if i use all my own cash

5 Replies

a lady i know has a townhouse condo unit that she wants to sell. there is currently a tenant in there. it is an end unit.

back in october an end unit in top condition sold for 141k.

right now an end unit that looks identical to the one i am trying to get under contract is on the market for 159k.  all cosmetic work needs to be done to this one (over priced).

so if i expected to resell this one without putting any work into it, could i buy it for 110k?

i am using all of my own cash so there are no lending fees or anything

 110k --> 130k resale.

its only a 20k spread but if i use my own cash it cuts down a lot on the lending fees.  i would expect to resell it within a month

Calculate your buying side closing cost and selling side costs + realtor fees. Also what if buyer inspection finds something wrong that you need to fix. You will also have hoa fees and taxes and utilities. Calculate all of that then decide if you are comfortable locking up a good chunk of cash for that amount of return.

Don't forget to make sure her HOA/maintenance fees are current and remember that you'll have to pay them until the unit sells.

Depending on how much they are they could take a big bite out of your $20K profit. 

You might want to check into how long other similar units on the property took to sell because like I mentioned, you'll be paying the HOA/maintenance fees until it does.

The other issue is the tenant and lease. Worse case - you may have to evict them and that adds to time and cost.

That being said, walking away from the table with $15K - $18K is good enough for me and beats leaving your money in the bank doing nothing.

Originally posted by @Danny Woodson :

so if i expected to resell this one without putting any work into it, could i buy it for 110k?

i am using all of my own cash so there are no lending fees or anything

 110k --> 130k resale.

its only a 20k spread but if i use my own cash it cuts down a lot on the lending fees.  i would expect to resell it within a month

Not sure what you mean by, "could I buy it?"  Are you asking if the woman will sell it to you for that amount?  Only she can answer that question...

Or are you asking if it would be a good investment?

If that's the question, the answer is likely no.  For several reasons:

-  First, if you plan to sell it without doing any work to it, you're going to have difficulty selling to an end-buyer getting a loan.  The lender will see that you purchased it for $110K, did nothing to it and are now trying to sell it for $130K.  They will assume that, since you didn't do any work to it, it's only worth the $110K you paid, and a buyer won't be able to get a loan for more than that amount.

-  Second, there's not much profit for you.  Once you factor in purchase closing costs, holding costs (insurance, taxes, utilities, lawn care, etc.) and selling costs (closing costs, commissions, concessions, warranty, etc.), you're likely looking at a profit of less than $5K if you sell for $130K...and potentially much less than $5K if you don't get full asking price.

@J Scott

thanks. what about this scenario...

an older lady wants to move to florida soon with her disabled husband.  the house has a lot of stuff  like handrails for her disabled husband.  they also did not pull permits for the upstairs. 

an identical house sold for 185k in top shape condition.

how much does this hurt my resale price without the permits? the staircase is really really steep. what do you suggest i do?

i offered her 100k last year and have not heard back from her. i was thinking about offering her more .

Originally posted by @Danny Woodson :

@J Scott

thanks. what about this scenario...

an older lady wants to move to florida soon with her disabled husband.  the house has a lot of stuff  like handrails for her disabled husband.  they also did not pull permits for the upstairs. 

an identical house sold for 185k in top shape condition.

how much does this hurt my resale price without the permits? the staircase is really really steep. what do you suggest i do?

i offered her 100k last year and have not heard back from her. i was thinking about offering her more .

Not enough information.  

What do you intend to do with the property?  

Are you going to rehab it?  If so, how much will you spend?  

What is the resale value given the condition you plan to resell it for?

If you don't rehab it, you have the same issue as above -- it likely won't appraise for more than you purchased it for.

As for permits, if you know that work that required permits was done without permits being pulled, you legally need to disclose that.  It may not be an issue, or potentially the end-buyer's lender may refuse to lend until all permits are pulled and closed out.  Worst case, the city finds out and makes you pull permits and get full inspections.

It sounds like you're just starting out and are grasping at opportunities without knowing what a deal looks like.  I would suggest stepping back, learning the whole process a good bit more, and learning how to evaluate deals before you start looking for them...

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