Posted by Stacy (AZ) on March 19, 2001 at 21:04:53:
I’m not an expert, but too bad. I’m giving you may opinion anyway. If the market in your area is like mine (still seller’s market), this is what I’d do:
Deal #1: Buy it
Deal #2: Buy it.
If your market is still OK (and it should improve somewhat with interest rates possibly going lower), you’ve got your first subject-to deals. Funny how sometimes you get exactly what you’ve wished for, isn’t it? Make sure to factor-in realistic values and holding costs for 1 bathroom houses, which might take a little longer to sell. Make sure to do your due diligence, and get title insurance.
Posted by Todd (ID) on March 19, 2001 at 20:26:16:
I would like the experts opinion on these 2 Subjct To deals that I have recently negotiated. Deal 1: 3br/1 bath, 1000 SF. ,Pre foreclosure with $2500 in back payments due. Loan balance of 50k and ARV of 75k. Needs 5K in repairs. Has a 9.5% fixed at $600 PITI. Seller just wants out, she has owned it 12 years. Deal 2: 3/1 1400 sf. on a half acre, not a fixer. Appraised at 80k 5 years ago, 68k owed, it should appraise at 90k. Payment of 620/mo PITI. 2500 in back payments due and lender started foreclsure 2 weeks ago. Once again, seller just wants out. I have been trying for 2 months to get a subject to deal and BINGO, 2 in 2 days. Should I do them both or are they skinny? My plan is to flip the fixer and L/O deal 2. What would the pros do? Thanks in advance.
There appears to be sufficient equity to be worth saving. The 5K repairs-I would look at as to what could be done with less and sell with a credit to the buyer if they do some of the fixup. Like buy the carpet or do minor repairs. You do more cosmetics. The only problem you may have is holding costs until you get them occupied. I think I could even leave them in there with a Pactrust and have them pay an extra 100/mo then sell and collect the profit in two years. You can also ask them to pay a payment. They don’t just have to walk out leaving you with the payments. Part of the negotiating can be what they can contribute.
It’s important to make sure your estimates are accurate. 5k is a bit of fixup for a terms deal. I’m assuming that by saying “seller just wants out”, you at least have an agreement in principle to buy for the underlying balance, plus arrears.
I think Terry’s idea about the fixer was brilliant. You might also consider a “fixer l/o”. They are a relatively new strategy on the CRE guru circuit, but seem to be profitable in lower price ranges, such as the one you have here.
Deal 2 is probably a no-brainer, with both deals subject to your due diligence, of course.
Make sure to get estimates for all repair costs, unless you are already familiar with them. It always costs more money, and takes more time than you would think.
What are the rents in the area? 1,000 sf house that needs $5k in repairs may be hard to flip for the amounts you have given. You might try a Work for Down ad or even a Fire Sale ad.
The other question is do you have to cash to do both deals? If not you might try a partner.
Check the title and make sure there are no other liens.
Get it under contract with an inspection clause.
Talk to the banks and negotiate the back payments. See if you can get a foreberance [sp?] Ask to spread the payments over time but stop the process on the 2nd one quick. Make sure of your appraisal on these. With owner finance I can usually mark them up at least 10% sometimes more.