10 unit (3 building with common parking area) OWC Deal..
Hey all,
So my wife found this interesting deal on craigslist. The guy just bought this 3 building property hard money($70k) from the bank. 2 of the 10 units are livable (the one big side-by-side duplex in front) and the other 8 units (2 4-plexes in back) are trashed. According to some of my friends in the police force this was the site of a major drug bust about last year. However I've done the math, I know there is an ability to add spot lights to the big common parking area (with garage space for each unit!) and security cameras etc. Essentially we would own half the street, and would have an opportunity to turn this neighborhood around.
Guy is willing to do OWC at 150k, with 10k down. I'm superfine with that as the ARV is somewhere between 300 and 350, and the bank is OK with paying him off using a construction loan. Sweet! Here's where it gets weird.
My mom is a retired paralegal, and worked exclusively with real estate attorneys for 15 years (sweet deal, hey?) She did a quick title search on the deal and found that the guy who bought it purchased the property under an LLC that is in arrears to the state-- she says that it will be nigh impossible to get clean title to the property in this case, and to even sell it looks like his LLC needs to pay near $10k in back taxes and filing fees--I know they guy doesn't have that money, and I'm not in the mood to pay him that extra dough just to get his books straight.
Second issue--The deed is as old as time--like early 1900s old. And more importantly the original deed only had the one building on it-- the big 2 family. Now there are the two fourplexes, a large garage, and a huge parking area. Mommy says that encroachments and such will make a bank not want to underwrite a loan as they don't know exactly what they can collateralize. Is this the case?
She said the only way to get a real clean deed that you can loan on would be a survey, and the current owner told me he was quoted $10k for the survey.
I called the guy and told him this and he immediately asked for earnest money..kind of ("Well If you're serious I'll think about getting this stuff cleared up *long pause*) I told him I'm not putting down earnest money unless he gets a clean deed at least.
Any other insight into deals like this? Is it really going to be something along the lines of ponying up another 20-30k in other fees just to get clean deed and title? would love any advice from folks who have had similar dealings.
Thanks!