Hello BP. We're newbie investors from Chicago, reaching out to folks versed on handling preforeclosure deals.
Got this one from mailers we did on preforeclosures with equity. The sellers' reason on selling is because they are in the process of divorce. SFR is in a great neighborhood, facing foreclosure with 20% equity, doesn't need major repairs, in a move in ready condition but not in top shape. We've done our due diligence, found no liens with as is value at $596k.
With $596k x .70 - $10k repair - $10k closing costs = $397200 is our best offer which was not agreeable for them, they want a minimum of $490k. We're thinking the only way they can get the most of this house is to either rent it or have someone take over their payments but given it's a divorce situation, they'd rather not.
We're newbies so we're a bit nervous about handling this, we don't want to waste their time, but at the same time we want to be able to help them out.
Any other ways you handled such a situation?
Any input would be greatly appreciated.
Your business decision should not be based on helping out unless your a charity. Run the numbers and consider your profits. If you can't make the numbers work you have to be willing to walk away.
Too little equity. Huge investment for very small margin.
Too big of a deal for your first transaction. You will lose sleep, if you buy this one.
Thank you both, Crystal Smith & Joseph Ball. I just wanted to make sure we're not overlooking any other solution we can do. (besides the obvious which was to walk away :)
Appreciate the feedback! Have a good one!
How much is the arrears?
If it's small enough, I can make it work. For example, I've made over $37K profit on a $170K house I bought for 93% of market value ($160K) or a property with very little equity. I revealed how I did it in my podcast (Biggerpockets.com/show65).
What would be your exit strategy for this ? Sounds like you want it to be a buy and hold SFR . That case what would it rent for , and what would be your cash flow after financing and expenses ?
Never heard that one, I don't know why predatory keeps popping in my mind.
Might search for "HUD credit counselor" as that should take you threads concerning dealing with sellers in foreclosure as there are applicable federal laws pertaining to dealing in pre-foreclosures you need to be aware of.
Pre-foreclosures are not something for newbies to get creative with, IMO and you can end up having much more trouble than the deal could ever be worth.
Buy it conventionally, with a loan or pay cash, I suggest you not mess around with strategies. It also looks to be rather thin and helping has limits, never allow yourself to get emotionally involved with any property......well, unless you have some attachment like your dad was born there or it's something you just want because you want it, but not as to investment properties. :)
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