%
$1000 for 3 months of taxes
$15000 for Rehab
~$11500 in Capital Gains if sold for $300K (very rough estimate).
So when all is said and done there looks to be about $25K in profits..
Now, for the riddle.. How do I make this work for the least upfront expense.
Also, say I get the seller to agree to a sub2 deal where I take over his payments for the $108K, where would I get all the additional money from.. Would a bank give me a loan on a house that I purchased 'sub2'..
Thanks!!!!!!
3 months isn't enough time to budget, better plan on 6 and hope it goes sooner.
Add in insurance, utilities, pad the rehab costs by at least 10%, realtor costs to sell if applicable, closing costs again on the sale, etc.
Thanks for the advice.. I thought I was being conservative with 3 mos.. I guess 6 mos is more realistic.
So what would you do given the above scenaro to get the balance of the sub2 mortgage and equity in the home needed by the seller? Would a regular bank be willing to give me a loan given the 'creativity' of the deal?
If you end up needing a realtor to sell this house,(about 15K @ 5%) unless you up the selling price, your expenses will eat up all the profit. You may wish to reconsider this deal.
I spoke to Wachovia bank today about my loan options. They have a construction loan that is interest only until the construction is complete. During the construction phase you pay prime. After construction the rate gets fixed at whatever the rates are going for at the time. And they appraise at what the value of the house will be after repairs (they require construction plans from a General Contractor). It's kinda like a HUD 203b but without the qualification requirements and no escrow. And you need to own the house to get it but I asked him if we could do both loans (mortgage for purchase and then construction loan immediately) in the same day and he said he didn't see why not.. The construction loan has to pay off your mortgage first and after the construction is complete that's your new mortgage. So, if I find a good flipper I can buy the house and do a construction loan all at once.
I can even get plans from a GC and after the loan gets approved do some of the work myself (bathrooms, floors etc) and pay myself out of the loan.. Maybe to cover closing costs..
This sounds good to me..
Maybe this is nothing new and I'm just showing my newbness..