Flipping Pre-foreclosures?
I am new to investing in Chicago. I was looking into flipping houses. Flipping pre-foreclosures seems like it would be profitable. Can this be done? What problems might I run into? Do I need any special forms or contracts? Any input or advice would be appreciated.
Jack
[ Edited by jscanlan84 on Date 09/15/2005 ]
LazyInvestor,
Awesome post, that goes a long way to answering a post I placed. Wish I looked at this posting before...
Oh well!
Thanks,
mrsposy said...
LazyInvestor,
Awesome post, that goes a long way to answering a post I placed. Wish I looked at this posting before...
Oh well!
Thanks,
mrsposey,
Glad you could benefit from it!
Happy Investing,
Steve Majors - The Lazy Investor
Another thing lazy fail to mention is that if the home owners are behind in payments, you still have to make up the back payments and attorney fees. Usually with a 100k mortgage, you can look at paying at least 3k to catch up the payments. Sometimes the balance will be spreaded out of a 6 month period raising the monthly payments up by 200 dollars min.
What I am seeing is that when you find a motivated seller, the property has not been able to sell because it needs repairs. When is it feasible to take over a property subject to, when back payments are due and it is needs of minor repairs? Should these properties be marketed as lease options in order to get the up front cash to do the repairs?
What I am reading here is basically “subject to” is assumption without lender’s knowledge. Most loans are due on sale… How do I avoid the title company(because they don’t want to do it illegally ) and have my interest protected? Is this legal? This “subject to” …who writes up this contract ? An attorney?
Thanks
I have a question to go along with this..
I have a property I am working on. I have the resources to buy it outright. There will be minor repairs needed. I talked to a lender who says she is investor friendly, but told me if I close on this property with a loan, I wll not be able to sell retail for 3 months due to seasoning issues. How will sub-to help on this matter? The seller will be getting 20,000 out of the deal. I was thinking about offering 5,000 when vacated and the balance when I sell, or a pre-determined date. Fix-up is only going to take a week or 2.
Thanks
Don
Well Jack, if you were to pay off the arrears and catch up the mortgage. You would still have to wait until the payment post to the homeowners account which could take a few days. Then they will have to remove the foreclosure status from down at the court house. at that point you can then record the deed. But it is always recommended that you have the property quit claimed into a land trust, using the homeowners name to name the trust. Then have the homeowner sign a trust agreement with you as the trustee, after that they will assign their interest over to your company.
The same for you time, if you have the owner to deed the property into a land trust, this should prevent the seasoning issues. Just let the lender know that you will be the trustee over the property and you will be selling the property for the seller. That should prevent the seasoning issue.[ Edited by charlotteinvestor on Date 04/19/2006 ]
With late fees, back payments, deferred payments, property and flood insurance, legal fees, etc., I have paid over $13k to reinstate a $126k mortgage when I bought a subject-to.
[addsig]
bump
Put down more money so you can get them to hold out for 6 more weeks. That is the only solution. Putting down at least 2k will let them know that you are planning to close. Make it non-refundable. That should do the trick.
Well Newkid, he said that he only has 6 weeks and to advise someone to break the law is not professional. It is irresponsible. That is fraud no matter how you look at it.
If putting down 2000 dollars wont allow them a 1 and half closing then so what move on to the next deal.[ Edited by charlotteinvestor on Date 04/22/2006 ]
agreed, move on to the next deal
charlotteinvestor,
Do you invest in Bessemer City, or Gastonia? Would these areas be good for rentals?
Well Newkid,
i think you misunderstand what i mean by fraud. If you advise someone to say they are buying a property as an investment and then on the mortgage they apply for occupied owner financing that is fraud.
I know a few guys that are investing Bessemer City as well as Gastonia, and they are doing very well. From my understanding the median price range for homes may be around 100-130k. So you would be better off catering to that market for best results. Not saying that you cant buy high end properties. Because alot of people would like to live in a smaller town that is outside of Charlotte.
If your children are old enough, then you could let them purchase it for you, if they plan on living with you. Then you could co-sign, so they can be sure to get the mortgage.
Who is foreclosing the first or second? It looks like your doing all the work for the second, they are letting you negotiate with the first to see what the first will accept as payoff. That will let the second know where they stand. What information did you provide to both lenders?
Tell the second lender that they can only receive 2k. Bottom line. The first wants all of the proceeds and leave them with nothing.
Who cares if the loan cannot be assumed. Purchase the property "subject to" the existing financing. Check out the Subject To form on this site and you will find tons of information on this.
thanks for the ideas everyone
I always appreciate any help anyone can provide
better to learn from other people than from my own mistakes right?
There’s no reason for you to wait a year to refinance. You can take the deal subject to and immediately refinance. If there’s no security instrument recorded at purchase, then purchase price is irrelevant. The strategy I use is to take the property subject to, refinance to pull my money and a portion of the profit out and then fix up, list it and forget about it until it sells. Sometimes the fix up has to happen before the refinance, depending on the home’s condition.
There’s no reason for you to wait a year to refinance. You can take the deal subject to and immediately refinance. If there’s no security instrument recorded at purchase, then purchase price is irrelevant. The strategy I use is to take the property subject to, refinance to pull my money and a portion of the profit out and then fix up, list it and forget about it until it sells. Sometimes the fix up has to happen before the refinance, depending on the home’s condition.
Or set up a double closing. Have your LLC to sell the property to you and have your LLC to hold back a second.