All Forum Posts by: Farrukh Amini

It’s in the heights.  

I'm wondering if anyone has experience with a money lender or other ways to finance an REO that could help me close on this delicate all-cash deal. It's all cash because, for some reason, this bank said no to appraisal contingency from the hard money lender, so we're funding this all cash. Our offer is almost accepted - we're negotiating the closing date at this point, and all of a sudden my partner got cold feet and backed out last minute (The partnership was he brings the capital and I put in the expertise and the work and we split the profits 50/50). I understand him because this is a risky deal, but the return is great too. Below are the details:

Type of property: 2 bedroom condo (850sq ft) in a 5 unit B class building with dedicated parking. 

Location: Jersey City, NJ (in a very desirable neighborhood)

Seller: Bank Owned

Asking price: $200k

Negotiated price: $150k all cash (that's how much the partner had besides the reserved $20K that we planned on using for repair and resolving HOA arrears issues - explained below).

ARV: $300 (recently sold and currently listed comps range in $280-$400k based on size and condition and other factors).

The main issue: The main reason this property hasn't sold was due to HOA arrears. The previous owner of this condo who got foreclosed on stopped paying, including her dues, causing the entire building to stop paying HOA fees. Now everyone owes in arrears. The former head of the HOA association who's one of the apartment owners is not being cooperative to release any details regarding HOA financials. Based on my tax research and talking to another tenant I estimate $6,400-$10,000 owed in arrears for this unit. With legal fees and rehab, I'm estimating an additional $20k to make this property appealing to a buyer that uses conventional financing.

Potential: If acquired for cash, can finish the rehab in 2 weeks and rent it out for a minimum of $1,800/month (minus roughly $700 in taxes/insurance/HOA) which can generate an approximate positive cash flow of $1,100 while working on resolving the HOA stuff. Once fully resolved, can sell for $300k+.

My challenge: No conventional bank would loan to a borrower unless those issues are resolved. The only options are either a hard money lender or all cash. The bank doesn't want an appraisal contingency, and the two hard money lenders I've been in contact require an appraisal. Now the partner that originally agreed to fund the deal backed out. Need to find funding by Monday or Tuesday because the counter offer went back to the seller on Friday. 

Any advice and input are greatly appreciated. I have no prior experience with REO or cash/hard money financing.

Noted @Nathan Gesner I’ll definitely consult an attorney before I make a decision on this. Thank you. 

Ah I see. I guess it’s best if I contact an attorney to get more accurate information about the process and details. Thanks again for the info @Aaron DiCaprio

 Thank you Aaron for the input. That’s an interesting point about rent protection policy. I’ve never heard of that before. I’ll have to look into that. 

 If you have to go to court to evict a tenant, how long can that process take at max? Or is that state specific?

Thank you @Michael Noto and @Nathan Gesner for your inputs. I haven’t even thought about inspections. I’ll see if the seller can try to arrange that. Otherwise I won’t consider. The seller is out of town so it looks like they just don’t want to deal with the whole eviction process. They’re willing to offer credit to deal with the tenant. 

A 2 unit property that we bid a while ago reached out asking if we’d consider the following scenario: tenant in one unit has stopped paying and is not being cooperative with showings. We’re wondering about how much of a risk this can be and weather we should consider it given how much discount or credit the seller can give us.

Should we consider this deal, and if yes, what would the process and timeline look like to get the problem tenant out?

Thank you for your time and input. 

Thank you @Bobby Shell 

Thank you for sharing your experience Jon. Do you mind sharing what kind of ROI you're seeing with your Roofstock investment?