Newbie makes BIG mistake....now needs help - Posted by IB (NJ)

Posted by IB(NJ) on November 30, 2000 at 10:17:37:

Thanks Dew:

I’m concerned about the amount of time it would take to find another buyer. So I’m thinking why not buy it myself, hold on to it for about 6 mos. to 1 yr. while collecting pos. cash flow, and then sell it. The mayor of the city (Newark) has just publicly pledged to pump $19 mil into the area within a 7 block radius. This is the same block that the small plane carrying a family of 3 went down and crashed into the KFC. So I’m thinking the houses in the area will appreciate rather nicely in the next couple of years. Maybe I’ll hold onto the house til then.

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.

Re: Newbie makes BIG mistake…now needs help - Posted by mike

Posted by mike on November 30, 2000 at 08:27:24:

I wont cover all your questions, just a point or two
As a rule of thumb, part of the ‘rehab money’ should be a few months of motgage payemnts shouldnt it?
If you never structure a ‘business plan’ for the rehab, you should at least hang onto a couple months payment.
p/u Kevin C Meyers "buy it , fix , sell it"
ISBN 0-7931-2610-X

Its a really good rehab guide.

Good luck

Re: Newbie makes BIG mistake…now needs help - Posted by dewCO

Posted by dewCO on November 29, 2000 at 23:22:24:

Can’t you resell the house, if that’s your first choice. If you can’t give terms, give price to make it go away.

You need to start talking to lenders in your area. To see if no seasoning on ownership is a problem or not. Doubtful you’ll get 100% NON owner occ. financing. But 95% is possible at NorthAermican Mtg.