New Guy - Deal? Flip? Or Walk Away? - Posted by Larry

Real Estate Investing
1

Posted by Juan on July 02, 2002 at 21:56:44:

Larry,

This is where you really have to put your thinkig cap on and be creative. GL makes some good points about the L/O and see if you can split up the property. Call the local zoning office and they can assist you with what you can do with the property.

Even if you just took it over, you might be at a bit of a negative cash-flow. You have about $1100 in rental income and a $1000 mortgage (does this include taxes and insurance, if not than you must factor those in plus repairs).

There is some potential, be sure to do your homework, but don’t overanalyze. Get in or move on to the next deal, there are many more out there.

2

New Guy - Deal? Flip? Or Walk Away? - Posted by Larry

Posted by Larry on June 28, 2002 at 09:39:15:

I would appreciate your help determining if there is a deal I can do here.

My current business model is to buy-rehab-resell. AND I am an aspiring RE investor (a newbie, new guy, whatever), and am (still) actively working toward my 1st deal.

A seller found me through my B. Signs with a rural rental property. He contacted me before and without talking to any realtors.

The seller, who is elderly, has refinanced the property a great deal, recently, I think to repay medical bills, so its mortgaged to the hilt; $129,000, $1,077/mo., Jan 2001; the 4th refinance since ?97. The original mortgage was $51,000 in 1985.

Its a 2.75 acre parcel with an old frame house (1910) that?s rented to his 2 grandsons for about $550 ea. One tenant wants to stay, but the owner told me he would “just like to get rid of it” (his words), because he can?t make the monthly mortgage when the 2nd grandson(tenant) moves out in August. He also stated that he just “needs enough to payoff the mortgage”. He?s motivated (I think), but I?m struggling to find a deal here that I can make work.

The property site is in Washington County, western Maryland, near Sharpsburg and its Civil War battlefield tourist areas. Only about a ½ acre is in use for the house, yard, etc.

Comps suggest that the FMV may around $110,000 - $135,000. Newer homes and renovated period homes are going for 2 and 3 times that.

My first question is this: Since this does not fit my plan, and I presently do not have the REI where-with-all and capital to pursue developing it, is this a candidate to flip? Because of the large mortgage, I?m stumped how this can be win-win for me, the seller, or the flippee.

If I could, I envision the unused area of the parcel, to be developed with a new house, after clearing the trash, trailer, and brush, etc. Or, similar scenarios, like razing the old house, and using the whole parcel. Nearby parcels have been similarly developed, and there are many new, micro-estate type properties in the immediate vicinity.

My second question is this: Is there another way to make a deal ? Again, because of the large mortgage, I?m blind to other possibilities.

OR ? Is this a walk-away ?

Thanks,

Larry Cross

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Re: New Guy - Deal? Flip? Or Walk Away? - Posted by Larry Cross

Posted by Larry Cross on July 01, 2002 at 09:04:47:

Thanks to all for your responses.

You confirm my novice conclusions.

Larry

4

no equity - Posted by Donald

Posted by Donald on June 29, 2002 at 17:28:54:

Larry

No deal here.

You will have a Negative cash flow of over a $1,000.00 a month and NO EQUITY.

Move on to the next house.

my 2 cents

Donald

5

Re: New Guy - Deal? Flip? Or Walk Away? - Posted by Bryan (SC)

Posted by Bryan (SC) on June 28, 2002 at 15:00:19:

I?ve never tried doing this, but it seems like a good strategy to me: Take an option on the house and then try getting a retail buyer with one of those quick sale, auction type programs. If that doesn?t work, find a suitable T/B, explain the whole process to the elderly gentleman, and turn the T/B over to him. Keep whatever the T/B has to put down. The elderly man gets a tenant paying his whole mortgage plus the sale of his house pretty soon. You get the down payment money for helping him out and have no more responsibility in the deal.

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Re: New Guy - Deal? Flip? Or Walk Away? - Posted by Fred

Posted by Fred on June 28, 2002 at 12:26:27:

Walk away, FAST-RUN!!!

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Re: New Guy - Deal? Flip? Or Walk Away? - Posted by GL(ON)

Posted by GL(ON) on June 28, 2002 at 09:50:35:

This is the type of situation that L/O fans look for. A heavily mortgaged house they can take over for nothing down by assuming the mortgage, then flip to a tenant/buyer for a small profit ($5000).

There is another angle. You mention making better use of the 2.75 acres of land. Could you get the place for assuming the mortgage, sever off the house and a reasonable sized lot, and have 2 acres or more for nothing?

These ideas depend on the condition and saleability of the house, and the size and shape of the lot, etc.

Depending on the circumstances you may be able to make some money here even though the place is mortgaged to the hilt. At least it is an opportunity to buy for nothing down.