Is there a deal here?

Question

If you don't mind would you please give me your opinion on this? I have recently received call backs on letters I have sent to houses that were vacant. Some of them have mortages that are only a few years old. They want out but the owner really has no room to bring the price down to a level that would be practical for an investment. I could probably find this information out before I send the letter, should I just avoid these or is there a deal here that I don't know about?

Thanks, Gary

Matt Henning · Answer

Thanks Jon, that is what I thought, if it was easy everybody would be doing it.

Good ideas.

Matt

Jon Holdman · Answer

You need to generate your own.  Get to your local REIA meeting and meet people.  Advertise "handyman special".  Put up a web site offering fixer-uppers.  I'm sure you'll find other possibilities with some reading in the wholesale forums.

Dirge,
I don't really know your situation well enough to have reservations.  And its entirely possible for you to find buyers with different buying criteria.  So if you find deals that make you money, by all means, move ahead.

Jon

Gary M. · Answer

kim,

They own the property free and clear. They seem set on selling as there are three different people as owners. What are you doing, property management?

Anyway, they turned down my offer. Despite Wheaties's reservations I decided that I had given myself a big enough cushion for repairs and still make it desirable to wholesale buyers in my area.

Kimberly Anway-Morency · Answer

Dirge, Just curious are the owners mortgages lower than the potential rent?  I have been running across some property's like this and have come up with a way to help them and put $ in my pocket. Poor property managment in my area may turn out to be a blessing on my end.

Matt Henning · Answer

Wheatie:L

I am unearthing some great deals here in Boise, where so I find a Wholesale buyers list ???? Or is that the pipeline generated throught years of being in the market ??

Thanks

Jon Holdman · Answer

What is your exit strategy? Rehab and resell?  Keep as a rental?  If you're going to wholesale them, what would be your end buyer's exit strategy?

For rehabs, apply the 70% less repairs rule:  max price = (ARV*70%) - repairs.

For rentals, apply the 50% expenses rule:  cash flow = (rent * 50%) - mortgage payment, and figure the maximum price from the mortgage payment.  
max payment = (rent * 50%) - desired cash flow
max price = PV (interest rate, desired loan term, max payment)
These don't sound like great rentals.

If you're wholesaling, deduct your assignment fee off the max prices.

If you already have a wholesale buyers list, find out what their criteria is.  Some buyers may be willing to pay more.

If the max price is below the principal owed, you'll have to do a short sale.

If you already have a wholesale buyers list, find out what their criteria is.  Some buyers may be willing to pay more.

Jon

Gary M. · Answer

One has about 72,000 principal probably an ARV of 90,000. It needs work I'm not sure how much yet. This area rents for about 700/mo 3 br 1 ba.

The other has a 53,000 principal the ARV is... I'm not too sure but rent there is about 550/mo 3 br 1 ba. It also needs work but it does have a metal roof and replacement windows.

Gary

Jon Holdman · Answer

Hard to evaluate without knowing the details, but these sound like short sale situations.

Jon