Ran Out Of Funds!
Here's the problem.... I have a property located within 25 blocks of the river on a major street leading to downtown Austin. Residential fixxer ups are going for $150 a square foot with updated homes selling for $200 a square foot. This property is two buildings. Front bldg is 1280 sq. ft. back bldg is 455 sq.ft. Back building is rented out for $750 a month. I have a renter willing to pay $1850 for the front. I need another $25k to finish the project. $8000 to catch up with mortgage pymts, $6150 for back taxes (can be paid in installments over 4 months)
$1250 to change zoning from residential to commercial.
$9000 for driveway and curb cut ($2000 for base and rest to be paid in stages)
$600 for gutters and wheelchair ramp
I went through a rough seperation and am just now getting back on my feet. This home will be coming up for foreclosure in October. Once this property is converted to commercial, the value would be anywhere from $300K to $350K. What advice can anyone give me on how to handle this situation?
What is your mortgage payment? Also what can you rent the front house for now? You currently owe 14,000 to avoid losing the place. Personally throwing down another 36,000 to get that $1,850 doesn't make much sense when you are in a serious cash crunch. I would focus on getting current with your mortgage and taxes first. With the high interest rate you would get for the $50,000, you might end up just digging yourself a bigger hole and losing the house in the future because your cash flow can't cover your payments.
Follow the cash. If the cash flow doesn't work, the best thing might be to sell.
My payments are $2150 a month. I only need $25K not $36K. You lost me on the extra $1850??? My plan is to catch up on payments and sell the property as commercial in the spring of 2005 or sooner. I would prefer to sell owner finance. The area is red hot and not much land is available. Lots are appraised around $100K. My payoff will be under $220K
The base for the drive way needs to be layed out before the tenant can move in.
Zoning change needs to be changed ASAP. Both tenants are using this space for commercial use.
The monthly expenses are $2150 PITI after I pay the $8,000 to lender and $6150 to back taxes.
As far as the terms, I can pay 10% interest on the $25,000 payed back within 12 months.
This property has more than $450 positive cash flow. I just want to finish the project and sell it.
So if the zoning change doesn't happen your deal is dead in the water? Where are you in the zoning change process? Quite frankly 10% return is not enough to take a shot on the crap-shoot of a zoning change.
I already have a confirmation from the city of Austin Zoning and Planning Commission. The zoning will be changed to GR. The property is between a popular mexican restaraunt on one side and a liquor store and well established bar on the other. The reason I bought this property was because I already knew it was going to be changed to commercial and I had the chance to purchase this property with no money down as residential at a substantial discount.
So is there any additional work to be done to get the zoning change or are you simply waiting for paperwork?
How much did you pay? How much is your mortgage? Who is the lender?
$2000 for the base, $1250 for zoning change.
$217,000 for the property, including repair costs.
$2150 is the monthly mortgage with Washington Mutual.
I know this is not the answer you want to hear cause what you want is somebody to come across with $25,000 but I'm not sure you really need it.
As I understand your numbers so far you need,
$ 1,250 to complete the Zoning Change (though I am a little confused here-- if the zoning change is approved and you are just waiting for the paperwork what is this fee for?)
$ 2,000 for the driveway base
$ 600 for gutters and ramps (is this concrete work?)
For a total of $3,860 But you have a tenant for $1,850. So security deposit and first month rent is $3,700. So you are actually $150 short of completing your move-in work.
At that point you will owe,
$ 8,000 in mortgage payments and
$ 6,150 in back taxes
$ 7,000 of black top work to do eventually
and you'll have a postive cash flow of $500 per month.
It looks like your loan with WA MU must be a 15 year @ 9%
IIf it were me I'd be looking closely at the redemption dates on those taxes and talking to Wa Mu about a forebearance period.
If they changed their period from 15 years to 30 your payment would drop to $1700 per month that would give you $1,000 per month to put toward the back taxes and the pavement. In other words you'd be caught up in a year.
Alternatively if they kept the payment the same and stretched the period to 30 years then the loan amount would increase to $267,000 which is more than enough to get you out of your mess. Even a 20 year term is a $20,000 spread-- plenty to get you through if you husband your dollars carefully.
If they gave you 6 months with no payments you could pay off the taxes and the driveway and go back to your original payment plan.
Offer to put the place on the market as soon as the tenant moves in. Offer to make up the back payments on the back end. I think you can negotitate your way out of this mess without bringing in any more money.
Point out that if you file a re-org there's a pretty good chance that you could get 4 or 5 months of no payments, get the other stuff caught up and get the BK court to order them to let you go back to your original payment plan anyway and everybody's got a lot of legal bills in the meantime.
If you do decide on an outside investor expect to pay at least 15-20 % ROI and I wouldn't do the deal even then. I'd want half of your back end. Yes, that is outrageous but you sound desperate. Negotiate some breathing room and finish the deal.
MVTX,
How did things turn out?