I'm looking at the following Fannie Mae foreclosure:
3 BR/1.5 BA
Decent Working-Class Neighborhood
Price: $52,900 (asking)
Rehab: $2,500-$3,000 (nothing major, but needs fridge and dishwasher)
Potential Rental Income: $750/month
Basically, the deal looks pretty decent with no major capital needed. Owner occupied homes in the area are listed (and transacting) for north of $100k.
I would try to finance the deal using the Fannie Mae Homepath mortgage with 10% down. From what I could tell, I should cashflow between $100-$150/month.
Any thoughts or advice? Anyone done a deal with the Homepath financing? Thanks for your help.
sounds like a decent deal, but with a deal like this I think you'd be better flipping it, if its really in an area of homes worth 100k+, im assuming this home is comparable? If you were to buy for $53,000 put $7k in it, and be able to sell it for $100k why not go that route? the only good thing about possibly keeping it is you could finance with the FM homepath, and put less down and lower rate, but id be interested in making $25k after realtor and everything and sell it quick.. if the area really has houses selling for 100k why is this one not selling if it doesnt need much more for appliances? if its really a good deal its probablly being bought while we speak.
Well, because I'm looking at a 20% cash on cash investment in year 1, which will hopefully only grow from that point. I'd prefer the stream of income rather than a chunk of cash (although I'm sure I'm in the minority on that one).
I'm still investigating, so we'll see if it needs more capital than I anticipate. The property was listed for $69k for several months and did not sell, but they have received a few offers since lowering the price.
I'm really more interested in owning and renting than flipping, but the appeal of making a quick profit is certainly appealing.
Is it better for a first deal to be a flip or more of a long term hold?
I tried to do a deal with Homepath financing - the broker dinked around for 3 weeks, then demanded 15% down instead of 10%, a big list of "questions" & conditions, a total waste of time, and too late to get a "regular" investors loan. Luckily we were able to close it cash.
If you decide to try it, get the details on who they plan on selling the loan to - if your broker/banker has ever done one, etc. - I was told Wells is the only game in town (no idea if that's true), and they want 15% down, even though Homepath is 10%, the investor can write whatever silly rules they want on top of the standards.
With all the fees they nick you for, a 20% down loan actually costs you less out of pocket, and not so many hoops to jump through.
I wouldn't waste my time with it again... hopefully you'll have better luck.
I'm really more interested in owning and renting than flipping, but the appeal of making a quick profit is certainly appealing.
Is it better for a first deal to be a flip or more of a long term hold?
It all depends on your goals and what you want out of your investing, personally I hold ALL of my properties, and like the rental aspect of investing, but your talking about a pretty large spread, of which you could now pour into another rental property and possibly pay cash, or use that money to leverage, all depends on what you wanna do.
Not to be rude, but if your new im willing to guess the property will sell for more then you expect (including cost to actually purchase ect), retail for less, and remodel will cost more.
I just feel personally if your numbers are somewhat correct, why not buy the house for 53, remodel up to 60, and fire sell it for 90k, should sell rather quickly, and you'd still look to profit 20k after all fees and realtor and if your comps are correct, should sell fast! 20k in a month or so? yes please.
You may be right. I was certainly a little surprised tonight to see that the expected closing costs for the loan (including prepaids, etc.) was $3900. However, the process seemed to go smoothly and I was certainly happy to see an investment loan of 90% LTV at a 5.25% rate.
One nice thing is that I'm currently a real estate agent, so I get 3% back on the purchase and only have to pay out 3% when I sell, so that does help cut down on the transaction costs.
I guess I'm nervous because there seem to be two classes of home sales in this market: foreclosure sales, that are generally selling between $40-60k, and owner-occupied, traditional sales, that are generally selling between $90-120k. Someone just down the street bought one of these homes for $43k a few months ago and has it on the market for $103k.
This seems a little too good to be true to me; that for some reason, people are willing to spend twice the money to avoid buying a foreclosure. I'd rather wait and rent, and see what happens with the listing down the street, then potentially sell opportunistically as needed.
I also am not seeing many deals like this one. However, I am just getting started, so we'll need to see.
Anyone else seeing this split nature in low-middle income neighborhoods, with foreclosures at one level and arms-length transactions in others?