Here are the details:
My friend has an empty house. She moved out two years ago, leaving her significant other in the property. The roof leaked and was not addressed over that time, leaving a mess of some of the interior.
Today, nobody lives there and she wants out. She is still making the mortgage payment, but is not able to rent it out due to the damage. Here's where I come in. She divulged this info at our monthly poker game... it just fell in my lap.
3 Bedroom, 1 & 1/2 Baths, w/ bonus office space
1 car garage (typical for neighborhood)
Comparable properties in neighborhood sell between $150-160k
- Estimated damage (moisture and general damage) with a contractor at $45k (yeah, nothing to sneeze at; new roof membrane, hvac and ducts (ducts on roof on old NM house), gyp bd work, mold abatement, all new flooring, interior doors, etc.
- New work would include redoing the kitchen (simple and small, maybe $10k)
- Upgrade electrical service so we can upgrade the AC ($1.5k)
- Spruce up landscaping front and back $5k
- Small contingency of $4.5k for misc.
- I feel pretty good about $65k as a healthy flip budget
So, she owes $98,000
We think it only makes sense to go into this if we can get it for $60,000 max (begin negotiations at $50,000).
Purchase + flip = $125,000
Potential sale on low side of $150,000
Potential Profit on low side: $25,000 - carrying costs
So, the real meat of the question (other than feedback on my flip numbers) is what to do about getting the property for its current worth. If she's not in default, how do we approach the bank with our offer (considering it's much less than is owed, but is self-evident as a fair offer if they saw the damage)?
I've got a partner in on this (real estate agent/broker), but he hasn't dealt with this specific situation yet in his career (about 6 years).
So, from my research today. Options not ranked.
Subject-To from seller
Approval from seller to contact lender
Negotiate with lender
Walk owner through short sale and hope the bank takes our offer?
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