Posted by Tom Nagle PA on November 08, 2000 at 22:29:29:
Clark-
Thought I would answer this while I was here. In one month, the seller is going to have nothing: no house and bad credit for the next 10 years. I bet she’ll take much less than 8K - 9K. I had a similar deal in September. My LTV was a tad higher though.
Best of luck.
Tom Nagle
Preforeclosure can you help Ed?- - Posted by clark
Posted by clark on November 08, 2000 at 20:44:15:
I found a distressed home forsale. The owner has a loan balance of 48,000. She wants 10k to 15k to walk away at closing. I feel pretty comfident that she will take 8k to 9k as the foreclosure process draws nearer. She is 3k behind on payments right now and is going to be forclosed in about a month. The FMV is 90k, but it needs about 10k in fix-up. I have excellent credit and only 11k in cash to work with. The house is located in Vancouver Washington where the market is great, at least thats what the so called experts are saying. I’m planning on flipping the property. Can you help me figure out someway to make this deal work? I might add, this is my first deal. Thanks Clark
I dont have the experience Piper does… - Posted by David Alexander
Posted by David Alexander on November 10, 2000 at 18:15:31:
but I’d do the deal, just would structure it different.
I’d first try to buy her for little to nothing out of paocket to walk… in the event that didnt work I make the 8k a dormant note due when the property sold, wouldnt mention payments or interest.
I’d try to get the 10k down if I could, and I wait and pay the 3k at the latest possible moment, then I would either exit by selling for cash or selling with financing for about 10k down or so.
Selling for cash should give you a 100% return after figuring in costs such as Realtor, closing, holding, etc.
Owner Financing should give you a great cash own cash return of any cash you have buried, hopefully not more than about the 3k… but collecting a cashflow on the full loan and interest rate spreads.
And I would try to figure a way to borrow that so that you have all your cash back and can keep on moving on more deals.
ie… 80% is 72k borrow as much cash as you can against the spread between the 48-72k mark and give someone a decent return, you can then take the cash and do more deals.
David Alexander
Re: Preforeclosure can you help Ed?- - Posted by ChrisTX
Posted by ChrisTX on November 10, 2000 at 17:47:32:
I agree with Jim…Tell the lady it looks like to you she is going to have to give up the property, and she can give it up in one of two ways: She can give it up, lose her credit, and walk away with nothing. Or she can give it up, SAVE her credit, and walk away with $1000 in bank of back pocket!..which would she prefer?
Let her decide and then you can decide. Good Luck
Re: Preforeclosure can you help Ed?- - Posted by JPiper
Posted by JPiper on November 09, 2000 at 07:09:21:
I can’t see this deal being worth more than about $50-$55K…at least not if you plan on making any dough on it.
Figure it this way…you take the loan over for $48K, bring it current with $3K, maybe give her $2K to walk. This puts you in at $53K.
Now you spend $10K in fix-up…you’re up to $63K. That leaves a margin of $27K based on your FMV. But we haven’t reflected anything yet for carrying costs, if any, real estate commissions, closing costs for selling and/or buying, and the fact that you may have to carry something to get this thing sold. We’re also not reflecting the fact that you may have cost overruns on your rehab (or some other type of contractor problem)…of course, that may not happen where you live.
Don’t know about you, but this deal at tops to me would not be worth more than $55K…and even that would make me uncomfortable. I say offer to take her loan over, bring it current, and give her $1K-$2K tops to walk.
JPiper