I'm a new investor looking for my first house to flip. I finally have some motivated sellers contacting me trying to sell their house. This latest one has me extremely interested but I do not know how to approach it.
It is a divorce. The husband is moving out at the end of January and the wife(who contacted me) is moving out the first week in February. Coming up very soon!! They cannot afford the loan payments on their own, so they just want out. They are not interested in making any money on it, and they are willing to be as creative as necessary.
Luxury House built in 2001, 2 story, 6 bedrooms+loft, 2.5 baths, 3 car garage
--in great condition
1st Mortgage: $669,000 @ $3,500/mo
2nd Mortgage: $160,000 @ $1,350/mo
Total or both Mtgs =$829,000
Estimated Pre-payment penalty: $20,000
Total Payoff: $849,000
Estimated appraisal Value(according to wife's friend): $900,000 to $945,000
First, I would have to verify these amounts as I am only going off what the wife has told me so far. I know, not much equity, but sellers are extremely motivated. Is there anything I can do?? I would love to try to control it if there is a possibility of making money. Please help!!
I am not a seasoned investor but with these high priced homes its a whole new ball game. My first two options would be after you do your research are one contact the gentlemen just below you on this message board. Charles does auctions and if you can buy some time and get them to pay feb mortgage then you will be able to auction the property off. Get the property under contract with option or Charles contract and you will have the opportunity to sell fast. Second would be to contact the most successful high end realtor in the city. Tell him you need to sell ask the avg dom and if you can sell in 30-60 days. Problem here is if it doesnt and you cant purchase the property then you have only delayed the sellers goals and thats not right. I hope we get more input from the pros i hope this helped. Also what formas of advertising are you using to get some of the sellers calling you. Please be detailed if you could, Thanks.
Thank you for your input. As it turns out, i have been able to get in contact with some individuals who deal with these homes all the time. Fortunately, we have gotten the ball rolling, and we have also found that this couple is a few months behind on their payments. This makes a short sale a possibility. We'll see. Thank you for the advice.
As far as advertising, it was very simple. This couple in particular responded to a very simple online ad. It did not target luxury homes, however, it did encourage homes of any price or any situation to call. I have also placed ads in the paper, and shortly I will have signs all over the neighborhoods around me. In order to get started in the business, i have found that one thing you can't shortchange is marketing. Sometimes it can get pricey, but the returns are well worth it. Here in California, I have found that direct marketing and mailing has not been as successful as other methods. Of course, every market might be different. Hope that helps.
The deal really sounds too tight to risk putting yourself in the middle. You could craft a deal with the sellers to lease/option it to you and you could turn around and lease/option it back out. If you try to take the property sub-to and then sell it, you will get upside down with holding costs and selling costs. If it is worth $900K today, you could maybe lease/option it to someone for $950K - $1MM and collect your check in a couple of years. I wouldn't suggest you get too obligated to the property though, if you can't move it you are going to be very unhappy.
It sucks to pass on motivated sellers, but there is no equity to play around with and very large payment to worry about. Get your marketing out there and find another one.
I am with Bryan on this one. Unless you are in the Orange County area, prices have already started dropping in the SF bay area and San Diego. If this was your first house that you planned on staying in for the next 10 years, then it might not matter. But to try and flip this house at a point when real estate is already heading down involves taking considerable risk.
prices are sure dropping in our area of South Carolina. Lots of nice expensive houses where owners are remodeling their next homes and can't get out of the old one. Realtos are beginning to look more desperate.