Posted by DaveD(WI) on September 26, 2003 at 13:22:21:
OK, a $1 option, a $10 option, whatever is legal in your state. If sale price is 1k each plus back fees, and he doesn’t want to actually own them, you tie them up cheap so you have something to market. $10 is pretty close to free if you get my drift. The conversation goes something like this “… these are in real bad shape, I don’t know if I can do anything with them, but here’s $10. You get the rest when I close, refinance, resell, whatever.”
GOT a call from a friend who father has 2 junker properties in a bad area.
the properties were given to him and have just been sitting for 2 -3 years. he dont do real estate and just wants to get rid of them (1k each =2k) befor they get vandalized more.
the junkies in the area broke in and gutted and stole anything of value already.
the area comps go for 25-35k each, and he will basicly give me both houses if i pay the back water,garbage,and tax bill (total $6500 to bring both current)
both are free and clear but will cost 10-15k each (for contractors to fix each one.
he wants 1k for each house = $2000
bring both bills current =$6500
fix both houses =$25000
the market value when fixed up is 25-35k each.
so thats 60-70k retail.
i dont have that much cash 2K but i know that the city has programs for bad area repair. or i can try to do a quick flip, but i dont know any rehab investors yet. (so i dont know if they would even work that area.)
i know there is a profit but is it worth the risk?
there are home owners in the ares but it has another 2 junkers down the street.
Money can always be made! - Posted by John Smith, IV
Posted by John Smith, IV on October 01, 2003 at 24:13:33:
Or at least almost always.
It this case, don’t buy.
Make an offer to buy with exit clauses in place, and turn around and sell the contract. Finding the buyer is where your creativity will come into place.
It looks like DaveD has given you a plan to work with.
Posted by DaveD(WI) on September 24, 2003 at 21:59:35:
CM,
The real estate landscape is well littered with the bones of newbie investors who start out buying warzone junker properties. What is your exit strategy? Who is going to buy the property from you? You see, a slumlord is really your only buyer. And they already know how to buy everything they need real cheap. An owner-occupant isn’t likely to buy from you because if they can qualify for a loan they are more likely to want to live in a better neighborhood. Get it?
How accurate are your fix-up numbers? If you cost over-run by 20% (5-6k) of your targeted sales price for each house you won’t make a dime. In fact, you’ll lose money once you factor in your costs to buy, hold, and sell. You say you can’t possibly overrun each property by 5k? Trust me, it’s not that hard.
Here’s what I’d do. Tie it up with a free option to you, peg exactly what the back fees are, and wholesale it to a slumlord. Take a nice 3-5k assignment fee for your trouble and go find another deal. You don’t want to fix these turkeys.
Posted by DaveD(WI) on September 25, 2003 at 08:33:47:
You have to seek them out. Troll the local landlords club. I don’t mean investors club, I mean landlords club. There is a difference. Check with your local HUD office to maybe get a list of their section 8 landlords. Canvass the neighborhood to find out who their landlords are. Offer a reward… "if your landlord buys my house you get $200. Be creative.
Run a newspaper ad. Handyman special… Illness forces sale (I’m sick of this house)… Please steal my house… all these are great attention-getters. Be prepared for those who would cut you out of your contract by direct dealing with the owner or just waiting out your option. You’ve got to be tough. The best way to get tough is by creating a feeding frenzy. Don’t let people hose you around. Can you do that with your houses? But… this is putting the cart before the horse. You need to tie up your deal first.