Flipper · Hamilton, OH · Member since 2013 · 18 posts · 3 votes
So I have an extremely motivated seller wanting to get rid of a 3-family property for 500 dollars. It's in extremely rough condition, but could be a decent cash-flow property if done correctly.
The problem as I see it that the property currently has 4300 in back taxes.
The lady selling the property now is listed as the owner on the auditor's website, but says she never transfered the deed into her name and didn't knwo there was back taxes when she bought it, and didn't pay taxes on the property while she attempted to repair it.
I'm not sure how this situation goes forward. I would've guessed taxes would've been settled at her closing but apparently not. So if I were to get this under contract and flip the dead, the owner now would have to pay all taxes correct?
You put the property under contract for $500 subject to the existing tax lien. Property tax liens transfer with the property so once she sells, it isn't her problem any longer. When you wholesale, your price is the $500 + $4,300 taxes + your assignment fee and you tell your buyer he/she is paying both sides of closing costs and title insurance. Their buy price will be $4,800 + $1,500 (est) in closing costs + $your wholesale fee. Your buyer brings in the full amount to closing, and escrow sends you the difference after paying off the taxes and the seller's net. Super easy deal. Now, get her into escrow and go find a buyer ASAP. Once you find a buyer, let escrow know who it is so they can type up the deed to the seller with your buyer's name on it or have docs go out with your name on the deed and do an assignment. This really is a super easy deal and I do similar transactions every month.
I don't know what the ARV on this property is, how much work it needs, or what the income might look like, but if there is enough equity after rehab, you might consider just selling 1/2 of the property to another investor for the amount you need to close it, pay the taxes, and rehab the property (and if there is enough room, include a little extra for your pocket). Then you get paid to buy the property, fix it up, and you have 1/2 a rental you can use for future income and as lubricant on another deal. I've done this multiple times and got paid to buy 1/2 of many, many houses.
You could write the contract that way, and given that the lady seller sounds like a scatter brain she would probably sign it. But the reality is she isn't going to pay the $3,800 in taxes to sell a property for $500. Then what are you going to do?
It is both funny and scary to imagine how this sale would work out given that neither one of you seem to have the slightest clue as to how transfer title. It would seem to me the taxes are a minor problem relative to other issues here, is there not a mortgage on this?
I agree with you, my lack of understanding of all this definitely sets me back, but I'm pretty much brand new to this so I'm still learning the ins and outs.
There isn't a mortgage on the property, she only owes the taxes. She originally bought it to make an investment property but then was not able to afford the repairs and essentially stopped paying attention to it all together.
The $500 is just her wanting to be done with the headache.
You put the property under contract for $500 subject to the existing tax lien. Property tax liens transfer with the property so once she sells, it isn't her problem any longer. When you wholesale, your price is the $500 + $4,300 taxes + your assignment fee and you tell your buyer he/she is paying both sides of closing costs and title insurance. Their buy price will be $4,800 + $1,500 (est) in closing costs + $your wholesale fee. Your buyer brings in the full amount to closing, and escrow sends you the difference after paying off the taxes and the seller's net. Super easy deal. Now, get her into escrow and go find a buyer ASAP. Once you find a buyer, let escrow know who it is so they can type up the deed to the seller with your buyer's name on it or have docs go out with your name on the deed and do an assignment. This really is a super easy deal and I do similar transactions every month.
I don't know what the ARV on this property is, how much work it needs, or what the income might look like, but if there is enough equity after rehab, you might consider just selling 1/2 of the property to another investor for the amount you need to close it, pay the taxes, and rehab the property (and if there is enough room, include a little extra for your pocket). Then you get paid to buy the property, fix it up, and you have 1/2 a rental you can use for future income and as lubricant on another deal. I've done this multiple times and got paid to buy 1/2 of many, many houses.
@aaron mazzrillo just curious what's the typical profile or motivation of a buyer who would take only half of a property. If I'm putting up money personally I'm wanting to own the whole thing. How do you "sell" it where you get to stay in for half?
I'm just curious to see what a 3 family property looks like that sells for $500. Some of those little storage buildings at Home Depot sell for more than that. The tires I put on my truck last weekend were more than that. Why flip it if it's worth a darn? I'd buy it myself, fix it up and either rent them out or sell at full price. You can make a hell of a lot more that way.