Re: Newbie Needs Advice-You Got it! - Posted by Jack
Posted by Jack on March 18, 2006 at 19:04:28:
Take Dave T’s advice. It’s right on the money. Probably the most important information is what is it really, conservately, worth, compared to the loan balance, any back payments and anything else owed and the $15K he is asking. It is likely that you will want to offer less. What you are dealing with here is a “subject to” the existing mortgage and it can be tricky. You, sooner or later, will have to deal with the mortgage company. There are ways to do this like getting the present owner to send a letter to the mortgage company, designating you as making his future payment for him.
Most mortgages now days have a due on sale clause, but there are ways to get around it. You need comparative sales in the last six months in the immediate area. You can get these from a realtor if you have one that is friendly, or other free or pay services. Compare it as to size, number of bedrooms and baths and price per square foot and average them out to detemine this properties’ likely value. Condition could also be a factor. Once you have all of this you can realistically determine what it may be worth to you. If you are going to keep it as a rental, then you also have to have to realistically find out what rent you can get and whether or not it will cover your payments, including insurance and taxes home owner’s dues etc. Look at rental prices for comparable properties in the immediate area in newspapers or other sources. If it will not, or only breaks even without a good cushon for vancies, repairs etc., and a good positive cash flow for you on top of it all, it’s not a good deal. If you are going to just flip it to another buyer, be sure there is enough margin for you and for him. You should probably plan on him getting more. If you want to rehab and sell, make sure there is enough margin to cover all costs, including both end buying and selling closing and holding costs for a reasonable period, say six months, to give you a reasonable profit. There may be other considerations, that
I am sure other experienced investors, like say Frank Chin who could add. I do not normally go into this detail on a post, but I do firmly believe that if you have been successful, you should give back some of your knowledge to help others as a humanistic, if not moralistic and spiritualistic contribution to those who have either not been so fortunate or are in the learning curve.
You have had a Investor’s 101 Course for for free for this particular situation. I hope that I am not scaring you off, but there is a learning curve to Real Estate Investing. You need to know that, but not let it keep you from charging ahead. Ain’t R. E. Investing great? I wish you a long and sucessful career in doing this, as I have had. If you want more, let me know. If not that is OK too. Jack.