My First Subject To Opportunity - Need Help!
Hello,
I am working on my first real estate investment deal and I need some help understanding how to finance it.
I have a seller who needs to sell fast because she is moving to another state for a job.
The house was on the market for $127,400 but it was not selling because it needs some cosmetic work—paint, carpet, some window work, etc. However, it does have a new roof and new siding. Because the house was not selling, the owner took it off the market. Other houses in the same neighborhood are selling in the $130-150k range.
The owner told me she needs to get $20k out of the property and she has an existing mortgage of $78,500. So, she would be willing to sell it to me for $98,500.
My objective with the property would be to fix it up and sell it.
I have two questions:
1. Does this sound like a good deal?
2. If this does sound like a good deal, what is the best way to finance it?
My idea is to assume the existing mortgage (subject to) and use a hard lender for the $20k she wants. I would finance the house repairs on my credit card. My real estate agent would sell it for a 5% commission. So, if I spent around $7k to fix it up, I estimate I would earn around $14k after my agent’s commission.
Is there a better way to creatively finance this deal?
Also, am I thinking correctly on this deal? I have been reading real estate books like crazy but I am still kind of fuzzy on how the financing end of things works.
Any advice from you experts would be most appreciated!
Peter
See if she will grab a you doing a lease purchase and assume the note and the buy price of 98,500...
if she needs the cash....suggest she gets an equity loan for the 20k and you still lease purchase it ....shes liquid you got the property...
your down $10......
make sure you have your contracts in order...
forget about the realtor.......
you can sell it yourself a lot quicker than they can.....
remember .... no body wanted it!!!!!!
Market it the right way!
peter, i would market it as is on a sweat equity basis. Your advertising is the key.
Something most agents don't do effectively.
.
But i wouldn't be writing checks for 7k
to return only 14k. And your going to be making payments on the loan. Now YOU become the stuckie and you are the motivated seller. I'd only take the deal if she would wait on her money till i got cashed out.
norepur
She wants 20000 cash now. Offer to assume or take subject to and give her a 30,000 second, all due and payable in 18 months. She can sell it at a discount or hold it and make some money. You get in with no cash - she makes a little more - win win.
sorry! I forgot your details! let me revise my last post to you as I see that she wants 98 including her 20k. deduct 20k from the number we ended up with. Now add 3K for contingency, another 3500 because you can pay all of the buyers closing for quicker deal, and the don' t wanter still makes more money than you and you have to wait for yours and winter is upon us and you live in WI? If so, add 1 more months holding time. Does this deal still sound good? I always show the seller my numbers so they understand why they cant have what they want. She gets 5k to move, 5 net after you sell. have her deed the property but escrow it with the attorney so you can't borrow on it and neither can she without somebody doing time. Good luck. Diane
You didnot get my first email I see. So lets start again!
78+20seller+7work+3contingency+15K resale (4% closing + 6% seller help to buyer who gets 100% financing--your quickest way to sell)+2500 holding=125,500. Give her 5k, escrow deed, etc. see my previous post. you might make a few bucks. this way, ok to try. but, if you have to get a loan on property, forget it. margin too close.
By the way, I did close on that deal. grossed $80,532 at settlement. the attorney was blown away! have another one now buying for 149k, appraised at 205k as is, 268k fixed up. will spend about 20k in it. this is a good year for me! believe me, these deals come. you just cant get anxious. work your numbers. i'm picking this one up because the seller bought it for 95, already spent 35 in it (new septic, gas line, plumbing, electric, ceramic tiles, drywall, new windows -- and ran out of money. he didnt know his numbers or have room for problems and ran into one with the plumber--i get it now and just lay carpeting, install kitchen and baths -- the easy work -- and walk away with the profits. these things can happen to you if you dont plan for worst-worst scenario, my friend. good luck! diane