Any creative ways to invest in property with negative equity?
Hello BP! I've been following the forum for a while and have finally come up with a question that I hope is worth discussion.
I've recently come across a seller with a home worth about 60k+ after-repairs that has about 30k left on the mortgage and a 25k home equity loan on top of that. I haven't been on the inside, but I suspect about 15-20k in repairs are needed. It's vacant, homeowner probably does not have the capacity or desire to fix/rent it. and would like to wash their hands of it for the amount of the loans. The owner probably does not have the desire/capacity to pay any balance of the loans either.
Obviously, I can't buy it for 55k, and a lease option will not work considering the monthly payments on the loans. Is this (and situations like it) just a complete no-go, or are there creative ways to work with the lienholders or any other solutions?
Thanks!
#4 All Forums Contributor
- Plymouth, MI
I would never buy a property that put ME upside down after purchase, or that had negative cash flow. I'm not in the business of taking over someone else's problem(s) and making them mine. I am in the business of taking someone else's problem(s) and solving them.
How sure are you about the ARV being $60k?
What would the Taxes and Insurance cost be?
- @Ray Jones It's a no go but a good exercise to run the numbers.
Well it depends. Does the seller have other property they can transfer the home equity loan to as collateral and then see if you can negotiate a lower price if not then I would say move on. You can't force a deal if there is no deal and purchase a house that would out you upside down is definitely no deal at all.
Thanks for the response, Joe! I agree that being upside down after purchase is no good in any circumstance. I was curious as to whether there are ways, generally speaking, to get such lienholders to settle to a lower amount prior to buying the property, or something to that effect.
Thanks, Al!
Thanks, Gilbert! I did not consider that at all.