Newbie asking for input, advice, "A Mentor??"
So I paid my money for the very basic course with Fortune Builders and it is packed full of great information covering the basics. I tried to find anything that would help on what I walked into, but to no avail. I literally paid the bargain price so no mentor included.
Okay, here goes, we have a housekeeper and she mentioned she is desperate to sell her house on 80 acres. I went through the list of questions I've been taught to ask.
1. What's your motivation to sell?
2. Are you the only person on the deed?
3. Your the mortgage holder as well?
4. Tell me about your home.
5. Do you know what is owed still?
That's when the strange happened. So her motivation is she just wants out, the house partially burned and due to medical issues, she had no insurance. (The fire department did far more damage than the fire, but not their fault.) She is the deed holder and the decision maker. The property has a barn that has had at least 2 additions added, it has a trailer house on the property as well, but the septic has to be replaced for it. The son is working on that now using regular 500 gallon containers. Not anywhere near code. She had a deal with the guy she bought it from 6 years ago, but no official contracts although her name is on the deed. She thinks she only owes $20,000. Here is where it gets interesting. The guy she bought it from was going to come to Colorado and make it official with a post dated contract (Her words, not mine) and told her she did only owe the $20K, but he died before he could make it up.
Now the property is in probate and the children of the dearly departed told her she owes $54,000. She hired a lawyer then fired her soon after over a payment dispute and because she was not getting anything done. She did learn that even though there is no official contract, the deed is legal and she has every right to sell it. It must be, she has a realtor listing it, but said she wants to fire him as well. (I made sure she knew I could not advise her on that, I have no issues with working through a realtor.)
The house, (If you can call it that,) is a total loss not only from the fire, but it really looks like something out of the Texas Chainsaw Massacre. Its more of a shack on a postage stamp foundation. It's only 960 square feet with 3 bedrooms and 1 bath. I did a walk through and simply stopped writing down what was wrong because everything, "And I mean EVERYTHING has to be replaced."
It would be cheaper and faster to demolish it, dig and pour a basement then buy a manufactured home of about 1800 square feet and spending $14K on giving the barn and out buildings a face lift, adding a gravel drive, landscape, plant trees, fix fence and sell or demo the junky trailer. Based on my current research it would look like this:
Offer: $80,000 Based on land values and the only comp in a 10 mile area the past 750 days.
Demo costs: $10,000 For both house, foundation, trailer and some fencing and an outbuilding.
New full basement: $8000 Plus or minus $1000 depending on the Double Wide Modular
Double Wide $115,000 Average higher end home with sizzle features
Landscape/Clean up $14,000 Face lift on barn, clean up horse pens, fix or replace fence, add a gravel drive, plant 6 trees, add accent plants and shrubs, place a 500 gallon buried holding tank for watering needs etc.
2 car garage $17,000 Add a 24 x 24 detached 2 car garage. Help to increase the value a lot.
Holding Costs $10,000 Plan on 18 month hold to sell. My realtor friend said hold times average over 400 days in rural areas.
Total Investment $254,000 Based on my repair estimate to just repair the existing home would have been $125,000. Investment would have been $269,000.
Interest paid $38,100 That is "if" it took the full 18 months to sell, based on 15%, could be lower maybe??
Final sale price $350,000 Based on upgrades, a full basement a new garage and cleaned up property and other sales at $380K+
Closing/Title Fees $10,500 Based on 3% if she does fire her realtor. I am not sure here though, still learning.
Estimated profit $47,400 This could go higher the faster it sells.
All of this was based on my research so far, I still need to determine the legality of buying during probate and how that works as well as nail down some of these costs. They are all an average or prices given to me from a real estate friend and using my deal analyzer software. According to Zillow, houses similar to what I am planning have averaged 375K on only 40 acres within 25 miles of this property. I can see splitting the land into one 40 acre plot and two 20 acre plots for future builds.
I'm obviously a novice and am still learning, but I feel like this is just not enough to risk it on my first deal. There is no guarantee they will take my offer anyway, they turned down an offer for $120,000 last week. My only defense will be the total I will need to finance to get this done. Anyway, go ahead and rip this deal apart. Be brutally honest, I need it. I have until Wednesday to make an actual offer, but have plenty of calls to make to lawyers, the probate attorney representing the beneficiaries nail down actual bids for the ball park ones I assume here. Oh yea, and start looking for private money as well as a rehab lender. The hold time of 400+ days worries me. Lots can happen with that long of a hold.
Sorry so long,
Thanks,
Chad Bilstein