HELP QUICK...Is This A Good Deal?
I need to make this offer soon if I can get this. I'm somewhat of a newbie.
-House value: $126,000
-Price: 85,500 (repo)
-Fix up to make rental or sell retail max: 15,000 (mainly cosmetic, carpets, I'll paint)
-House has extra area with bathroom that could be converted into studio easily (included in 15 k)
-Estimated rent I could get: $1100
Offer cash 80k cash (there's another offer on it). I actually put a full price offer with financing on it yesterday, but think that it maybe worth it to make a cash offer today if I can.
My question is my cash will come from Home equity line of credit and 2 credit cards at 8%. My exit plan would be to refinance within 2 months and rent out and sell in 3-5 years or if for some reason I can't refinance I would sell in within 3 months.
Can I refinance non-owner occupied, even if I don't have a job (I get laid off this week)? Credit score of 750. I will have about 15k buffer after all is said and done for carrying, unexpected stuff. I don't think this is too risky because of the market here, am I missing something?
With that credit score, there are lenders that will take you "stated", although the rate will be higher. If the property does indeed appraise for 126K, you could immediately refi after all repairs and pull out roughly $113,400. That would put you at 90% LTV and I have a few lenders that will do 90% on non-owner occ as long as you have good credit, which you do.
-- as for the purchase price, if you are paying cash, ALWAYS offer a lower price.
Here's how I would figure it:
ARV - 126,000
Repairs - 15,000
current value- 111,000
max bid - 88,800 (80% of current value)
- would start around 70% (around 78K) if buying cash.
If you got it for 80,000, that would be 72%, very good buy.
The idea is to be able to refi and pull out ALL your money that you have invested including repairs......at least that's what I shoot for.
Hope this helps !
Jason
My question is why would you offer $85,500, or even $80,000. Is there a reason why you would offer those amounts.
Are you offering $80k just because it is less then what they are asking, or does that number work for you?
Do you really want to be a landlord?
It isn't easy to refinance and cash out shortly after you buy. Most lenders won't let you "cash out" until you've held the home for one year.
If you are interested in doing this and interested in waiting 3-5 years for a pay day, then it's your call. If you want instant gratification, this isn't going to do that for you. It will probably lose you money for awhile.
[addsig]
why not rehab and flip? do you have the 80k in cash or are you going through HML?
I say if you are SURE what the repairs are and what it will be worth after they are done I say JUMP IN>
You MIGHT make a couple more K by offering lower but you might miss out entirely.
Me I would offer just like you say 85K BUT they only have until 5PM the day you put the offer in.
Then put it up for sale as you rehap if you even want to rehab.
If it sells and you make 15K take it and run. If not then finish the rehab, up the price and sell it outright.
Of course each of us have our own internal feelings and other such stuff.
GREAT job finding it and PLEASE tell us what happens.
Best of luck
Michael
I agree that a rehab/flip would be a more appealing plan than a long hold. Your return on investment (ROI) will be much less over a longer period of time. Additionally I would start by lowballing it and see how low you can go .
Hi all,
Thanks for the responses.
Some more background.
There were 5 offers made on this house. The house was actually purchased for $127,500 in October of 2003. I just got laid off (its a good thing, my partner and unemployment will definitely get me through). My strategy is to hold property when I can or flip. I want to get into subject to's with distressed property as well. Sending out postcards 1st week in January. Also shortsales. I'm not exactly sure what investment strategy will be my forte, but I want to give them all a try and then narrow.
I actually think I will be rehabbing/sell this house. Unless the inspection shows something nasty, with what I saw, I can do all repairs for no more than 10k and get it back on the market within 2 months. I can back out if inspection shows bad stuff. I kind of was looking for a cosmetic fixer upper (which is pretty hard to find in my area) to go through the process.
I just bought another undervalued property with a small cash flow, because I wanted to get my stake in the ground as a landlord. In 2 years, I'll be able to consider income from the rental when getting a loan which might be important if I don't get a "normal" job. Right now, rental income doesn't mean jack. I bought this for the appreciation factor. 9K down, bought house low, expect to make 250% ROI on appreciation gains when I sell. 2 year paycheck is okay for this one.
Also, I used to make $80k a year as an engineer. I just spoke with a recruiter asking me if $23k would work. I definitely decided real estate investment is the way to go!
I will keep you all posted. Thanks again for the advice and encouragement.
Best,
Paola
You said its a good market. Ok. Location makes a big difference in this deal. How good is good. If its really hot I say ok if just good get them to come down some more or walk away. Investors have a nasty habit of taking on properties they cant get rid of with little equity 26k after all that work is little then you have marketing and holding and selling costs. By the time its said and done and remember if the market is super hot disregard. Unless you can get 35% out of it after repairs its not worth it.
moneyprivate