Sub2 On Free & Clear Property
just a little unclear here.....i've been "kinda" working on this one for a while....but here it is: sellers lost their home to fire, have been waiting for the insurance company to come around and pay it off.......during this time, i had been talking with Sellers regarding purchasing on a Sub2 after the insurance co. came around and did what they were supposed to do.....now that's been done (payoff).......so they own the home free and clear now.....what do you guys suggest i do in the way of paying them monthly for the house....it's going to cost around $57,000 to rehab.....would i offer to pay them a certain amount and in that, include the cost of the rehab and they get the difference?.......i don't have my exact numbers in front of me so can't be more specific right now......but how about some pretty generic responses...thanks guys :-D
What will theproperty be worth when its completed? There is a certain point where it's not worth the time and trouble to do as an investment. I'm not saying you're there without more information, but I wonder.
Give up the skinny on this deal. Share the numbers, and you should get more help.
Jeff
The problem with a "burn out" is getting a fix on the real costs to rehab the building. I presume that there was extensive fire damage.
There's always surprises. The insurance settlement of $57,000 may or may not cover the real costs. Insurance claims are generally not windfalls.
Theres a lot of agencies which you have to deal with and satisfy to bring the structure up to building codes.
You need to get at least 3 contractor estimates. You need to figure what the after repaired value will be. You need to figure the costs of funds and the holding period. You need to be able to get an exceptional deal to spend your time and efforts. That's a generic response to your question.
I have done two fire rehabs. There can be some good money, but your holding period is long and there are many obstacles. You could consider quick turning to a general contractor or another investor that has extensive rehab experience. You would make less, but you would also have less hassles which would free up your time to do the next deal.
Get it under contract with a time contingency. Give yourself 25 days to inspect the property and talk to the code people. You will need unlimited access to the property during this time. Really you are just buying time to get the next buyer in line.
Brenda
Since the property is free and clear you will not be doing a subject-to because there is no financing in place. Ask to buy the house and property as-is with owner financing. Offer the owner 50-75% of land value only. Most of the 25 burnouts I have bought were from insurance companies.