Newbie makes BIG mistake…now needs help - Posted by IB (NJ)
Posted by IB (NJ) on November 29, 2000 at 22:14:44:
You’ve all probably heard me talking about the deal that I was SUPPOSED to be closing on this week. Well my buyer backed out on me after dealing with him for the last 6 weeks. As a newbie, I made mistakes on this one from day one.
Aside from picking the wrong Contractors for the job (they turned a 3 week project into 2 mos.), we jumped out with no marketing plan. That is, we only knew how to advertise in the newspaper. So after a couple of weeks of trying to figure out how to better market our two fam.(property A) we got desperate for a buyer and decided go under contract with a 30 year old, single, police officer with bad credit and who still lived with his mother. On top of that we attempted to get him in (with a mortgage company contact of ours) with no money down. It wasn’t until I started reading this board that I realized that you never let a buyer with bad credit do a no money down deal. He has nothing at all invested in the deal and can walk away anytime he wishes (he did have $500 earnest money in it). Which of course he did. So here’s my current situation which I need advice on.
We purchased our 2 fam (property A) from a bank for $47k all cash. We put another $15k in for fix up and maintenance. Some where in the middle of fixing this baby up, a good deal was presented to me which I couldn?t refuse. A ?friend? down at the tax office called and told me about a sfh (property B) that a guy (in tax trouble) was trying to sell for $17k cash. The house was worth about $50k as is. We judged that it would take about $25k to fix up and retail for about $120k so we knew this was a steal. But I only had about $8k left to spare. So I had to take about $10k off my credit card to complete the deal. Luckily I make a hefty salary at my J.O.B. so I was able to cover expenses on property A while my Contractor worked to finish it. Our plan was to sell property A and use the proceeds to pay off the credit card debt from property B and start the rehabbing of it. All of this relied on a bad credit buyer with no money down. I swear I don?t know what the H$$% I was thinking. Or whether or not I was thinking at all. So anyway, this buyer of mine backs out and I?m stuck with a finished 2 fam. and sfh waiting to be fixed. I need to know what?s the best thing to do with Prop. A. I have a bank loan pending for the rehab funds for prop. B. The bank will loan 75% of the LTV for prop.B which again should come in at around $50k.
Should I refinance prop. A and rent it out for about 6 mos? We figured we should be able to generate at least $400 monthly using good Sec. 8 tenants. If a house is under the company?s name, can it be refinanced at 100% LTV. Is that possible? Or is it better for me to buy it individually for fmv (about $95k) and cash out? My credit?s good so I should be able to get 100% LTV. What?s the going rate anyway for a conventional mortgage for someone with good credit. Will ?seasoning? affect this deal in anyway? Will I as the new owner have to hold onto the house for 6-12 mos. before I can turn around and resell it? That?s if I chose to? Again, I?m a newbie so I don?t now. Thanks in advance for your help guys. Thanks to you veterans for bearing through reading this. Hopefully I can look back at this post 2 years from now and laugh. Right now I?m far from smiling.