Posted by David Garcia on January 24, 2002 at 12:15:57:
It sounds like a good deal considering that you don’t have credit & that it’s your first home.
Another option you have is to flip it. Just sell straight out for the appraised value after it’s fixed.
I work with lenders that finance people with 500 credit scores with a 85% LTV & 10% apr.
REO Opportunity - Need Advice - Posted by Sakima
Posted by Sakima on January 24, 2002 at 08:50:24:
My mother-in-law introduced me to a company in Alabama that has a lot of foreclosed properties for sale. The company accepts all cash, but they also provide financing. I am currently interested in a house that costs 30K plus. Unfortunately, I do not have all cash and doubt that I could borrow the money from another source. I am seriously thinking about having the company finance me. They are asking $2,000 down for properties located in Alabama and 10% down for properties outside of Alabama. The rate is 11% with no closing costs. For loans greater than 25K they will finance for 30 years, and for loans less than 25K they will finance for 15 years. My two questions are as follows:
1)Do you think this would be a good route to go considering this will be my first deal if the property has the potential to be profitable? Would you let the company finance the mortgage?
I know 11% is high but I will not be paying the 11% if I get someone in the house. Having the financing in my name will also help my credit a great deal. The properties are sold as is. Some are in okay condition and some need some work. The finance company is trying to get what they have in the property. Thanks.
Re: REO Opportunity - Need Advice - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 24, 2002 at 21:43:49:
Sakima-------------
This sounds like a good way to go to get started. I would encourage you to buy only if you know you are not paying over market value. As Al Miller–(SO CA) suggested, get out there and evaluate the market value before committing.
Yes, the interest rate is high. But, if you hold the property for a year or two, you may be able to refinance for a much lower rate. Just be sure that there is no “Pre-payment penalty” on the loan. That would require you to pay extra money if you pay off the loan early.
Since you do not mention wanting to live in the house, I suppose you have your own living situation set to your satisfaction.
You would be well advised to approach a couple of local mortgage brokers and ask them what kind of terms they can offer you in mortgages. If you can do better with them, why go with the seller financing? Try to get a discount on the price since they don’t have to finance. At least $3K, I’d judge. If you can’t do better, sure, go with the lender/seller’s financing.
You ask about renting or lease/optioning out. Well, those are two different investment approaches. I don’t think anybody can tell you which approach to choose. Certainly not given the lack of knowledge about you and your situation. I personally favor long-term rental holding. But for beginners, it is often better to resell quickly and get the cash to work more deals. Long-term holding is much less work, it seems to me, compared to the constant effort to find and buy new deals. Then resell them. But, different people have different approaches. Some people do not like being a “landlord.” You might talk to some people who know you well and ask them, if you think they will be hones iwth you, whether they think you would do well as a property owner/landlord. Listen to the spedifics about you and your previous actions as possible predictotrs of what you would be like as a landlord. But make up your own mind. You might want to read through part of Leigh Robinson’s “Landlording” book to see if the business of holding rental properties is congenial to you or not.
Good InvestingRon Starr*
Re: REO Opportunity - Need Advice - Posted by Rhonda
Posted by Rhonda on January 24, 2002 at 19:08:50:
Newbie
here could you send me the name of the finance
company you found. I am trying to come up with as
many financing companies as i can to get started
any help will be appreciated
thanks rhonda
Re: REO Opportunity - Need Advice - Posted by Al Miller-So Cal
Posted by Al Miller-So Cal on January 24, 2002 at 17:12:35:
Become an expert-go back and look at all sales last
6 months and see where you are reality time.
Be an expert in your the place youre at now. Dont
ask advice but know what youre doing. You are the expert. My advice. Look at the market. Whats for sale. How much? Whats sold. How much? Whats hot and what`s not?
You are the supreme expert. Only the searching and
lost souls are asking to direct them about areas about
where they live.
Hope this helps.
Re: REO Opportunity - Need Advice - Posted by GL
Posted by GL on January 24, 2002 at 09:14:55:
This could be a good deal if the price is right. I wouldn’t pay 11% if I could do better elsewhere but you say you can’t so 11% it is.
There are 2 ways to tell if the deal would be profitable. One is to figure out what the place would be worth in good shape. Subtract 30% of that for your expenses and profit. Then subtract what it would cost to put the place in good shape. If you can buy for less than that then it is a good deal. You could fix up, sell and make money.
The other way is to find out what houses like that are renting for. Figure out what your expenses would be for taxes, insurance, repairs and vacancies, and deduct that from the rent. Subtract your monthly payment from the net rent. Don’t forget to allow yourself interest on your down payment. If there is anything left over for you (positive cash flow) then it could be a good deal. Provided the selling price is at or below market value.
These are the general rules to use. They tend to fly out the window if there is a real hot market with rapid inflation. But I doubt that applies or the houses wouldn’t be so hard to sell. They wouldn’t have so many foreclosures and they would get snapped up quick.
Re: REO Opportunity - Need Advice - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 24, 2002 at 21:30:30:
Al Miller–(So CA)-------------
I liked your post. To the point. Clear-cut. Spare. And it has a real poetic quality that I enjoyed. Sort of a real-estate haiqu of a long variety.
Good Investing and Good PostingRon Starr********