Next action on lead (4 years behind on taxes, almost no equity)

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Next action on lead (4 years behind on taxes, almost no equity)

Michael Zagorsky
Tucson, AZ · Member since 2015 · 56 posts · 15 votes

So I'm new in real estate investing looking primarily into getting into buy and hold.  

I picked up on the following lead.  Right now as a newbie I'm thinking this situation is not something I can move forward with but wanted everyone else's opinion.  

A woman was looking to sell her house in Cocoa, Brevard, Florida. I would guess the ARV on the house is in the $45-65k range. It belonged to her husband and she said that the mortgage has not been paid in over 5 years. She does not have any documentation on the mortgage, but I show the mortgage in 2004 for $74k and the last assignment being in 2013.

I show 4 years of tax liens held by various investors totaling about $5k before interest, also a water lien and code violations.  

I have not inspected the house yet or met with the owner in person, so I am unsure of the properties condition, but I would guess the current value in the $25k range.  

I'm not really sure of my next steps in this situation.  It looks like I would have to deal with a ton of lien holders and the bank before I could get it and I figure the bank would get almost nothing.  

Also, if I pass on the house because of the level of rehab needed, should I try and get a wholesaler involved?

Any thoughts?  

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  • Patricio P.
    Sacramento, CA · Member since 2015 · 74 posts · 21 votes
    11y

    45-65k ARV is a huge range. I think what is owed on the property is irrelevant until you can pinpoint a much more specific ARV. A 50% range is far too much uncertainty to proceed with purchasing in my opinion.

    I would get help from a realtor on estimating ARV and/or pull comps to get a better idea. Like @J Scott says, it's a good idea run your calculations on 100 properties before you submit you first offer. That way you have a stronger understanding of what houses are selling for.

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  • Michael Zagorsky
    OP
    Tucson, AZ · Member since 2015 · 56 posts · 15 votes
    11y

    Based upon some nearby comps, I would call the ARV $42.5k-$54k.

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  • Bill Hamilton
    Denver, CO · Member since 2015 · 251 posts · 123 votes
    11y

    I guess I am confused why you (or anyone) would think this is a deal that should be pursued. It sounds like it is almost certainly upside down and depending on factors that you don't know about yet, it could be in a position where the bank should be paying you to take it off their plate. Walk away. If for some reason you are still interested, let it go to auction and show up to bid (assuming that where you are that wipes out most liens). Or maybe I am missing something here. I am always okay with people pointing out why I might be wrong. It just helps me to learn.

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  • Michael Zagorsky
    OP
    Tucson, AZ · Member since 2015 · 56 posts · 15 votes
    11y
    Originally posted by @Bill Hamilton:

    Walk away. 

    That's my conclusion too, but I wanted to check to see if there was something I am not thinking about.   The only thing I can think about is buying the oldest tax lien from the investor and foreclosing but that seems like a long road to hoe.

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  • Melody Everett-NeddoPro Member
    Quality Technician in a CNC Machine Shop · Rapid City, MI · Member since 2015 · 159 posts · 35 votes
    11y
    Originally posted by @Patricio P.:

    I would get help from a realtor on estimating ARV and/or pull comps to get a better idea. Like @J Scott says, it's a good idea run your calculations on 100 properties before you submit you first offer. That way you have a stronger understanding of what houses are selling for.

     Where can I see @J Scott full post on this?  Thanks, Melody

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  • JR T.
    Financial services executive · Frederick, MD · Member since 2015 · 609 posts · 341 votes
    11y

    Next step is to find a better source of leads ;)

    That's not a lead. That's wood.

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  • Patricio P.
    Sacramento, CA · Member since 2015 · 74 posts · 21 votes
    11y

    There may be a blog post of his regarding that but I read it in his book on flipping houses. Lots of fantastic information in there.

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