forslosure

5 Replies

If a house was bought back from the bank, and the bank list the house for sale $34,900. it has been on the market a month 2 b 1 b 864sqf would u have trouble selling the house for at or near market value, say a loan from the bank for the $34,900 and $5,000 rehab out of pocket. you r in $39,900 market value $63,255 rehab complete the first month. if it is sitting on the market now how will it flip for profit? how are you suppose to pay the mortgage if it sits on the market for 1 year or is their something im missing in investment loans or any other kind of loans any advice

Sorry, but that's really hard to read.

I think you're saying a REO (bank owned property) is on the market at $34,900. With $5,000 of rehab it would be worth $63,255. And you're wondering how to do this deal.

First, lets consider this deal. Purchase plus rehab would be $39,900 vs. an ARV of $63,255. That's a 63% deal ($39,900/$63,255). That's a really good deal. So, I'm pretty skeptical those numbers are correct. Further, its hard to do much rehab for $5000. Nothing much more than paint and flooring and a few small repairs. And if you're only doing small repairs its hard to force a large change in value, almost double. That sort of increase usually requires more than lipstick. So, could you sell for $63,255? Maybe, but I'd want to be very sure before doing that deal. That means strong, close, similar comps to support the higher value.

Second, could you get a bank loan for 100% of the purchase price.  Highly unlikely.  For one, you almost always need 20% down for bank loans.  For two, its really tough to get bank loans under about $50K.  No impossible, but the low value means the bank doesn't make much money, so most lenders won't do these.

A hard money lender might fund this deal.  The percentage is good.  But, again, the low loan amounts make it a low profit deal.  Add another zero on all those numbers and its a no-brainer, assuming all the number are correct.

To do fix and flips you almost always have to have some cash of your own.  You'll have up front costs, the mortgage payments you mention, insurance, utilities, etc.  You would have to cover those out of pocket.

Finally you will NEVER pull this off in a month.  From your purchase closing to your selling closing is, at best, about three months.  That's because most buyers will use a mortgage and that alone takes 1-2 months to close.  So, even if you do the rehab in a couple of weeks and get the property under contract quickly it will take time to close.  Meanwhile you're making the mortgage payments and other expenses.  Better to assume you'll be holding it for three to six months.  If you budget for six months and it takes less time you'll have more money in your pocket.

You might want to check out @J Scott Book on House Flipping.

Foreclosure Information

DEC 13 2014Listed by bank$34,900This property was foreclosed and now the lender is selling it for $34,900.Zillow's Foreclosure Estimate predicts this property will sell for $63,255.
DEC 9 2014Foreclosed$114,897The lender assumed this property for $114,897 during foreclosure proceedings and now owns it.

@jonholdman

Do Not use Zillow for anything except sold comp.s, as their values are always off, and the data can be months out of date.

If you're serious about flipping houses, spend a couple months here on BP reading everything you can.  Once you learn the basics, you'll be able to answer all the questions you posed here in this thread...

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