Hello All,
Please help. I am new to real estate investing but I do understand the basics of getting a piece of property under contract and ASSIGNING it to another investor for a small assignment fee. However I am lost when it comes to how this works when the property has an existing mortage on it. For example:
I found a vacant “run down” property in a very desirable section of town in Los Angeles. The comps there for properties that are at least a 95% match to my property are averaging $900,000-1 Million. My subject property has a current loan balance of $677,000 on it and the original loan amount was for $645,000. Obviosuly the owner cannot pay the mortgage and is several months behind. So how does this deal work?
When I make an offer should the offer be discounted from numbers based on the ARV/Comps? Meaning if I want the deal at a 30% discount is it 30% off the ARV/Comps? or is it 30% off what is owed on the loan. Is the below (using ARV/Comp numbers) correct? And should those be the numbers I need to be using?
Here are the numbers:
Seller: Very Motivated & Distressed
Subject Property: ARV $900,000 (Based on reliable comps.)
Current Loan Balance on Property: $677,000
Offer to Motivated Seller: $630,000 (30% off $900,000)
Cost of Repairs To Property: $80,000
Total Cost to Repair & Acquire Property: $710,000
*Selling Price Of Property: $800,000
Profit: $90,000
Last question: This is a deal I would ASSIGN to another investor. Any advice as to what I should charge for this deal? What is my assignment fee bassed on? I was thinking 1-2% of the ARV. Is this fair?
*Property is sold at $100,000 less than comps in order to make a very very fast but reasonable profit. Seller takes the $630,000 made from the sale and negotiates a deal with his lender.
Sincere, Sincere Thanks!
Ron