Is This a Possible Deal of Some Kind?

Question

I was contacted by a very motivated seller who is ready to get out from under her house payment. She bought the house on February 21 & lost her job on February 25â€¦ouch!!
 
She has found a new job but her pay has been cut by 40% and she is struggling to support her kids as a single mother. She contacted me to see if I would buy her property. Obviously there is no equity at all.

Iâ€™ve spoken to some realtors in the area and they say the comps show a sell price between $160k-$167k. The homeowner owes $165k. Since Iâ€™m still pretty new to investing Iâ€™m not sure if there is a way I could help her. I was thinking of doing a Sub2 but not sure.

House Value: $160k-$167k

Owes: $165K

Payment: $1180.39 (Includes everything, Mortgage Ins, Taxes, Interest, and Homeowners Ins.)

Interest Rate: 4.75%

The property is located in a well desired area and the seller says the property is in mint condition. That will have to be verified of course.

She has yet to miss a payment but is afraid she will very soon.
 
Am I missing anything that would help to determine if this is a deal of any kind? How would you approach this? Is there anything here? Advice would be greatly appreciated.

Thanks.

Alex Hart · Answer

I agree the rent to value ratio is poor. This property wouldn't make a great rental. Iâ€™m going to talk to the owner tonight and see if she would want to go the short sale route. I will pass on the idea of trying to find a buyer to assume her loan.

Thanks Will

Will Barnard · Answer

One other idea (although not for profit for you as investor) is to locate an end buyer and contact bank with explanation of situation, try and get them to agree to have new buyer take over existing loan, would save the bank lots of money from having to foreclose and they could qualify the buyer themselves.

Sometimes, there is no money for the investor, but doing a good deed will come back to you later down the road.

Will Barnard · Answer

The rent to value ratio is poor for buy and hold so I would toss that idea out the window. Unless you can get a short sale approved for significantly lower than what is owed, I don'tt see a deal here for an investor. if this was a friend of mine, I would suggest getting it listed for sale ASAP and hope an end buyer could come in and buy it. If it is in as good as condition as stated, a new buyer could take over payments or come with financing and cash this out. Seller would only have to come to the table with closing costs which is a big minimization of loss when considering credit.

Alex Hart · Answer

Hey Roy,

From what I've calculated I could get $1300-$1375 a month in rent. I've never done a land contract or lease option as I'm still pretty new to the investing world. I was trying to think of a way to wholesale this to someone who wants to lease option it.That's possible right?

Alex Hart · Answer

Hi Joseph,

No I haven't thought about a short sale yet. That could be a possible solution. I have yet to do a short sale.

Roy S. · Answer

You need to know how much you could rent it for and/or what you could get for lease options and land contracts in the area.

Are you ready to become a landlord?

Joseph Sanchez · Answer

Hi Alex,

I will tell you I am by no means an expert, and this is only a suggestion. Have you thought of submitting a short sale offer to the lender?