Posted by Bill Jacobsen on May 30, 2007 at 12:27:41:
I am sure I don’t know all the details but I am assuming that the houses are now rehabbed. Can’t you rent the two vacant units and have possitive cash flow? Why not sell House number # 1 cheap and rent House #2. I am not sure why you have to refinance House #1.
I am assuming that you do know what went wrong on this deal and that you will learn from the mistakes. Unfortunitly, the tuition may be quite high.
I bought (2) 2-Fam houses from a wholesaler about 2 months ago. Houses are side-by-side. At the time, the numbers looked good and they still do but I am running out of cash.
Here are the numbers:
HOUSE #1
ARV: $230K
Total debt: $163,500
Repairs: $6,400
monthly debt service: $1,431.61
current income: $800 (2nd Flr. apt.)
This is a 2-fam house with 1 rehabbed vacant apt. The other unit is on a MTM lease. Tenant is on S8. Both apts. could rent for $1K per apt.
HOUSE #2
ARV: $230K
Total debt: $185,500
Repairs: $6,400
monthly debt service: $1,338.09
current income: $780 (2nd Flr apt.)
This is a 2-fam house with 1 rehabbed vacant apt. The other unit is on a MTM lease. Tenant is on S8. Both apts. could rent for $1K per apt. I have a $20K construction loan attached to this house. I used this money to both rehab both properties.
After June mortgages are paid, I will have $1,846.99 left*
Original exit strategy:
Refinance HOUSE 1 and pay off contruction loan attached to HOUSE 2. After refinancing House 1, sell it and keep HOUSE 2. We would fill the vacant apt for HOUSE 2 and raise the rent for the other apt. Both apts. would rent for $1K each.
This is not looking good. Please advise.
Many thanks!!
Two others have already stated the obvious here. Why don’t you rent out the vacant units if they will rent for $1,000 each? Then sell one of the building?
oh, and I read your short sale plan, thanks for the chuckle.
In addition to the other suggestions you received, learn about wholesaling (instead of simply buying from wholesalers). It will assist you with your cash flow during rehab projects.
If you rent the vacant units out at $1k/month you’ll have your debt service covered, I don’t know if the net is enough to cover your taxes and insurance, but it’s a better position than you’re in now and will give you some time to make a new plan or market the properties for sale.