Thanks for the reply Frank. Forgive my lack of terminology. Do you mean that the figure of $67,800 would be the maximum purchase price you would pay or does that include the $8000 in repairs also.
$8,000 for materials? What is wrong with the house? With such a large figure for materials how long will it take for you to do all the work? You will have to be able to pay the mortgage and insurance while you do the repairs.
Mortgage Payments (~$730/mo) x 1 month for repairs = $730
Holding costs (~$730/mo) x 2 months to sell it retail = $1,460
(This may vary on market, check comps)
Closing costs (~5% of Sale Price) = $5,085
Mortgage arrears = $2900
Repair Materials = $8,000 Total Expense = $18,175
Purchase Price (should be the existing balance) = $73,000 TOTAL IN THE PROPERTY = $91,175
Sale Price with 10% of market value for quick sale = $101,700
Total Profit = $10,525 Not too much.
(Don’t forget to pay yourself for all that work you will be doing on the weekends and evenings trying to do all the repairs. OOPPSS I forgot the realtor commission if you end up having to use one. Another 6% of the sale price ~$6k)
Using Frank’s number you will make about $13k by Realtor or $19k if by FSBO. MUCH BETTER.
You also need to consider the rest of the holding costs.
Insurance (got to be insured or the loan gets foreclosed)
Taxes (they go on while you are holding)
Utilities (need electricity and water while you are working)
These are a bare minimum. I am sure others may think of things that I have missed.
Glenn,
This may be a candidate for a short sale. You might approach the mortgage holder (with the owners written consent) to see if they would consider a short sale. It might be cheaper for them to do the short sale than to do the foreclosure.
Glenn:
I would do this deal! Remember in this business, you need to be a transaction engineer. I would sell this myself by owner, put a banner on the property, put an ad in the paper. I would offer no money down using a government program such as Nehemiah or Hart or use a conventional program as long as they have decent credit. I don’t see much room in it for a wholesale deal, since the numbers are tight, but since you are assumming ‘subject to’, you can make some money if you ‘retail’ it.
Make sure to always figure 6 months of carrying cost. Things do happen. Houses do fall out of escrow, etc… It is a cheap insurance policy. I have had pretty houses in the middle of the block fall out of escrow or take a long time to sell for no apparent reason and I ended up holding on to the properties for a year!
Thank you all for your replies. I am learning a great deal just by scrolling through the forums and reading other peoples questions and the responses they get. I am not working at present so I have plenty of time to put into the remodeling. That deal is gone but for the next one I could probably cut down my materials cost by not using high end products where basic ones would suffice.
I look forward to reading your posts in the forums and again thank you .