Unique Wholesale/Wholetail/Rehab/Resale/Hold Opportunity...Need Some Advice...

10 Replies

So, I have been attempting to buy my neighbors house for the last six or eight months...it has been sitting vacant for about two years. The owner had a heart attach while mowing the grass and moved into a condo. The owner e-mailed me yesterday and offered to sell at a fair price. This is a really convenient rehab project for me to complete over the winter and sell in the spring...and this would make a great cash-flow property due to the desirability of the area....or this would be a potential wholetail deal to an owner-occupant...or this is a good wholesale opportunity...thoughts on a good strategy??

Pros/Cons

Rehab

  • Pro- house is next door and I could consider this my personal winter project and do the work myself ( I have ADD and need to a project to work on...)
  • Con- all my personal cash is tied up in other projects...

Hold

  • Pro- Minimal investment will create decent passive income and healthy ROI
  • Con- all my personal cash is tied up in other projects...

Wholetail

  • Pro- may generate a decent return on the purchase/sale spread
  • Con- no winter project or ability to hold for passive income

Wholesale

  • Pro- quick cash
  • Con- not many folks buying properties for cash in my area/ may be unable to sell

@Brandon Sturgill  firstly, sounds like you really can't go wrong.  Have you thought about doing a light fix up and a lease option.  If it's a desirable rental neighborhood that might be the best of both worlds for you.  You could get the equivalent of an assignment fee up front with the option fee, collect rent for a few years and then get even more cash out of it with less expense when you sell it.  Since all your cash is tied up elsewhere, you may be able to get the owner to defer the payment for a year, get a tenant in there and refinance to pay him off.  Since he's been sitting on it for so long, he may be open to it.  Just my 2 cents... I love stuff like this, so keep me updated on your progress!

@Andrew Davis   nice thinking!

@Brandon Sturgill if money is tight get some private lender money at the REIA, talk to the president about getting up in front of the group. Get a list of CPAs in your area and ask them to consider telling their clients about a private loan. Go talk to the Chamber of commerce and give a speech about being a private lender. Study up on SDIRAs at

https://www.trustetc.com/resources/education/artic...

Then create a note with the private lender with no payments til the spring at a good interest rate.

Buy it on land contract with no payments til May or lower payments til May.

Do the work and sell it on lease option w 3% down or sell it with an agent in May.

Or you could consider a JV with the seller: You do the work and resell the house, you get reimbursed for the rehab and private lender interest and a JV fee of say $10K, then the seller gets the balance.

What are the numbers?  That will make a difference in determination of exit strategy, I assume....

Btw, rehabbing a neighboring house is awesome in most respects, but don't forget that you'll never get away from it when you want to...  :-)

@J Scott Good point. The property is a 3BR/2BA 1,000ft. with a full basement. The ARV is 106-110k (based on current comps) with 18-22k in rehab costs for a quality rehab. The owner wants $78k, but my guess is he will take $70k. Not great numbers on the rehab side, but attractive as a buy-and-hold (cash-out refi later...). Financing would be 75%LTV with standard entrance/holding/exit costs....maybe a rehab loan as well through my portfolio lender.

Originally posted by @Brandon Sturgill :

@J Scott Good point. The property is a 3BR/2BA 1,000ft. with a full basement. The ARV is 106-110k (based on current comps) with 18-22k in rehab costs for a quality rehab. The owner wants $78k, but my guess is he will take $70k. Not great numbers on the rehab side, but attractive as a buy-and-hold (cash-out refi later...). Financing would be 75%LTV with standard entrance/holding/exit costs....maybe a rehab loan as well through my portfolio lender.

 And what will it rent for?

As a flip, there's not much room for profit - maybe $5-8K.

As a rental, you're looking at about 8% cap rate, give or take.  Leverage that well, and you could see cash-on-cash returns at 12-15%.

I like it as a rental, not so much as a flip...

Thanks @J Scott I appreciate you taking the time to offer the perspective. 

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