All Forum Posts by: Neil Schindel

@Mary Mitchell I think you misunderstood what was written. It would not sell for 100k on the open market. It would possible sell for 80k but that is before a buyer is guaranteed to beat up the price because of all of the repairs that are needed. This is an investor property. No homeowner will buy this due to the amount of repairs.

@Will Barnard I appreciate the candor. It is hard to work as an investor and trying to get the best deal for myself and also as an agent that has the responsibility to clients and potential clients to be honest and forthcoming as the market expert. I have explained to him all of his options and explained what can happen when listing on the open market with a house that needs several repairs. He understands and wants to sell to me directly but I can tell money or real estate is not his strong suit. I don’t know if I need to explain further his options, lay it out in writing cohesively or what to make sure he fully understands all options on the table.

@Mike Cumbie he is a hoarder. He has immense amounts of stuff in there. I don’t even know the extent of the damage under the stuff. The house could not be listed for more than 100k in current condition and probably would only sell for 80k-90k. Once a buyer beats him down due to all the repairs they will find and he pays all closing costs he will be right where he is now. Not to mention the amount of time it will take for him to get all his stuff out. I’m trying to help him and rent a moving company to help him move it all.

@Tom S. Based off my comps and cma from mls ( I’m a real estate agent) it’s fmv is around 140k if I can get the extra bath, and 2 rooms and 500+ sqft added into the house by adding a/c.

I am currently working with a seller who owes 70k on his mortgage. His house is assessed at 63k. It has a finished upstairs with 2 bedrooms and a bathroom but isn't added to the assessment because it doesn't have A/C. He wanted to sell it for 60k until he found out he would be liable for the other 10k. The numbers work till about 65k as my max purchase price. He is somewhat of a hoarder and I am now working with him to sell me a couple motorcycles in his garage along with the house to reach the 70k in value. 

Has anyone done something like this before?

I am most likely going to take it for myself but what if I Wholesale it? do I assign the purchase for the house but keep the motorcycles? what investor will want the house an motorcycles?

This is a very strange situation.

The Situation:

I recently purchased my first investment property. It was a duplex and the deal was brought to me by a co-worker who is also a Wholesaler on the side. We have been talking ever since and he has been showing me the ropes. I recently got a lead for a house where the guy wanted 60k, I looked on county records found it was a 3 bed 1 bath with 1,100 Sqft. In the area a home like that goes for around 110k all fixed up. What makes this special is it has a 500 Sqft. garage attached and is the only house to have one in the area. I figured the repairs for this place would cost me around 20-25k (Not an the most upside potential, but there is some.) It should also be noted even as a wholesaler for and foremost I want this for my own portfolio. Its only if I don't have the times and money due to my other deals that i will sell this to another investor.

Flash forward to when I meat the seller at his home. It is in good condition on the outside but there are cars everywhere. Immediately I am worried, by looking at his yard I cant tell this man is a hoarder. I step inside and my fears are confirmed. There is barely a path for me to walk through but I can still see a lot the home through all the junk. I don't see mold or anything to alarming. The place isn't horrible in terms of cleanliness or disrepair. The place is just filled and filled with stuff. I go into the garage and that is filled with stuff as well (which explains why all his cars are on his yard).

After we see the house he asks me if I want to see the upstairs. Now, I saw a window as I was driving up to the house but according to city records it is a one story with 3 beds 1 bath which is what I saw downstairs. I say sure and I make my way up the narrow staircase filled with stuff. When I get to the top and turn on a light I am struck. Not only is the upstairs finished but it has a full bath in pretty good condition(also the hoarding hadn't yet reached the upstairs and it was completely empty up there). There was a room to the left with 2 closets, the bathroom straight ahead, and a much larger room to the right with 4 closets and past that was a duck/crawl attic storage area. I found out the 1-2 bedrooms, the bath, and the extra 500 Sqft. aren't included in the city records is because it doesn't have A/C so isn't included in the assessment. This extra area though bumps my possible resale of the house to 140-150k and maybe tacks on an extra 10k in repairs.

Now the problem: He wanted to sell it to me for 60k but then after talking to him more I find he owes 70k on a mortgage. Once I told him if he sold it to me for that price he would owe 10k on the mortgage his demeaner completely changed. I find out as well that all of the stuff belonged to his family that have either died or left and he wants to take it all with him. His dad recently died and left him his house and he is ready to move into it. The max I'm willing to pay is 65k for the house after finding this new addition. I noticed some motorcycles in the garage that could be lumped into the sale. Me and my friend have rebuilt a couple motorcycles and so they could be worth something to me. I think if I can get him free and clear of his loan and he walks away with nothing he would be willing to sell to me.

Has anyone dealt with something like this before or lumped personal property into a contract for a home?

I am trying to be unbiased here and keep emotions out of this while still finding a way to make the deal work. Based off of my numbers my cash on cash return and my rental income is great for the BRRRR strategy which is what I would be doing for this house.

@Aaron K. Very true. Definitely something I had overlooked. I'll up my closing costs depending on the deal size. In my area 5k is the cost to purchase but I need to add another item for closing costs when selling for fix and flip. I should only keep the 5k for the BRRRR strategy though.

Thank you for the feedback it is making me think of what I can do to improve my model like adding separate loans for the house and the repairs.

I am a real estate agent so that is why I don't have real estate commissions in there. If I was to have another agent sell it I would add it into the closing costs. I don't know if your banks are different but my mortgage guy will give me a loan for the house at 4% and the loan for the repairs at 5-5.5%. so to make things easier I took any average of the loan percentage and put that in there. I also have a hard money lender who does fix and flips for 8%. As for the taxes right now I am only investing in Richmond and so the one percent is to reflect actual Richmond taxes. This is a excel workbook so everything can be changed based off of the property I  am looking at.