All Forum Posts by: Account Closed

My realtor sent me a foreclosure that hit the market this morning. He told me there are several showings scheduled today so I'm hoping to take a peek at it as well.

Bank of America, asking 69,900.

I'm thinking of borrowing $60k @ 10% APR from a private lender.

Cash offer of 55k.

$85k appraisal (conserative) would give me 68k cash back.. so after paying closing costs, and the investor back, I would have about 3k.

68k loan, 5%, 30year = $365/month = 4380/yr

Rent = $750/mo = 9000/yr minus 4380 DS = 4620 minus 1000 for taxes and insurance = 3620, minus 10% vacancy, and 10% capex = 2900 cashflow/year or 241/mo.

I plan to self manage, put even if I added another 10% for PM, I would still be above $200 CF.

Is this a good deal?

The house went under contract last night with a "first look" buyer.

I really appreciate everyone's input and advice on this. It was definitely a learning experience!

@Donald Crockett - thanks for the feedback!

I can definitely see what you are saying.

This house wouldn't bring enough rent to justify a rental. Would have to flip it if anything.

@Mark Brogan

Thanks for the response, @Micah Copeland.

Just an update, I looked at the property this weekend and it looks pretty good. Does need a few high cost items such as HVAC (8k), tie to sewer (2k). Other than that I would just be updating the house. I've put together a $25k estimate (including the above items.) 

Something that is a concern for me, and I would really appreciate some input on, is that there is a decent sized horizontal crack in the basement foundation. The crack runs along the mortor joint and has a laterial shift of about 1/2" at the worst spot. There is a letter from an engineer that states that the crack is fine, so in that case, I would just plan to correct it cosmetically. There was a little puddle of water on the floor, which I assume had come through the foundation, which concerns me. I've contacted a foundation repair company to get another opinion. There is a sump pump in the basement.

Any thoughts/opinions/experiences with this?

One of my two investors has backed out on the deal, as the return isn't as high as what he would like to see. 

If I can get another investor, I would like to place an offer of 70k on the house, and after the rehab be in for around 95-100k, then resell for 125-135k.

Thoughts?

Thanks,

Andrew

Hi, and welcome to BP!

Take your time! Read as much as possible and find a mentor.

I highly recommend listening to as many of the podcasts as you can. They will answer almost all of your questions.

Andrew

Happy Friday, everyone!

I'm dying to get started in real estate investing. I'm trying to analyze multiple deals every week to get better with numbers. I would also like to increase my presence here on BP to learn, and give back in return.

Yesterday I found a foreclosure on the MLS. Its a Fannie Mae property and has been listed for about 2 weeks. The current price is $109,900. Its a 3/1, 1800 SQ FT, 1974 ranch.

I try to analyze each deal as if money isn't a factor, so I'll talk about the entry/exit strategies first, then financing.

My realtor told me he's been in the house and it needs a little bit of work. It would need HVAC for sure. He mentioned there's a moisture issue in the basement which could be due to a grading issue. He thinks that the house in "tip top shape" would go for around $123k.

Lets also say I added an HVAC system ($10k?) and had other repairs (maybe up to 10k? contingency)

So, 70% of ARV = (used $115k for conservative) = $80.5k - 20k for HVAC and other repairs = $60 purchase.

Is it crazy to think that I could get this house for $60k?

Financing

My wife and I don't have a lot of money to get started. We have 1, and possibly 2 investors that are willing to work with us. Investor 1 has committed $50k at 8%. Investor 2 MIGHT commit $40-50k at 12% (high rate I know, but its an option). My pitch to both of them is to borrow the money in full, and I will pay all of the interest up front, with a balloon payment at the end of whatever term we decide for each deal.

My long term strategy is to hold rentals, but I understand that some properties may not be feasible and I may look to flip opportunities to increase my startup capital.

With above property, if I were able to acquire and do said repairs, and refi, I could possibly be into the property for $80-85k. With a $115k appraisal, I would be able to get a refi of $92k @ 5% (~$500/month). Paying the investors back would leave me with $7-12k in pocket. 

The downside to this is that I don't think the house would bring enough rent to make it work well.

Assumed rent = $750 x 12 = 9000 minus 500 for insurance - 1100 taxes = 7400 NOI minus 6000 for DS = $1400 CF.

The cashflow doesn't seem to be very substantial but maybe that's all I'll get just starting out? The 7-12k from the refi makes me feel more comfortable as far as an emergency fund, but at the same time, an unnoticed issue with the house could eat all of that up. 

What are your thoughts on this rental analysis?

If I were to flip and sell for $115k, I would profit $30-35k, minus closing costs...I think.

Would I be crazy to combine funds from both investors to tackle this? If I borrowed $50@8% and $40@12%, I would be 8800 out of pocket, just for acquisition. It would be nice if I could structure so that I didn't have anything out of pocket to start with though.

Thanks in advance for your time and advice!

-Andrew

@Chance Cooper

Awesome story! And cool that you are passing a legacy to your son!

Thank you for your service to our country!