All Forum Posts by: Wilson Lee

Hi Jonathan, 

You really want that house oh?  But no money right this second?  It sounds like money is not the issue, But timing is.  You need more time to buy this house right?  There is a way to get the deal, But it is not ease to do.  It takes some time negotiating with the seller. 

It is a lease with a separate purchase contract.   You lease the house form them until the closing date of your purchase contract.   The closing date is set far enough forward to fix your timing issue.    You can sublet the house out while you hold the lease.

There is a lot of info here on BP that can give you the ends and outs on how to pitch one to the seller.  Get a local real estate attorney to draft up an agreement if your land it as the devil is in the details with this. 

Some items of note.

You still need cash, A large earnest deposit in escrow to be specific, money talks, cash is king, ect...

They own the house until you close, So any renovations done before closing are lost if you back out.  That risk can mitigated by having the rehab first come out of your earnest escrow.  

Be very carefully not to form a mortgage in the eyes of the court.  A lease purchase can cross the line in to a mortgage very quickly.  Use an attorney! 

Of course, get the right to sublet in your lease with the seller.

Cloud the title by recording your purchase contract!  This prevents the seller form backing out and selling out form under you.

Hi Aliyev,

A few thing jump out at me in your post.  One, If there is only one meter for each utility, it could be a sign that the home is also not zoned to be a duplex.  Which could be a problem if you ever need to pull permits.  

For your metering issue, We need more information to know if it is work your time.  I would invite a general contractor out to make a bid on setting up 2nd meters.   That would give you a realistic cost to compare the benefit too. 

After you get that information, use it to calculate your return on that investment.

From a quality of life stand point, forcing 2 families to share the same AC/heat is a scene set for disaster.  I would fear any quality tenant would find a new home as soon as they could.  The only people who would put up with that is people who don't have a choice. 

Your question about window AC units is perplexing,  You would have to block all the air ducts off the the apartment that would be using the window units.  That would involve drywall repair and add to your cost.  Also, make sure your market is receptive to window units.  I would drive around your neighborhood and see if window units are used. 

When we got our first quad-plex as an owner occupant. We had to go to a smaller town next to our market.  The added commute to work was a pain.  But it was the only way to buy within our means.

A 2nd though would be to look for value add and try for a 203k loan.

We did our first rehab on a personal line of credit.  $30K     We got it for 20K at foreclosure,.  Did 10K in carpet/paint/appliances.   it appraised at 65K,  We cashed out 40K when we got it financed.  It took a while to find a bank that would do a low loan amount.

The rehab was not scary at all.  The appraisal was the worrisome part. 

I found that turnkey had little equity passed to us.  It ended up being our cash stuck in the property and limited our growth.

I hope you don't have lose asbestos.   Check your contract.  Hopefully you have a language that would let you walk and keep your earnest money.   If you do, use it to negotiate to ask for a remedy or to be credited at closing for the remedy cost.

the cost to install a door is less than than $200.  That is way less than he premium increase you would see if you have to file a claim. 

 The Williams are great.  Right after  we closed on the property I put an eviction notice on the front door.   I included a handwritten letter recognizing their efforts to keep the property up.   I knowledged their pride of ownership.  I let them know  I was nervous about having to get a mortgage myself and that I hope one day I am not foreclosed on too.

  When we spoke on the phone I reiterated the above.  I invented a fictitious partner to take the blame for wanting to put new locks on the doors and not allowing them to take any fixtures from the house.  

 I don't know if any of this spark a desire for them to be nice to me or if they're just nice under their own merits.  I  tried to let them see me as a person rather than a cog in the foreclosure machine

 They told me our local power company has a program that gives out free electric water heaters when changing from gas.   They had intended  receiving one themselves before the foreclosure started .

There are cautionary tells in the pod cast and in the blogs here on BP about how to beat out the competition at auctions and negotiate with contractors.  This week, I armed my self with the advice bestowed to me in the forms and set to battle it out at my first foreclosure auction! 

I started Monday last week by scouting out the auction.  I watch the bidding and learned there is a website for my market that list every property for auction and the starting bid. I found one I like the starting bid of, $15,200. The auction date was in 1 week.

Next,  did  some home work.  Comps for this house was around $65,000.  I found This Website for a DIY title search.  I did research this property's last owners, There was no liens.

Then, I asked and loan officer at Wells Fargo to give me a $35,000 personal line of credit.  I think I am a nice person and they should give me their money... Right? - 3 days later they approved me.   The loan officer told me about a local credit union who may want to carry the mortgage after it is fixed up.

Next, I drove by the house.  It looked like people lived there or at lest their stuff did, The listing put out by the auction company also said it was occupied. I called the power company who told me the power had been off for 4 months.

So this lead to the auction, I arrived before the auction started and spoke with the other investors there.  I told them about what I wanted to do and asked about their careers.   I found 4 investors where there to bid on that property.  The first was Terry, he was a land lord and owned 2 house on that street.  The 2nd was Markus, he was a turn key provider from CA. Then there was Josh who was a DIY weekend flipper.  Last I meet Jason who is a contractor low on work for his crew. 

I knew each one of them had deeper pockets and had more know-how. I was out of my depth.

The results?   Terry and Markus agreed to not bid, They both where happy to see a new investor, they told me what they think the house is worth, and how high each was willing to bid. Terry left before the bidding started. Markus stayed to bid on other houses.  Jason, the contractor, offered to not bid if I would take a bid form him on the rehab job.  Josh was the hold out. 

The bidding opened on this house, I bid first, $15,201.  Josh bid 15,300. this keep up until 20,200 At this time  Josh let out a sigh and asked me if I really wanted it. I nodded. The bidding closed.  I had my first winning bid.

After math, Markus, the whole seller, invited me to call him if the property was more than what I could take on.  He offered $36,000 for it.

The former owners still had personal items in the home.  Mr and Ms Williams found my information and contacted me. They walked me through the house to show me every nook and cranny.  They handed me their set of keys, unsolicited.  The house was dated, but clean and intact.

Jason, the contractor, Came out the the property with me.   He gave me copies of his insurances and his bonding info.  He estimated it needed $14,000 in rehab.  He offered to do it for $8,500.  He is not charging a mark up on materiel or his GC's fee.  He is happy to keep his crew working.  The work starts in 2 days!

I did not expect any of this.  Everyone involved was great. They all wanted my to succeed.  The last owners are amazing.  Even my bank made this easy.  I could do this some more.

 Quick side bar.  I assume when a mortgage is assigned to another bank, The assigned mortgage keeps its 1st position, and all liens recorded after the original mortgage is still subordinate to the assigned mortgage.  Even if the lien is recorded before the assignment date.

Is that correct?

 Thank you for the advice,  I have friends who may lend me the cash,  They are not knowledge in matters of real-state.  I don't know how they would perceive the risk. 120 extra days of holding is an opportunity cost that I need to account for.