Tons of cheapies...too much $$ to fix - Posted by Buddy

Posted by Bud Branstetter on September 10, 2001 at 21:14:16:

Let us say you buy one of those el cheapos for 20K. If you owner financed it at 30K at 12% 30 year your payment would be 308/mo. This equates to better than an 18% return. Instead, ask for a 500/mo payment at 12% and shorten the time. It would normally pay off in about 92 months. But on your original 20K investment the return is a little over 25%.

This is a good way to invest cash for good returns. If they fix up the house and refi to a lower rate your return goes up even more. Many people in the trades will do these types because they can do the labor themselves. They can get surplus materials. You, in turn, pay retail labor rates plus contractor profits. As soon as the place is fixed up then you could get an appraisal and sell your note. I haven’t had you yet. I have a number setting in the IRA returning 35% on the original capital.

Tons of cheapies…too much $$ to fix - Posted by Buddy

Posted by Buddy on September 10, 2001 at 20:55:59:

I have recently been absolutely overwhelmed with the number of homes made available to me at dirt cheap prices. $10k, 20k, 30k range. All have potential, but the re-hab costs are more than they will be worth when complete. The problem is that they are mainly large, older homes in decaying areas of town. It may take 30k or more to bring one of these old ladies up to snuff, and the value would be in the 50’s renovated. Even if I pay 10K, then spend 30K to make it worth 50K, thats just too skinny of a deal for me. I’ve had better luck with smaller 1200-1400 sq ft. 3 br single family homes that need work. I know that I will rarely spend over 20k on it even if it’s rough. Any thoughts on buying these big old houses ???