My first deal need some guidance. Kinda of funny there's not, "sections"


#1

Hello all. My name is John and I live in the Dallas, TX area, I need some guidance. I have always been fascinated with real estate, but always watched from the couch. After years of watching I am dipping in.

Duplex - One side - Lady is moving to assisted living and told me she cannot make a profit on this house. Payoff is 71k. Payments are 523/month. 2/3 Bedroom 2 bath. North of 635 mile to mile and a half in Garland. Area on Zillow lame zestimate shows 146K but shows 3 bd 1 ba. Called Realtor - Comps closest were about a year ago 130’s.

So seller has a greed to allow me to take over payments until I can get the house, “to qualify for financing and pass inspections”. She has given me a year. I am pretty savvy with construction - I own and operate an access control/security company in the Dallas area. I have several folks in various trades that can and will come work.

House, hasn’t been touched since it was built in the 80’s. Necessity to pass inspections. One bathroom needs completely tore out and rebuilt. Possible wall rebuilds. Luckily, my son and I can do this. The only major concern is the toilet not working, going to have my plumber come check out the toilet drain and make sure I don’t have to start busting concrete floors replacing a sewer line. He has assured me this is worst case scenario and more than likely is not and will not be necessary.

Painting - family.

Floors - Contractor - all rooms

A/C condenser - Contractor

Office or bedroom install door to confirm its a 3rd bedroom - family

Kitchen - could go either way. Rip out and rebuild or stain and/or repaint cabinets - family

Outside - cut down trees and light landscaping - family

Quite a bit to do on this 71K home.

So in structuring this deal with the current owner. Do I just do a basic purchase agreement detailing the deal? Does she do a, “quit claim deed”?

Just want to make sure we are both locked into this deal and I get my check at closing when I sell.


#2

STOP and THINK, NEVER let emotion drive your real estate deals.

Sounds like you are entering a basic subject to deal.

First question. Do you have the ability to finance out if the lender decides to call the loan after transfer to you.

Without a deed in your name you are basically rehabbing the house for the owner…whom IS NOT you.

Find out what the ARV value is…do not go on speculations and guess work. Get FIRM numbers.

GET SOUND FIRM of ALL costs to rehab., AGAIN, DO NOT go on “Well that is the worst case…and I guess I could do it for…etc.”

If the kitchen need to be torn out and redone that alone could wreck the deal.

“So seller has a greed to allow me to take over payments until I can get the house, “to qualify for financing and pass inspections”. She has given me a year. I am pretty savvy with construction - I own and operate an access control/security company in the Dallas area.”

What does seller have to lose here…AND…what do you have to gain???

I have several folks in various trades that can and will come work…Best friends ARE NOT the way to do construction on YOUR project with NOTHING to gain for them.

FINALLY and to end the PRELIMINARIES…How does this thing pencil out AFTER all your time, effort, money???


#3

Thank you for replying. I have been going over this for some time. It has taken me almost a month to get to the point I am at. Reaching out to folks to get a better idea of how and what I am getting myself into.

Let’s talk numbers first to save time. Payoff is 71k. Called 2 realtors for comps in the area. Properties move fast and don’t stay listed long. So, comps from realtor 1 - 130’s, realtor 2 - 135 to 140.

I have been involved in all sorts of construction in my life. The biggest benefit to me is the fact that I can at least have a good idea if a contractor is trying to take advantage of me. When I talk about folks in, “various trades” I am referring to actual contractors with actual businesses. In the past I have had success bartering services. Mine for theirs. I know their skill sets and what they are capable of doing. This would be a true business deal. I am not asking for favors when they have time.

I know the AC condenser is not working and needs replaced. I called my AC guy he has a unit in his shop and can replace and fill with Freon for 3500. My plumber will have to do whatever it takes in the bathroom. He will have to come out and assess once I get an appointment set next week. That is the only thing I do not have a true number on. Everything else, I know I can handle myself as I have done in the past.

I know my part will be 17K for rehab costs. So I am at 20,500 before I get a true number from the plumber.

As far as structuring the deal. I did find out that Lease/Options are frowned upon in Texas and if you don’t have an attorney draw one up properly it can be illegal. I do know that an, “owner finance” deal is not an option because the lady does not own the home, the bank does.

So here is an option - have an attorney do the legal lease option for 179 days. That will give me 6 months to get the house ready for an appraisal. Then get FHA financing on the home and hold it.

I don’t know for sure if this is the right direction. But I think this may be the path I choose.

I am very ready for opinions and questions.

Thank you.


#4

Seems a bit skinny to me. 71K payoff, 20 K for rehab, if rehab goes to 30K gets skinnier. Sell at Mkt of 130 minus 10 percent cloisng costs, 6 months carry, etc…does not apeal to me at these numbers.

By the way LOOK & CHECK before you LEAP…I believe FHA ,loans REQUIRE OWNER OCCUPANCY for at least six months and there is one helluva stiff penalty if you are caught not occupying.
Good Luck.