Best Acquisition Method
Hi guys, not sure what would be the best way to handle this deal. Details are as follows:
fmv after repairs: 146,000
repairs: 19,000
1st bal: 107000(103k +4k prepay penalty)
back pay owed: 4000
holding costs: 4000 (4 mos @ 1000/mo)
Seller is in charge of handling his deceased parents estate and neither him nor his brothers or sisters can afford the payments on this. He just wants out. I plan on rehabbing and selling right away conventionally to get my money back out. I was thinking sub to would be the best but since I'm re-selling right away not sure if this is the best route. Any suggestions would be appreciated.
Thanks!!!
Ryan
I would agree the profits projected are thin. 10K or so is not to be ignored but if anything does not go as planned you might be looking at a lot less. In particular if the $149 resale is found to be optimistic and you need a price reduction plus a realtor's fee then you are wasting your time.
Short sale is always something to consider. Not sure you will have a happy seller if you ask them to wait and then find that you can not get a short sale done. There is no credit damage to the present owners if they lose the place so that will not motivate them much. If they can not afford the payments but see what they think is their money on the table they will want to get a deal done.
Continue to work it as it has potential. If you go forward it will likely be tight so really make sure your numbers are solid. If it turns out that you can not get $149K on a sale consider a lease/option or some other way to forward price the place (soft terms with next year's price). That will tie up your cash so check the possibility to refinance to pull out your investment if you go the L/O route.
John
[addsig]
RRIDL21,
My first concern would be is this deal in probate - sub2's are difficult to almost impossible if the offer must be approved by the courts.
It is a marginal deal but has profit potential as well.
Let's say you can sell the property in 4 mths let's see if it would be a good sub2
Market value $146,000
As is value $129,000 I would sell as is
Loan pay off $107,000
Back payments $4,000
Now we have $18,000
Less 4 months of payments @ $830 = $3,320
Clean up cost say $500
Taxes $233
Insurance $525
Utilities $584
Closing cost $965
Add for FSBO cost $990
We are looking at a profit of $10,883 give the estate say $3,500 your possible return $7,383 but your out of pocket was $10,142 a return rate of around 130% not bad if it all works out
What if it does not sell for cash and say you have to do a lease option for purchase with 10% down and you lease op out for $950 month. Your out of pocket $9,568
Down payment $12,900 less your cost $9,568 = $3,332 give $1,500 to the estate you net $1,832 up front
Monthly lease payment $950 less mortgage payment $830 = $120 per month income.
I would due this kind of deal any day of the week if the market value is correct, if time on market is low and this is how I would structure the deal.
I would place the property in a trust and agree to share with them 50% of any net proceeds.
I would run an add using some key words fixer upper only $135,000, Will consider offers, discounted $15,000 and so on. I will not due repairs just a little clean up.
I run an add for 2 week cash only, then I will run an add for 2 weeks to lease purchase or owner finance if it did not sell the first 2 weeks. I would get 10% down and get $950 a month
The key to any deal is know the area market, know the subject investments market value, wholesale value and bail out value, and most importantly the motivation of the seller.
Let me give you an example of a deal that I just did, I agreed to purchase for:
$6,000 purchase price
$750 bird dog fee (payment to my property locator)
$200 advertising
$285 closing cost
My out of pocket on this deal is only $200 for the add. Did a FSBO for $19,000. At closing I got a check for $11,765. Now it did take 60 days to sell but I had it under contract with a 90 day close to cover my self.
[addsig]
Thanks for all the great advice guys, I really appreciate your input. I'm comfortable with the numbers on this one. I pretty much covered myself for worst case scenario with the repair amounts, I could easily get away with less. Also, the fmv of 146k that I showed is low. I'm confident I could get at least 153k. Most similar homes in this area are being listed around 165-170k. My biggest concern is what John addressed: having the courts involved. I'm not familiar with probate. As a matter of fact, I'm still not 100% sure its in Probate. I know the sellers parents did not have a will and that he is handling their estate. If anyone knows how this process works, let me know.
Thanks guys!
I do think you have a great deal, probate can cause a little problem, you should ask them if it is in probate and you can research this information at the court house
Quote:
On 2004-09-14 18:47, RRIDL21 wrote:
Thanks for all the great advice guys, I really appreciate your input. I'm comfortable with the numbers on this one. I pretty much covered myself for worst case scenario with the repair amounts, I could easily get away with less. Also, the fmv of 146k that I showed is low. I'm confident I could get at least 153k. Most similar homes in this area are being listed around 165-170k. My biggest concern is what John addressed: having the courts involved. I'm not familiar with probate. As a matter of fact, I'm still not 100% sure its in Probate. I know the sellers parents did not have a will and that he is handling their estate. If anyone knows how this process works, let me know.
Thanks guys!