First Deal, Need Help With The Numbers
Can I get some advice on my first deal. It's not great, but it might work based on what the seller is willing to do. Here are the figures for this townhome:
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FMV: $180,000
she owes: $174,700 on a 30yr fixed
PITI & association fee: $1400
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market rent: $1300
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She's had it listed for 6 months at around $188k. It's not selling and she's thinking of letting it go into foreclosure. Any ideas on how to structure this one?
Thanks.
It doesn't look like those numbers would work for me to do a Subject To. You might consider letting her get behind on her payments (if she's already said that's what she's going to do) and then trying a short sale.
Don't know if this is or isn't a good deal without some more info:
What's the appreciation rate around that area?
What's the average Days on the Market for houses sold in that area?
How good is the house: nice shape, nice neighborhood, etc.?
I ask because those numbers don't immediately scream DON'T sub2: you could offer her $10 and take over payments, clean it up, sell it on 2-year balloon contract for deed for $200K (~5% appreciation x 2 years), $15K down, $1500/month.
Your buyers refi in 2 years would pay off the original mtg and the leftover appreciation you built in would put money in your pocket.
Profit: 15K down now
+ 2400 (2 yrs of $100/month over mtg)
+ ~9K at close 2 yrs from now
Cost:
- $10
- $2K (cleaning/advertising costs)
Buyer pays for closing costs at the end of the 2 year CFD.
You would advertise it as No Qualifying Needed which would justify slightly higher monthly (can't get a house conventionally, etc.). Plus these people would be BUYERS not renters.
This would work if the appreciation was right and if the house was worth living in; if it's in a war zone or not sellable for other reasons, then it might be too thin a deal (I'm thinking about your holding costs per month while you're trying to sell--it could eat up your profit pretty fast).
Andy
[ Edited by arytkatz on Date 06/04/2004 ][ Edited by arytkatz on Date 06/04/2004 ]
Thanks for the reply.
9% avg. appreciation in our neck of the woods. It's in very nice shape and it's in a nice neighborhood. It's clean and newer (december 2002) and doesn't need much. the only issue is - the market is somewhat saturated with townhomes (aren't they all?)? Thanks.
M
marc:
If what you say is the situation, then the last "holdup" might be days on market info.
Can you find a friendly realtor to give you some info on the TH market? Even if there are a lot, if they're selling in 2 weeks, then go for it. (I sold my condo in Chicago in 24 hours, despite a glut of condos/apt conversion to condos on the market).
If they're sitting on the market for 90+ days, you might want to structure the deal differently: maybe get an 15- to 30-day option and advertise for a buyer. If you can't rustle one up with your No Qual lure, then you regretfully bow out.
I lean toward shorter option periods, because I don't want to leave the seller hanging for 60 - 90 days waiting for my decision, only to end up not purchasing.
Andy
Good idea. I might ask her that. I've basically told her, that I can fill the property for the right price ($1200/month);
I did ask a realtor friend of mine and I think they are selling for the right price. which is about $175,000 in about 30 days. People are always buying for the right price.
I'm meeting with the seller today and I'm going to ask her to carry the taxes and HOA fee for 2 years. That way, her cost/month goes from $1400 down to $233. I'm not sure if she'll go for it, but she sort of does not have any other options besides me - but I don't want to get screwed either. It's sort of a lose/lose, unless I can get her to cover the above. Then I can see after a year or so I could make some on the refi.
What will you do if she agree's to it to make the sale, but doesn't keep her end of it (ie- she doesn't pay)?
I'm not sure. I guess, I'll make my loan servicing company make the collections and make her life not so good if she doesn't pay. I'll probably make her pay them directly, then have them cut me a check every other month or so, since they charge $5/check for anything over one check.
NEWS FLASH!!! NEWS FLASH!!! NEWS FLASH!!! NEWS FLASH!!!
I signed up the seller! My first deal! I met with her today and her husband was there too. He's not on the deed and they have a prenuptual agreement that states he's not on the deed and the ownership of the home will not be due to him. Anyway, I have her carrying $150/month. Took the home for $10.
congrats on your first one....now go get more.