Deal Analysis Requested
I've just about completed my first short sale. Here's the breakdown on the property.
ARV: $250k - $260k
Repairs: under $5k
Short Sale price : $185k
The property is a 2-flat, and each unit would rent for a min of $800 and I would rent the garage for $100/mo. There is also a finished basement that I could rent out as storage, but I'm not counting on that. The top unit is currently rented out for $800/month (verbal contract).
I've got my contract with the seller, got the short sale price okay'd and in writing from the bank this morning. As of right now I'm looking at retailing this property to a buyer. I'd probably do this for about $235k which would put my profit around $40k - $50k. I've got some people to pay - the gentelman in the property, the investor who referred the deal to me etc.
Needless to say there is profit in the deal.
There are several options at my disposal here, so I'm looking for what you guys out there have to say about each scenario.
Option 1: Close the deal in my name.
I'd get a loan for the $185k. Monthly payments depending on the loan would be under $1k /month. If I choose this option I walk into about 60k in equity with a cash flow of $500 - $700 /month. The only real repair required is painting on the inside which I can do myself. Obviously I would have an inspection done before I closed on it were I to choose this route. My only concern here is that the property is about an hour away from me and I'll be closing on a personal residence sometime in the next 4 - 8 months. If this cash flows enough the lender should consider this debt a wash. My payment = $1000/mo and 75% of $1600/mo of rent = $1200. My costs obviously would be what I need to close, fix, and the ground unit needs appliances. This is the largest risk to myself but also the most profitable. I'd probably hold for a year and then sell at around $280k - $300k.
Option 2: Assign my contract to retail buyer.
Look for a retail buyer and just assign my contract for about $40k. Obviously much less work involved, much less payoff but immediate cash.
Option 3: Assign to investor.
Again, even less profit but no real work from here on out other than locating this party.
I'm interested to hear what you "seasoned" guys out there would say. I'd love to hear a witty comment or quote from Lufos if that's possible
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Fire away gentleman, and thanks for your replies.
Ryan J. Schnabel
P.S. My thoughts are that if I close on it myself, and rent the place out for a year and then sell it there is almost no way I can go wrong. Even if I don't recieve ONE payment (I'd require 1 month security and one month rent up front to even have them move in) I could cover the monthly cost . This would cost me about $10k over one year period of time. I've got more than 3x that in the bank now and I'd keep it there in case this situation were to arise. If I then sell in one year I've significantly upped my profit in the deal.
Forgot to mention - this property is about an hour away from me.
[ Edited by rjs9352 on Date 03/05/2004 ][ Edited by rjs9352 on Date 03/06/2004 ]
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