All Forum Posts by: Curtis H.

@Alex Verdugo

The remaining $350K or so is meat on the bone for the buyer or investor. They won't realize that $350K without putting in at least an additional $100K in upgrades, in addition to the $30K I would have put into it. I could do that myself, but that would make this a remote rehab, which I have no interest or experience in doing. If I can make $75K profit and not touch it at all, I would rather do that of course. 

So in a perfect world I would...

Buy it for $950K (max)

Immediately wholesale it for $1.05 million ($100K profit)

New buyer can put $150K into it and sell it easy for $1.4 million.

Hello BP Members, 

Here is the scenario. This one is close to home as it's a friend of mine who has decided he is selling his home "As Is" in the Bay Area and moving. The circumstances surrounding it aren't the greatest, as he was essentially screwed by his wife's sister after she agreed to use her credit to get them into a house that they paid down for $400K over 10 years, she didn't pay the down payment, or taxes an insurance, and now she is demanding more than half the $500K equity after saying multiple times in 10 years she wanted nothing in return. The sister won't let up on the amount she wants, and since the house is in her name, she holds all the cards. Terrible lesson in getting things in writing and never trusting family. The sister was literally a saint before this all went down. Nobody saw it coming. So unfortunately the sister can't even get approved for a $50K loan, let alone refinance to pull the money out, and my friend can't qualify to get his own loan once he pays off the greedy sister. 

So here are the numbers...

House current value - $1 million

ARV (every room needs updating) - $1.35-1.4 million

Update/Repair estimate retail finishes - $150K

Update/repair estimate rental grade finishes - $30K

They both don't have money to update the home to sell for top dollar, so they are willing to take the $1 million and move on. 

My thoughts are if they sell with a realtor they walk away with about $950K after 5% commission fee. 

My offer - 

$925-950K  (no realtor involved)

Closing in 30-60 days

I get it under contract, put about $30K into it for cosmetic fixes so its rental quality ready, and then assign the contract for $100K to an investor or family willing to put in sweat equity.

Do a double closing and pay the sister $500K equity with the proceeds from the end buyer, I take my $100K fee, and sister pays my friend his portion of the $500K equity they agreed to. 

I know I am missing something here, but it seems like this could work and I could profit $75K for engineering the whole thing. 

Thoughts?

@Brent Coombs

Yes I am saving as well, and actively looking for other places to invest my money other than sitting in a bank, which I don't think is totally safe either these days. In regards to the required discipline, yes I am pretty good with money so I'm not worried about that. I do agree with @Frankie Woods that if a crisis is approaching I'll likely see it coming and will have time to make a move. 

@Frankie Woods

Yup, that is exactly what I am worried about. It's not like a NEED the money, but I'd rather have it and not need it. Yes I'll pay interest on it, but I understand that. 

@Grant Rothenburger

The simple answer for pulling the reserves is...I just would rather have it, not touch it since there is no emergency need for it, pay a bit of interest for the piece of mind, and put it all back when things settle down. I honestly don't think I'll need it, but piece of mind has no price tag. If I can not worry, and get my wife to not worry, that's priceless. Truly. Because when she's worried, she's just going to drive me crazy anyway with her worrying :-)

@Dave Skow

Very good point. That is a down side as most recessions follow rises in interest rates. Meaning if the event I'm worried about does happen, interest rates will probably be pretty high. All that being said, if that $25K gets me through an additional 6 months that I otherwise would not have been able to, it's money well spent. 

@Account Closed

Thanks for the website referral. Yeah I think I would feel better if I took out enough for 6 months of expenses to go along with what I already have for emergency funds.

Hello BP, 

I do NOT have a good feeling about the next 6-12 months in regards to money in general in the U.S. I have a feeling the dollar value will drop dramatically, stock market same, and in general I just feel a financial crisis is on the horizon. Some very smart money people (billionaires) are buying precious metals like crazy, and that's not a good sign for what they think the value of the dollar will be. I currently have a HELOC where the money is just sitting there waiting for me to use it, which I have not yet.

Although I don't need the money at the moment, I'm wondering if I should just pull say 25% of it out anyway in case the market goes south and I don't have access to it anymore because they froze the funds. I'd rather have it and not need it than need it and can't touch it. I don't think I'm fully understanding with the downside would be to taking out money I don't need at the moment. I'm also pretty disciplined so I don't worry that if I have it I will spend it on something silly. 

Thoughts?

@Tom Gimer

Totally agree.

"His personal life is irrelevant"

Huh? You call someone a fool and now stupid and then say the things in his life that are probably better than yours are irrelevant? Ha!

Is that how you tell yourself you are better than people who have less material things than you? Some deep rooted issues there sir. If nobody has ever told you, I will. I'm proud of you Thomas.You can stop over compensating now. 

Truth hurts. Be careful who you try to play internet tough guy with. What is it that Forrest Gump's mom says, Life is like a box a chocolates, you never know which one you're gonna...

Back to business for those of us who have sinned in their life. I do agree with the numbers. He fights it, he stands to lose everything, and I'm not sure that's worth being right. However, I still think the best approach is to make her life absolute hell personally and socially, and threaten to call the IRS and report that she has been getting $4K a month for the last 10 years and not reporting it. Since he wrote the mortgage payments directly to the bank, it will be hard for her to prove he was a tenant without paperwork, which she's only had for 6 months. If she DID report the income, why was there no lease agreement for 9.5 years? I still think those are valid arguments? 

I just don't think she has the guts to see this thing all the way through if he makes it ugly and personal. When I say "fight it till the end", I think this is more the approach I'm after, not court. Telling her friends at church that she is putting her own sister on the street while going back on her word puts a lot of pressure on her to answer these questions to others. She cares way too much about being seen as a saint in the public eye. The two sisters work together. More pressure at work if his wife tells people what she is doing. I think they should threaten to do all of the above. If he makes it easy for her, she will see it through for an easy payday. If she is going to take my equity, she will have to earn it with her reputation and be a hermit in her own city, or start a life in another. My guess is that it isn't worth it to her, when the alternative is them getting her into a new house like originally offered and life goes on like normal with relationships and reputations in tact. They are willing to give her $100K to get into a new house (which is ridiculous for using someone's credit only when they said they wanted nothing). So the question is whether or not the extra trouble is worth $180K. Both parties have to ask themselves the same question. 

We shall see!

@Tom Gimer

Right on the money. After the initial shock wore off, my advice to him was to surely seek counsel from a real estate attorney. Make sure he pays for it so it is good counsel. We all agree that him going to court is not likely to end favorably for him. Even he knows that.  

@Thomas S.

You sound like an internet tough guy, so I don't have much in the way of response.

He trusted someone whom had as clean of a moral record as anyone he had ever met. He saw her every day for nearly two decades, and saw how she went about life. I don't think he is "gullible" for that. I would have trusted her as well and I am not a very trusting person when it comes to money if you don't live in my house. All he ever saw was all the good she did and people she helped selflessly. To call him a fool is a bit "foolish" on your part. You don't know him. He has a high school sweetheart wife he's been married to for 20 years. Neither has ever cheated. They worship each other. 3 gorgeous kids, 3.5 GPAs and higher, Vice president of the high school, 4 sport athletes. Is his own boss. Doesn't need the internet or money to validate him or make him feel important. I would say life has treated this "fool" very well. 

@Kim Knox

Yes I think the $40K was from half the tax payments over 10 years. Regarding the gift for down payment, not sure. Remember this was before the crash when lending regulations were a bit suspect. They probably new what was going on with my friend as back then lenders didn't care. They just looked the other way. I think this was one of those cases. 

The family member rents an apartment, and only stayed with them for a couple years in the beginning, then moved out. Probably to satisfy the owner occupant status legally. Mortgage is slightly higher than market rent by a couple hundred bucks, but pretty close.